Oct 30, 2014

The HBO Dilemma

Last night, The Wall Street Journal confirmed what many of us had already suspected: that HBO has no intention of actually selling its new streaming service itself, but rather, is planning to outsource that function to either the MVPDs, who'll sell it as part of their broadband service or to device manufacturers like Roku, who’ll sell it as an add-on service.

Either way, HBO is not going to get its hands dirty with things like customer service and bill collection.

On the surface, the new OTT service should be a gold mine: HBO can price it below the cost of a monthly subscription through the MVPDs while structuring the deals to ensure they get a larger share of the revenue. They’re powerful enough now to do that.

Or are they? Because there’s a not-all-that-unlikely scenario that has HBO losing money on their shiny new streaming HBO On The Go service.

That scenario plays out like this: while the MVPDs have made it really difficult to pull out of your HBO package, the new OTT service will be attractive enough to get a lot of customers to pull the plug on the MVPDs and switch over.

And once they’re there, they’ll realize something many of us figured out fifteen years ago, back in the Sopranos days: there isn’t a whole lot of reason to subscribe to HBO for 12 months a year. Unlike Netflix, HBO doesn’t have a huge back catalog of content. They’ve got some pretty good movies, but so do Amazon and iTunes and at least theirs are first run. So a lot of people aren’t going to see the need to keep on spending ten or twelve dollars a month once they’ve seen the latest season of Game of Thrones. And thanks to binge viewing, that may take them all of three weeks.

And the thing is, it’s going to be really easy to unsubscribe from a Roku or Xbox type standalone service. Navigate to the web site, click a few boxes and you’re out.

Compare that to unsubscribing from HBO on your MVPDs service and you’ll see why I’m concerned. To begin with, the MPVDs have structured their offerings around the notions of different “levels” of service. So if you have the Titanium level package, you get the fastest internet speeds and all of the premium channels (HBO, Showtime, Cinemax, etc.)  Remove a piece from that titanium stack and the deal collapses and your monthly price goes way up. And since you’re not really sure how much of the hundred plus dollars a month you pay your MVPD actually goes towards getting you HBO, the impulse had been to just leave it alone, not to mess with the package.

But if the streaming service starts to look too good to pass up, a lot of people are going to decide to put up with the hassle of pulling out of the MVPDs program. And those formerly full time subscribers may quickly turn into part time ones.

HBO should be worried precisely because it’s going to be so easy to subscribe and unsubscribe. The MVPDs and their byzantine policies gave them a fairly stable customer base. But HBO wanted to give consumers choice, and choice is great and all that. Until someone decides to use their choice against you.

Caveat emptor.

UPDATE: TUESDAY, APRIL 7, 2105: HBO Now launched today and does not appear to have any type of contract restrictions: you can drop it any time you want.

Oct 28, 2014

The 800 Pound Monopoly In The Room

So today FCC Chairman Tom Wheeler came out with a widely praised announcement that for purposes of access to TV content, internet-based providers are now to be accorded the same respect as terrestrial and satellite based ones.

His blog post (yes, the FCC has a blog) starts out with a memorable call to arms "Consumers have long complained about how their cable service forces them to buy channels they never watch" and then continues to lay out all the reasons why internet based companies should be granted the same access to programming that cable, telco and satellite companies now have. Wheeler cites the 1992 Congressional ruling that forced networks to give access to satellite providers and correctly points out the correlation between satellite pay TV providers in the early 90s and OTT pay TV providers in the mid-10s.

Which is all well and good, but....

(And it's a really big but...)

While all the usual suspects are running around proclaiming the second coming of the New Era of Television (the first happened a few weeks ago with the HBO and CBS announcements)-- they, and Wheeler, are forgetting one crucial thing: the existing cable and telco companies own the internet. Or at least broadband access to it. What's more they pretty much have a monopoly, or at best, a duopoly, on it as their territories rarely, if ever, overlap.

