Is Content Kaput?

By Evie Haskell

 

Yes! says Time.com.  The age of content as king of the media jungle has passed.  Dozens of newspapers have shuttered their doors; companies such as News Corp., Time Warner and CBS have jettisoned billions of dollars in assets via write downs; broadcasters are threatening to flee their long time allegiance to "free" TV; and the get-it-for-nothing internet model has its fork in us all.

Good grief.

Time to get out the sleeping bags and survival rations.

Or maybe not.

Says an old, old canard:  Once Time has discovered a trend, it's already peaked. 

But who needs old canards?  We have a few more items to point out. 

Like the near $4 billion that Disney recorded in media network revenue in the fourth quarter of 2008.  (Admittedly that's down from 4Q07, but hey ... four billion.) 

Or like recent Nielsen data showing television viewership on the rise even as broadband video continues to proliferate.. 

Or like Tom Christie, EVP at Showtime who has seen the premium service's subscribers jump by nearly 850,000 each year in the past five years.    This plus the recent Nielsen data prompts him to muse on today's "second Golden Age of television.  When you look at the quality of many scripted series today on premiums, basic cable and broadcast ... you're seeing some simply terrific TV programs," he says.  "Consumers are recognizing and enjoying that.

This is not to say that the multiplatform video model doesn't have its challenges.  Booming competition has bit deeply into old-style business plans.  Today, nearly all U.S. households have a choice of at least two non-internet video providers (DirecTV and DISH); the vast majority have three (two DBS and one cable provider); and millions more have their choice of one of two major telco TV providers.

Add to that a scenario the raging growth of internet viewing:  According to a recent survey from Integrated Media Measurements 20 percent of primetime TV watchers also watch some TV online ... a fact which has led some Jeremiads to predict a catastrophic internet overload.  Mix competitive factors with this increasingly tight bandwidth space plus the never-ending threat of piracy and both content providers and platform operators face more sharp edges than the court of King Henry VIII.

In short, content may still reign as King.  But a food taster sure wouldn't hurt.

In this BRIDGE, we explore some of the key challenges and trends facing multiplatform program providers and distributors.  In addition, we've drawn on the resources of our MediaBiz Competitive Intelligence group to unveil today's most widely distributed programmers ... the (relatively) unchallenged winners both in an overall category and by multiple genres.

But first, a look at some of programming's big, big challenges.

Think video ... think threats to video ... and the looming monster beyond the shower curtain is, without question, the internet.  It's something that NBC's Jeff Zucker once famously referred as offering a trade of "digital pennies for analog dollars" and its might has been growing steadily since that day nearly five years ago when Disney broke industry ranks on internet issues via an iTunes video download deal.

A Rising Tide of Ire

 

Today, of course, virtually all programmers have some sort of internet presence and download-to-own is considered a relatively benign business model.  But a tide of ire is rising, and increasingly breaking, over multiplatform players who choose to offer current, full-length programming via the web. 

The impact of the internet on TV programming is "certainly the question of the day," says Terry Densen, VP for Verizon FiOS TV content and programming when asked about the issues.  "If the content providers make a significant amount of their content available free over the web, then that will dilute the value of our business and of the consumption of content."

This dilution is at the heart of some of the toughest battles now being fought over video content and who will carry what at which price ... which just last month hit the news.  Look for some serious saber rattling this month.

Says Christie at Showtime, "The main gripe (from platform providers) these days is that the affiliates are paying good license fees for content and seeing that content distributed for free over the internet doesn't make a lot of sense."

For programmers who do offer current fare for free, he adds drily, "I wouldn't be surprised if there weren't some very tough negotiations" coming up. 

That viewpoint is nearly universal these days among top distributors and programmers.  However, that hardly signals an end to free video via the net.

Referring to his company's Fancast web portal, Comcast SVP of video services Derek Harrar, says, "We've drunk the Kool-Aid (on web-based video).  But our goal is to make our web strategy work together with video (via Comcast's TV offerings) and you'll start to see that coming together across this year."

Among the strategies being pursued by Comcast are the creation of social/neighborhood type of web offerings which allow viewers to coalesce around the their favorite TV programs with options to recommend shows, write reviews and the like.

Indeed, making web/TV connections work together is a critical goals for those in the multiplatform biz.  And the savviest operators and programmers are tackling that goal via the use of web video as a promotional vehicle for full-blown TV fare.

At the three-year-old Smithsonian Channel, general manager Tom Hayden notes that his group does not offer programming free over the internet unless "It's not current and even then it's offered only in a very small number of programs.

"We use it to develop brand awareness and to promote what we're doing," he adds.  "It's designed to help distributors with the sale of our products and a lot of our agreements speak very clearly to this."

The online programming as promo theme also extends to today's programers' use of the internet's next-of-kin, AKA free-on-demand (FOD) video. 

Indeed at Showtime, Christie's staff has offered full seasons of some of their biggest hits on FOD ... but only for one season offered one time for free.  Single seasons of shows such as The Tudors and Dexter have both had a single season offered for free via VOD with each showing paired with what Christie terms "a pretty good offer to purchase Showtime.  It worked," he adds, "like a charm."

