Archive for Pay TV – Page 2

Getting media companies closer to consumers

image of TV set and remoteLast week’s profile in Variety of Turner’s Kevin Reilly had an interesting line about media distribution that struck a chord. Reilly is quoted as saying “Probably the biggest frustration of the age is that we’ve tied ourselves into a distribution partnership for the most part with partners who have not been focused on the consumer experience,” in reference to MVPDs.

I recently spent about two years as the global manager for the Disney account for a market research firm, and there too one sees the interesting disconnect of “traditional” media brands from their end consumers – something I hadn’t really recognized until it sort of slapped me in the face.

For as much as media giants such as “Disney” or “Warner Bros” are household names, the truth is that (putting aside theme parks and smallish direct-to-consumer specialty sales) they have been totally dependent on third-party intermediaries to deliver their product to consumers.

TV content: whether on their owned networks or another network, it relies on an MVPD to distribute it via pay TV, or a broadcast affiliate to send it out over-the-air. Through rental services, SVOD services, or retail outlets for home video.

Movie content: distribution through movie theatre chains for first run. Through rental services, SVOD services, or retail outlets for home video.

Consumer products: almost all brand or character products are designed and manufactured by third party licensees, and sold through online or brick-and-mortar retailers.

Thus one begins to understand the great business opportunity that streaming and digital offers these giants – taking back control of their relationship with the end consumer, either directly or by using it as leverage to demand better performance from their partners.

The drawbacks of not owning your relationship

Imaging having your business tied to cable TV companies. Deservedly or not, they are among the most disliked and distrusted companies with which consumers have to deal. And they are responsible for delivering your content through networks or VOD to consumers, and the consumer relationship?

Movie chains are not so reviled but they too are no paragons of consumer value. Many people consider movies to be over-priced and most people understand that the cost of concessions are exorbitant. And don’t get me started on the up-charges for “assigned seats” and buying your tickets online. But that’s where consumers have to go to experience first-run films.

And Amazon, a bastion of home video and licensed sales, while being extremely focused to create good consumer experiences, is no bargain. To keep prices low, it drives deep discounting through wholesaler relationships, as well as other considerations that impact placement, display, promotion, and the like.

Get down(stream)

While the above covers far more ground than strictly TV or movie content, it does show that a move away from the traditional distribution channels could benefit media companies in a number of ways. By increasing their direct dealings with the consumer, it offers a way to control the experience – which is great as long as it’s done right! And, as is so important in today’s world, it would also give them first-party data from their interactions with consumers.

So whether it’s a stand-alone SVOD/OTT service, or the advent of day-and-date home distribution of theatricals, movement downstream to get closer to the consumers’ actual touch-points could pay big dividends (figuratively and literally).

David Tice is the principal of TiceVision LLC, a media research consultancy.
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Throwing cold water on cord-never hyperbole

Last week’s article in MediaPost on the TV of Tomorrow conference included another example of the hyperventilating hyperbole that unfortunately drives our industry’s conversation about cord-cutters and cord-nevers.

In an unattributed quote in the article, the author writes “Millennials are cord-nevers who didn’t grow up in a world of TV networks.” Whether this is her opinion, or something a speaker said, is not specified. But whomever the quote belongs to, they are vastly incorrect.

The definition of a millennial varies, but for the purposes of this post, let’s say it’s people born between 1982 and 2004. And, again, for the purposes of this post, we’ll use high quality data from The Home Technology Monitor, published by SRI (1981-2001), Knowledge Networks (2001-2011), and GfK (2012 to present)*. This respected source has always used a representative probability-based sample that includes all homes, including offline and Spanish-dominant homes.

So let’s look at a couple of years with millennial kids:

— 1999 (kids 0 to 17 years old are millennials): pay TV penetration in these homes was 78%

— 2004 (kids 0 to 17 years old are millennials): pay TV penetration in these homes was 81%.

As can be seen from these two snapshots, millennials most definitely grew up in a corded world. Their homes were very familiar with TV networks and pay TV.

In fact, even this year – when adult millennials are ages 18 to 35 – the presence of traditional pay TV in households headed by a millennial is still a majority 59%.

Perhaps the author (or whomever she quoted) meant Gen Z and not millennials. Or maybe it was meant to say one of these groups are somewhat more likely to be cord-nevers. But the statement as published is an example of the received (incorrect) “wisdom” that comes out of many digital-focused reports and presentations from people unfamiliar with the long-term trends of TV reception and use.