This is actually as big a problem as it sounds. And it some point someone is going to have to (a) acknowledge it and (b) deal with it.

Right now, thanks to Chairman Wheeler, I can go out and buy up the rights to broadcast an array of network television programming over the internet. I can sell you packages as big or as small as I like. But in order to get them from my servers to your TV set, we've got to go through enemy territory.

Because there's nothing in any of these rulings preventing Comcast or Charter or FIOS or Uverse or Cox from  charging customers who don't use their pay TV service all sorts of exorbitant rates for data usage. It's a pretty easy package to put together: Get AcmeCo's Gold Package: 50 Mps Broadband plus 800 TV channels with no data cap! The flip side of which is: Get AcmeCo's internet only package, the one without pay TV and you'll be staring at giant sized data overages... especially if you sign up with one of those internet-only pay TV providers.

The scripts for the commercials to scare consumers away from those internet pay TV companies and their hidden fees sort of write themselves, as do the direct mail pieces and robocalls.

The solution, it would seem, is a fairly painful one: break up the broadband monopoly the way we broke up Ma Bell back in the '80s. It's a political football no one is going to want to get behind though, fraught as it is with images of tinpot dictators nationalizing large swaths of their economies and leaving the country bankrupt as they flee to Switzerland with their shoe-addicted mistresses.

Plan B would be much stricter regulation of the sort that's particularly hard to write without creating endless loopholes, but which would ensure that broadband providers could not penalize consumers for choosing an alternative pay TV provider.

Here again, it will be a while before that legislation is written, even longer till it's approved, which is why I am not holding my breath for a successful over the top TV service launch next year.

Until we address the fact that broadband access in the US is a monopoly-- and all that entails-- our pay TV options are going to remain more or less as limited as they are today.

Oct 20, 2014

The Great Unbundling

With the announcement that CBS was offering a $6/month a la carte package coming directly on the heels of HBO’s announcement that it, too, was offering an a la carte solution, it’s tempting to think that we’re seeing the start of the unraveling of the TV industry, a point in time similar to the launch of iTunes and the dramatic effect that had on the music business.

And while that may turn out to be so, I’d say it’s far more likely that we’re seeing a lot of testing of the waters.

Let’s take a look at CBS. They’re a broadcast network, which means that technically their live offering is already free to anyone with a TV and and antenna so they’re essentially giving you something you already have. (It’s also worth noting that the app actually only offers live viewing in certain markets, the ones where CBS own the local affiliate.) So the value here is in the On Demand content which includes both current shows and old-time favorites like The Brady Bunch.

What’s significant about CBS’ VOD though is that CBS is the only one of the majors that’s not hooked up with Hulu. That leaves them in the enviable position of being able to offer their current catalog without bumping into rights issues. Because depending on how the deal with Hulu has been negotiated, those other networks may not have the rights to put most of their more popular programming up on their own freestanding app.  (It’s not just Hulu either, the other broadcast networks also have deals with Netflix and Amazon.)

This is one area where CBS was smart not to have jumped on the bandwagon.

Or were they?

Because it will be interesting to see how many people are going to sign up for this new app. The actual market for it is sort of murky: of the ten million broadband subscribers without pay TV service, how many are in that boat by choice and how many are there as the result of a temporary financial setback?

So the question becomes how many in either bucket will be wiling to spend $6/month on an app that lets them watch CBS back catalog? Especially given that the networks’ biggest hit, Big Bang Theory, is not included. And that there will be commercials, something not found on the $9/month Netflix.

It’s an interesting question because it places a lot of weight on the value of CBS content. Will cord cutters see their palette as $9/month for Netflix, $8/month for Hulu, $8.25/month ($99/year) for Amazon and now $6/month for CBS? Or have they reached their breaking point in terms of how much they’re willing to spend?

The result will influence how the rest of the industry plays its next hand, whether they’re going to bank on an endless sea of a la carte options or if they’ll decide the consumer has a breaking point and begin to consolidate their efforts around existing OTT players like Netflix, using those platforms as the way to maximize profits from their existing catalogs.