Confirms Harrar at Comcast, one of the distributors to accept Showtime's free season offers, "Everybody needs to make money somehow" and the FOD Tudors' offering paid off nicely for both programmer and distributor.

From Comcast's viewpoint, of course, on-demand video provides a key competitive differentiator.  The cable big dog's VOD offerings have been enshrined both in CEO Brian Roberts' "Project Infinity" announcements and in widely touted claims of high-definition superiority.

The HD Explosion

 

Speaking of high definition .... There's a trend that only the most mole-like among us might have missed.  It is simply THE major gotta-have for sports, movies, news, premium and general entertainment channels ... and nearly everyone is racing to get more of it. 

Just consider Showtime where only four of its 12 networks (including its joint venture Smithsonian Channel) are currently offered in HD.  Says Christie of this ratio, "In the second half of this year, we will probably launch more HD channels.  We'd like to have our full complement of channels in HD."



On the distributor side, the most successful HD strategist has been DirecTV whose lengthy line-up of linear HD channels, and clever marketing of those channels, has resulted in steady subscriber gains.  Lacking the bandwidth to match DirecTV's linear HD prowess, Comcast has fought back via its on-demand HD offerings.

The company currently touts "more than 1,000" VOD HD offerings and Harrar notes in general that the operator's on-demand platform has ballooned into 120 "demands" every second of every day.  In all the company claims 300 million to 350 million OD views every month with movies, music videos and children's content ranking Nos 1, 2 and 3 in usage.

With its extensive on-demand menus, its high-def offerings both on-demand and via linear services (primarily sports)  and its video and data services, Harrar characterizes Comcast's marketing claim to fame as "a high quality experience that is relevant and exciting for our customers.  The way we program and provide service for our customers is relevant and exciting."
 
In terms of programming trends, this strategy contrasts interestingly with the marketing tack taken by Verizon.  In listing the key components for gaining and keeping subscribers, Densen puts HD, sports and multicultural programming at the top of his list.  On a secondary list, he believes that movies, VOD programming and "value" form the key components.
The elusive notion of "value" is, Densen says, a critical factor in setting Verizon apart from its competitors. 

"The 'value' equation is becoming more complex for video services because most packages are sold in bundles," Densen says.  The emphasis on the bundle ... and, more specifically, the bundle price ... "impacts your marketing message and the price points that you're flashing in the marketplace.

"So is there a price war going on?" he asks.  "Well, yes and no.  The price of the bundle is coming down but video prices are holding strong."

Just a few weeks ago, Densen notes, both DirecTV and DISH announced video pricing increases and cable companies have become notorious for their video price hikes.

In response to this climate, Verizon has pegged much of its marketing on value in video offering "the deepest content for a single price point" of any provider.  Thus the Verizon basic service offers hundreds of channels which normally would comprise several different tiers for cable operators.  The only add-ons, Densen says, are speciality packages for movies, sports and "extreme HD" ... a strategy which, he believes, offers greater simplicity, greater choice and ultimately greater value.•

Leaders of The Pack

The Nets in Every Corner

 

You already know who's at the tippy top of network distribution:  The CNNs, Discoverys and ESPNs which are  found on virtually every headend in every cable, satellite, telco, MDU, school, commercial and government facility in the nation.  These are the gotta-haves for just about everyone, anywhere offering video.

But how about the genre programming?  The distribution leaders in services offered for sports fans, or kids, or Spanish-language speakers?

"We think you'll find a few surprises here," says Pinna Gallant, SVP of MediaBiz Competitive Intelligence.  "When you look at all headends across the nation, and there are nearly 11,000 of them, some of the programmers in the top 10 for distribution don't fit the expected mold."

To get the ball rolling, though, we'll start with the easy stuff.  And we'll start big, with the 20 most distributed networks in the nation.  The first three are the obvious:  CNN, Discovery and ESPN, each of which reach more than 95 percent of all headends.

Beyond these three, all the names should be familiar.  But worth noting are the fact that ESPN captures two of the top 10 spots; eight of the top 20 spots go to the Family & Learning category; and one premium (HBO) makes the list.

The one network we expected to find, but didn't, in the top 20 is public affairs net CSPAN.  It sits in spot No. 21, with carriage in just under 77 percent of all headends.

Family & Learning, News and Sports

 

The most distributed type of programming in the U.S. is, not surprisingly, Family & Learning.  Morals' Jeremiads aside, family-oriented channels are clearly the most popular among all programming distributors. 

The fingerprints of Discovery Communications are found everywhere here as their Discovery, TLC, Animal Planet, Discovery Health and Science channels take spots Nos. 1, 3, 7, 8 and 10.

Turner, and its owner Time Warner, get the biggest bang in the News category, holding spots No. 1 and 3 with CNN and its related Headline News.  Sports news, via ESPN News appears in spot No. 7, reaching more than 60 percent of all headends.  And Bloomberg edged into the pack with a just over 50 percent ranking.

Sports are (in some ways) easy:  Just say ESPN.  The Disney-owned sporting giant sweeps the category with networks ranking No. 1, 2, 3 and 5 and distribution reaching as high as 96 percent for the flagship net.
 