All that being said, is cord-cutting, and are cord-nevers, a significant issue for the TV industry? Do TV stakeholders need to learn to play in an increasingly streaming world? Absolutely. But let’s not exacerbate the issue by passing along poor data.

And lastly, don’t get me started on later in the column when a media research leader used her child as an example of changing media use – a topic I covered some years ago here.

*Disclosure: the author ran The Home Technology Monitor between 1995 and 2017, and was employed by GfK until October 2017

David Tice is the principal of TiceVision LLC, a media research consultancy.
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Avoiding the Pennsy problem

Comcast logo

Yesterday, Bloomberg published a story on how cable companies are cozying up to Netflix and Hulu. These moves are in order to integrate those services into their respective user interfaces. A line in the story caught my attention: “[this] moves Philadelphia-based Comcast a step closer toward its goal of becoming a one-stop shop for a variety of digital video services.”

PRR logo

The first thing that popped into my head is an apocryphal story about another Philadelphia-based company, The Pennsylvania Railroad (PRR or “The Pennsy”). The story goes that the management of the PRR saw itself as being in the railroad business – not the transportation business. It thus ignored investing in advancements such as over-the-road trucking and air transport, assuming there will always be a major role for railroads.

However, this dedication to the rails ended up with the PRR, once the largest public company in the world with more employees than the US government, laying bankrupt by 1970 with its assets distributed among Amtrak, Conrail, and others.

In recent years, Comcast has been in the forefront of trying to retain its relevance in the changing media space. This has been demonstrated by its acquisition of NBC Universal, to development of the X1 platform, to using in-home auto-authentication for TV Everywhere. Not all pay TV service providers have been so foresightful – but then again, few have Comcast’s deep pockets.

Avoiding the train at the end of the tunnel

It should be no surprise then that all pay TV services should be seeing themselves as deliverers of content – whether it’s through regular cable subscriptions, skinny bundles, or third party services delivered through broadband or mobile. Ultimately, the quality of service and excellence of user interface will win out – whether we end up in a totally “a la carte” world, or if the cable bundle morphs into some digital equivalent.

David Tice is the principal of TiceVision LLC, a media research consultancy.
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O Canada, home of a la carte?

Roku with Canadian flag skinThe Hollywood Reporter just published an eye-opening story on the attempt in Canada to push “a la carte” channel subscriptions. In what should be no surprise – but it probably is to some people – the uptake on a la carte has not been impressive. Consumers are put off by increased pricing for their broadband, required equipment, and per-channel fees.

This is an enlightening case study for the USA. In conversations with folks outside our business, and too many within it, the opening assumption is that a skinny bundle with 20 channels should only cost something like 1/10 of a regular, 200 channel pay TV subscription. But there are a couple of things that few tend to consider…

First, in the the case of internet-based skinny bundles, cancelling the “triple play” pay TV subscription to go “broadband only” will result in a much higher fee for broadband service. For instance, Comcast’s low-end Performance broadband-only service has a list price of $75/month (potentially lower for the first 12 months via promos). This doesn’t include any required equipment fees, etc.

By comparison, Comcast offers a base level triple play, with 140 channels, higher speed broadband than the above, and unlimited calling for just $90/month. So a cord-cutter doesn’t “save” $90 a month by switching to a la carte, he or she only saves a small portion of that because of the loss of the bundling discount.

Second, unbundling networks either for pay TV or online skinny bundles means the consumer has to pay the full value of each network. If one uses CBS All Access, which costs $5.99 a month, as a benchmark for a upper tier entertainment network, then six top networks would run a consumer $36 a month. Interested in sports? Those networks are likely to be even more expensive.

Thus for the sake of argument, let’s say a ballpark cost for a broadband-only, a la carte, self-bundled TV service of six top tier networks would run something like $110 a month. Add in perhaps two of the three main SVOD services – Netflix, Hulu, or Amazon Prime @ $15/month each – and now one is at $140 a month. The consumer is able to get exactly what they want, but it’s not saving them much money on a net basis.

Just like buying pizza by the slice, or buying the individual items of a McDonald’s value meal, buying the elements of a bundled product will always cost more than the bundle. This economic logic seems to escape people when it comes to a la carte TV – maybe it’s because TV is such a personal service, or people don’t really consider how they receive TV until they actually do try to unbundle.