Once again, time will tell.

Oct 15, 2014

5 Questions From Today's HBO Anouncement

A lot of unanswered questions from today’s announcement during an analyst call. Here’s my top 5

How exclusive is Amazon’s agreement for HBO’s back catalog? If it is exclusive and only Amazon can stream the back catalog they recently bought, then the new app is going to feel like HBO GO Lite since all they'll be able to show is current season programming.

How are they going to make the MVPDs happy so that they keep the HBO gravy train flowing? The answer might be by telling them that the new OTT app is just HBO Lite and not as full featured at HBO Go. Or they may just be betting on the fact that the MVPDs need HBO more than HBO needs the MVPDs.

How does this affect CineMax which, with shows like The Knick, is also starting to have quality original content? Right now they are bundled with HBO in most MVPD packages. Will HBO throw Cinemax in on the new app?

How large is the audience really? If people don’t currently have HBO on their pay-TV package, why would this push them to sign up and of the group that does not currently have pay TV, how many of them made that decision for moral rather than economic reasons? In a similar vein, is HBO hoping that a low priced package can convince millennials to sign up rather than using their parents passwords?

How soon before another network follows them? The problem with assuming this is the opening of a floodgate is the convoluted rights equations in the US. Given how much of their back catalog is currently on Netflix, Amazon and Hulu, the other networks may not have a whole lot beyond their current seasons to throw up on an OTT app, thus greatly diminishing the appeal of launching such an app. Remember too that few other networks have the cachet of an HBO.

Listen to me discuss HBO's announcement on NPR's Morning Edition with Neda Ulaby

Oct 14, 2014

The Dawning Of The Rise of the Next Golden Age

For most of its relatively short life, television has been resigned to being background noise. While there were occasional shows that captured our attention, for the most part the television served as the soundtrack to our lives, filling the void so things didn’t seem so lonely.

That’s changing though, and television is now being consumed a lot more like books or movies: as a conscious choice, at a set time, with the concurrent expectation of quality inherent in that sort of decision.

It’s a combination of several factors: the internet has become our new background noise, a combination of websites and YouTube videos and tweets and Facebook posts splayed across multiple screens, providing us with the electronic hearth the television once did.

At that same time (and partly because of the new delivery methods enabled by the web) the quality of television has improved and the number of outlets for quality programs has grown along with it. Networks that began life as background noise (AMC, FX) or delivery systems (Netflix, Amazon) now have top quality programming. And the list is growing.

That’s changing the way we watch TV, but more importantly, it’s changing the way we think about TV. Decisions are now in the hands of the viewers and what they want to watch, not broadcasters and what they want to serve up. That’s a huge change and it’s soon going to be reflected in television’s business model, whether the industry is ready for it or not.

That change is going to hit the current ad supported model smack dab in the gonads.

Because no one wants to watch ads. Least of all a generation raised on Netflix. Where, in case you needed reminding, there are no ads. So look for the television equivalent of branded content or native advertising to replace interruptive advertising. Something that’s the diametric opposite of the sixty second pharma commercials with their tai chi’ng seniors and the 5 minute ad blocks that mark the waning days of commercial TV.

Change is also going to hit the idea of where the borders of a series lie. Because it’s no longer just about a seaon's worth of 22 or 44 minute scripts, cranked out week after week. It’s about creating an entire world around a show via second screen and social and gaming and other media and understanding that the ultimate viewer of those experiences may not actually see them during the lifetime of their creators. That’s creating something for perpetuity and the ensuing pressure is going to help ensure that the quality programming we’ve seen blossom is not just a passing fad.

Because as watching TV becomes more like reading a book, viewers are going to be able to choose what series they plow through from an increasingly broad and varied selection of current and prior favorites. Such is the blessing of the second golden age of TV.