The odd-man-out in this category is the G4-Video Game Channel. 

"We really debated whether to include this in the Sports category," says Gallant.  "But we believe that games can be considered a kind of sport and at more than  50 percent distribution, we felt they deserved inclusion.

"We were a bit surprised to see Fox Soccer in the top 10 listing but even more surprising is the fact that the 11th, 12th and 13th most distributed sports networks are all regional nets:  Fox College Sports - Atlantic, Central and Pacific.  That certainly tells you how strong the regional sports can be."

From Premiums to Spanish Language

 

Distribution percentages drop rapidly as we come to our last three categories:  Religious programming, HD 50 programming (defined as a contest among those networks offering at least 50 percent of their programming in HD) and Spanish language programming.  In these last three groups, we note with interest the overwhelming dominance of the Trinity Broadcasting Network in the religious category.  (It is found on nearly 60 percent of all headends while its closest competitor, Eternal Word Television Network scores just shy of 40 percent.)

Inspiration Networks also score a solid win in the Religious category with three of its offerings ... Inspiration, i-Lifetv and La Familia Cosmovision ... all appearing in the top 10. 

Despite the “HD-Everything!” marketing of many multiplatform players, networks offering at least half of their programming in HD remain a relatively small segment.  Even leader-of-the pack, ESPN-HD, is available in just under one-third of multiplatform systems.  That, of course, could change radically over the next few years as more programmers race to get more programming in high-def.  According to data on BRIDGE parent MediaBiz’s WhereIsHD.com the nation’s top three cable operators added a total of 737 linear HD feeds to their systems during the second week of February.

In our final category, Spanish language programming, we limited our selection to those channels offering 95 percent or greater of their programming in Spanish.  Here HBO Latino comes in as leader of the pack with carriage on nearly a third of all headends.  Also notable is the inclusion of History en Espanol which is found on just under one of every five headends.

Getting On

A Guide to Bandwidth Gridlock

 

Beyond the internet, HD, VOD, linear, license fee, advertising etc mares' nests facing today's programmers is one over-riding fact:

If your brand doesn't stretch back at least a decade, or link to a heavy-pursed sports franchise, your odds of getting on a multiplatform programming guide are about as good as Charlie Ergen's odds of being nominated Humanitarian of the Year.

In short, slim.  Very, very slim.

Still, some newbie programmers make it.  To get a feel for how to get on in today's programming packed world, we spoke with two:  The Smithsonian Channel and Retirement Living TV (RLTV).

Now we can hear you already.  The Smithsonian is a Showtime JV!  Of course they can get carriage.

Au contraire.  While the channel is a joint venture with the Smithsonian museum, it is not included Showtime's  programming package deals. leaving general manager Tom Hayden in the same tough spot of any new programmer:  How to convince a congenitally skeptical audience that your channel is worth it.

Not just worth it.  But worth real money.  For VOD carriage no less.

"We were the first quality VOD to ask for a rate," Hayden recalls. 

That concept proved difficult; however, the addition of HD service helped boost the service.  And in September 2007, the Smithsonian Channel scored  its first linear HD agreement with DirecTV.

Today the Smithsonian Channel also has carriage agreements with AT&T, Charter and Verizon (plus a DISH deal currently in argumentative abeyance) as well as  20 small cable operators and over-builders.  The service also has an iTunes download deal, plus DVDs and a host of international offerings.

While "getting on" was far from easy, Hayden credits the Smithsonian brand with much of the channel's success. 

"That's our strongest selling point," he says.  "If you go to a distributor and ask them to pay money for anything then you have to have something unique and special," he notes.  Still, Hayden admits, the going is slow.

"The toughest part (of launching a new channel) is how long it takes to get on," he says.  "You can have a great brand, and products and be validated in the marketplace but because of how dramatically the marketplace changes year to year and the number of issues you must deal with, it's very hard to create a sense of urgency to get something done in a timely fashion."
 
For Retirement Living TV, the brand is also important:  Founder John Erikson has built a virtual empire of retirement communities across the nation making him a foremost expert on the 50+ crowd.  But that, of course, is hardly enough to launch a channel. 

Rather, says RLTV general manager Patrick Baldwin, one of the first things you need is "money.  Copious amounts of money.
"In an industry used to antagonistic, leverage-based discussions, you need the leverage and commitment to be a true partner and solution provider,Ó he notes.

But the real key to gaining carriage, Baldwin says, came via consulting help from the late Fred Dressler of Time Warner fame.

"Fred drilled into us that, except for sports channels, this industry doesn't believe that an individual program offering can drive their business.  If you want their bandwidth and, on top of that, affiliate fees, you have to convince them otherwise."

With a dramatically under-served and increasingly desirable audience, RLTV got its first launch ... as a linear channel no less ... in September 2006.  Most recently, it scored a financial commitment (but NOT, Baldwin stresses an equity for distribution deal) from industry giant Comcast. 

Equally importantly, RLTV's appeal to retirees has brought in a stream of high quality advertisers such as Walgreens and United Health Care.  RLTV currently services approximately 3.5 million subscribers primarily via carriage deals with Comcast and Verizon.•