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Cable Technology Feature Article

June 23, 2014

AMC Joins the OTT Pack

By Tara Seals, TMCnet Contributor

AMC Networks Inc. has become the latest major cable net to explore the possibility of launching its own over-the-top (OTT) Internet-based subscription video service.

According to a person with knowledge of the situation, speaking to Businessweek, the outlet will be used to offer niche content, particularly documentaries. Its top-flight network content, like Mad Men and the Walking Dead, will stay right where it is, on the linear, on-demand and TV Everywhere outlets.

The niche play seems to be settling into a trend: the news comes shortly after ESPN (News - Alert) said that it was mulling a strategy for offering online access to live Major League Soccer games, as a way to add revenue without alienating its existing model of working solely with pay-TV operators for distribution.

In that case, ESPN president and co-chairman of Disney (News - Alert) Media Networks John Skipper said that it was also looking to other ways to add revenue by offering access to new programming no found on the linear networks.

"We've just got to think about other business models," Skipper said at an event in Bristol, Conn., where ESPN is headquartered. "We're not far along on any them, but we do think about how we might capture more money direct from consumers."

ESPN parent company Disney meanwhile is making OTT moves of its own. It bought the online video company Maker Studios earlier this year, which has created a multichannel YouTube (News - Alert) network with 350 million subscribers. It works with several popular YouTube channels and content creators, including viral video stars like PewDiePie and Toby Turner, and is overall one of the most popular channels on YouTube, drawing some 5.5 billion views monthly. It’s the No. 4 video partner for the site (behind VEVO, ZEFR and Fullscreen).

And, Disney is not alone making investments in a YouTube developer. Last May, DreamWorks Animation paid $33 million for AwesomenessTV, a tween-focused YouTube network (the overall payout could reach $117 million).

The interest of traditional media in OTT makes sense; it’s a way to give less mainstream content a home, leveraging the long-tail ad revenue model that has made the Web such a lucrative place to be. And with smarter devices and better broadband becoming the norm, viewing statistics are escalating too.

According to Nielsen, consumers spend nearly 159 hours watching video each month, including nearly 147 hours on TV. Brands are following the eyeballs as well. Several major advertisers and media buying firms, including MasterCard (News - Alert), Starcom MediaVest and Verizon Wireless are re-jiggering their budgets this year to allocate more dollars to online video. For instance, Starcom MediaVest, which buys about $40 billion in advertising annually for big clients like Proctor and Gamble, has moved $500 million of that budget away from TV in the last 12 months—most of it into online distribution.

Edited by Alisen Downey

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