Jan 5, 2013

The Lost Boys: How The MVPDs and Hollywood Missed The Streaming Revolution


So Amazon, to no one’s real surprise, just struck a deal with A&E to purchase untold hours of that network’s programming. It’s the first of what is presumed to be many deals to beef up Amazon’s catalog of TV content.

It’s a plan that’s worked well for Netflix: their catalog of TV content has kept them afloat as their movie catalog shrinks, and there’s no reason to suspect that Amazon won’t both profit and steal market share from Netflix with this strategy as well.

What’s remarkable though, is that this market exists at all: the MVPDs are basically sitting idly by while Netflix and Amazon buy up content that should by all rights be theirs and the movie studios cling to UltraViolet in a way that prevents any of the online streaming services from having any sort of valid catalog offering.

So how did this happen?

For the MVPDs it’s all about the focus on live TV, which fits into their current ad revenue based money-making model. Catch-up TV was okay - having a couple of recently run episodes available via On-Demand was seen as a nice customer service feature-- but no thought was given to making the the full Law and Order oeuvre available as there was no way to monetize it and it might cut into the audience for USA, TNT and other networks that are heavy on the Law and Order. 

HBO Go should have been the first warning: part of what made the app so popular was the extensive back catalog, something viewers were clearly interested in. 

But again, unable (or unwilling) to see any kind of monetization option, the MVPDs largely passed.... as did the networks themselves, who could have pushed the MVPDs to adopt some sort of money making scheme for showing old episodes. Which actually turned out to be a wise decision, given the money they’ll be making from Netflix, Amazon and the like.

As for movie studios, they are still clinging to the notion that people want to own movies, rather than rent them. This was once true, but a whole spate of research, like this February 2011 report from Screen Digest, shows the trend moving rapidly in towards renting, with consumers citing iVOD (internet video on demand, aka streaming aka Netflix, Amazon, iTune et al) as a major reason. 

By keeping release windows in place that favor buying over renting and insisting on all other sorts of “rights issues” shenanigans (e.g. renters are limited to a 24 or 48 hour non-renewable viewing window), they’ve only succeeded in cutting into their own revenues while making television more relevant than movies for both the streaming services and their customers.

The streaming services are far from fully evolved at this point: conventional wisdom has them all eventually being absorbed by the MVPDs in one form or another and integrated into the overall offering, and so it will be interested to see where they wind up.


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