Unbundling the future

All that being said, I expect there to be an “a la carte” world ahead – for some people. It may even go down to a la carte at the series level. But I think for many people, “TV” (or premium video, or whatever you want to name it) will continue to be a bundled product, whether it’s provided by the evolved versions of today’s MVPDs or dMVPDs. Most consumers don’t want to worry about 20 separate subscriptions and trying to figure out what streaming service they need to turn on to watch a particular program. There will always be a place in the market for services that make consumers’ lives easier.

David Tice is the principal of TiceVision LLC, a media research consultancy.
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Data can be dangerous without context

Bloomberg recently ran a story with a headline typical of the hyperventilation surrounding cord-cutting and streaming – Pay-TV Companies Are in Crisis Mode. This post has little comment on the veracity of the claims in the story, but is more a comment on how its data are presented. 

In the Bloomberg article, a common trick is used to influence opinions. Data on quarterly changes in pay TV subscribers are presented in a way that makes the changes appear large. The chart is unanchored, without context – there is no way for the reader to tell if these are large or small changes, only that there are columns showing what appear to be big declines for pay TV homes. Losing 500,000 homes is a huge deal, right?

Courtesy Bloomberg

Now, let’s take a look at these numbers on a chart that has context. I translated the counts in the Bloomberg chart into proportions of Pay TV households, making calculations using the data in the Bloomberg chart and Nielsen’s published counts of Pay TV households for each quarter. Having been placed into context, you can now see in my chart below that the changes per quarter are barely discernible yellow increments – changes of one half of one percent or less each quarter in total pay TV homes. Those 500,000 homes look a lot less daunting when put into the context of the 100,000,000 total pay TV homes. The optics are certainly different from what was shown in the article – and in fact may have raised a question about why have the article at all.

I’m not going to argue here the pros and cons of “pay TV is in crisis,” but I will argue that improper presentation of data is something anyone reading such articles should keep in mind. And these incidents are not just limited to Bloomberg or the press; very often data at conferences or in one-on-one sales pitches are presented in a way to show a particular story.

Press articles, conferences, and sales pitches are one thing; the biggest threat of all is if your internal staff or vendors show data out of context when you’re considering a tactical or strategic business decision. Attempts to force a particular interpretation can cost your company money – or you a job.

David Tice is the principal of TiceVision LLC, a media research consultancy.
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Will Movies Anywhere go anywhere?

Last week’s announcement of the “Movies Anywhere” app, by Disney and four of the five other major studios, is a welcome collaboration in the digital space among competitors from traditional media. But is it really only an exercise in closing the barn door after the horse has already bolted?

Movies Anywhere logoConsumers already voted with a yawn or confusion to Ultraviolet (launched in 2011) and Disney Movies Anywhere (2014), if they were even aware of them. For example, in a report I did for former employer GfK in Spring 2016, only four percent of digital movie buyers report ever using Ultraviolet.

In many ways, this is similar to what’s been seen in the past in the pay TV world. In that case, the implementation and marketing of video-on-demand (VOD) and TV Everywhere, potential game changers in that market, were not well executed. The former contributed to the rapid rise to dominance of Netflix’ streaming service, and the latter to the rise of the new entrants in the SVOD space.

VOD was not well understood by consumers, particularly suffering from a lack of consistency in marketing exacerbated by every cable operator giving VOD its own branding. Despite being first in market with arguably better content, VOD stalled because people did not understand it and it had a challenging consumer interface.  In many ways, TV Everywhere via pay TV operators suffered the same fate: conflicting branding and lack of consumer education, particularly about authentication. In this case, CTAM did bring together cable operators in 2014 to use a single logo and language, but still these services seem to have only recently improved their competitive position.

The moral

The moral of the story is that pay TV had perhaps the best combined solution (VOD for current content plus TV Everywhere for older and catalog content), but the inability to bring these to market in a way consumers could easily use and understand put them permanently behind the streaming competition.

For the Movies Anywhere service, a similar fate may be in store. Coming up with a better solution six years after the launch of Ultraviolet only means that consumers now have the SVOD or PPV models of movie viewing as permanently engrained habits. Will Movies Anywhere better serve the shrinking niche market of movie buyers? Sure. But will it stem the overwhelming movement from the ownership model of video content to the rental/subscription model? Unlikely.

David Tice is the principal of TiceVision LLC, a media research consultancy.
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