It means that showrunners (or someone on their staff) must have an understanding that the strength of that entire experience is what’s going to take someone from being the person who watches just one episode in passing to someone who watches the entire series in full. And most likely pays for the privilege.

Shows will need to engage current and future viewers, to bring them into the show’s world wherever they may encounter them and help them to stay engaged. They must account for varying levels of fandom from the obsessed “shippers” on Tumblr and Reddit to the multitasking chatters on Twitter to the between-friends masses on Facebook and everyone in between. This is going to require a new set of skills, people who understand that driving live tune- in is only the first step and that every show has to be viewed as a long term project.

This world will be on us sooner than we expect it because if we’ve learned one thing since the dawn of the industrial revolution, it’s that change happens gradually and then all at once. The good news is that most players will be the better for it. Viewers will have better and more varied programming and above all, choice. Actors will have better roles, more opportunities and more ways to earn royalty fees. Writers, directors and producers will have similar opportunities re: royalty fees and will also be freed up to explore the boundaries of what’s possible in transmedia experiences.

The only losers here might be print media and the movies. Because as serialized television takes a more prominent role in our culture, those media will either have to step up their game or risk losing a piece of a finite audience. Though given their lackluster performance over the past few years, I can’t but think a little competition would be a good thing.

Oct 9, 2014

New On Digiday: Facebook May Want To Become Your Pay TV Provider

While Twitter has been receiving most of the buzz around live television and tune-in, the launch of Facebook’s new video ad serving platform, Atlas, has the potential to radically change that conversation. Atlas gives Facebook the power to index users’ behavior both on and off Facebook, functionality we believe will be a huge boon for the television industry...  READ THE REST ON DIGIDAY

Oct 1, 2014

It's All About The Showrunners

For all the debate around who should be in charge of second screen and social TV efforts, one thing is becoming very clear: the key to success rests with the showrunners.

That’s because when the showunner is involved, along with the actors and the writing staff, it seems like the second screen experience is an actual part of the show, not some sort of bolted-on afterthought. In fact, a recent study from Twitter, Fox and the Advertising Research Foundation revealed that 40% of viewers prefer to see tweets from cast members versus 18% who wanted to see tweets from the official show handle.

This stands to reason on many levels: the type of viewer who is fan enough to want to tweet about a show is the type of viewer who’s likely formed some sort of connection with the actors and wants to read their tweets. It gives the sense of having a conversation with the actor and if the actor responds to or favorites a tweet, even better.

But success is dependent on more than just a cast that’s willing to tweet: it depends on having a long-term, well-planned strategy that takes more than just Twitter into account. Depending on the type of program and the type of audience it’s aimed at, the production company needs to have thought out everything from how the show translates on a gaming platform (as an actual video game), what sort of content to feature for behind-the-scenes, backstory or alternative story lines, how to film all of it, when and why and then of course figure out who is going to supervise all of it.

It’s a lot more complicated than just pulling together a couple of stills for the website and letting an intern wander around with a camera shooting “behind the scenes” footage.

But it’s worth it because when it’s done right it feels authentic and even more importantly, it feels organic— like everything is a part of the same show.

It’s worth it because the people who watch the show months, maybe even years, after it first airs are going to want a way to engage with the show, to talk about it, learn about it, to essentially recreate the water cooler chatter they long missed out on. And the strength of that second screen engagement is going to play a big role in propelling them from watching just one episode to watching the entire series

It’s worth it because second screen creates an additional advertising platform and thus an additional revenue stream, which more than makes up for the time and effort spent on creating that second screen experience.

But it’s got to start with the showrunners. Third party apps and network apps have their place, but they’re only as good (and desirable) as the content that’s on them. If the experiences around the shows are things fans want to engage with, then they’ll take off. But if it’s just IMDB, Rotten Tomatoes and a Twitter feed, that says “we don’t really care about you” and fans will take their loyalty to a show whose second screen experience indicates that they actually do care about their fans.

Your call showrunners.