[opendtv] Techhive: Pay TV as we know it will be dead by 2025, and this is how it will happen
- From: "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>
- To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
- Date: Tue, 30 Sep 2014 01:22:34 +0000
This piece starts out sounding a bit like Craig, putting a lot of emphasis on
the original content generated by Netflix. But don't be fooled. It goes well
beyond that simple little aspect. The more important point is that content
owners, those happily selling to the OTT sites now, are or will be the same
owners selling to traditional MVPDs. Content owners now selling exclusively to
the MVPDs are taking notice.
Here are a few meaningful quotes:
"These days a production company, rather than a talent shop, is often
responsible for assembling such packages. So if a writer and her agent can't
sell a concept directly to a network, they may go directly to a production
company like Sony TriStar. If the people at the production company like the
idea (and have relationships with other talent who would be good for the
project), they may put money behind it, and try to sell it to a network.
"Or in the more modern version of the story, they'll pitch it to a Netflix,
Amazon, or YouTube."
And they have, as the article points out.
And:
"The beginning of the end for linear, scheduled TV will come when the Internet
players have too many subscribers for the content rights holders to ignore, Lai
says. When that happens-and it may happen more quickly than many people
expect-the content owners will begin to break their exclusive content
agreements with the pay TV carriers. Instead, they'll begin streaming their
shows on their own websites, on video services like Amazon and Netflix, and via
apps on platforms like Roku and Apple TV."
(Where have we heard that before?)
And:
"Right now, the old deals are still in place: Content owners are honoring their
exclusivity agreements with pay TV operators. Sure, you can watch lots of HBO
video on mobile devices using the HBO Go app, but not before showing proof that
you've already paid your cable company for HBO service. However, content
owners, led by sports leagues, are starting to flirt with models that dismantle
the fortresses built by cable and broadcast TV companies."
Content owners are doing this, because they see that consumers are demanding
it, Craig. Nothing to do with the FCC forcing any business model on anyone,
Craig. The FCC can no more force a TV content distribution model on the owners
of content than they can force people to subscribe to MVPD bundles.
Bert
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http://www.techhive.com/article/2052185/pay-tv-as-we-know-it-will-be-dead-by-2025-and-this-is-how-it-will-happen.html
Pay TV as we know it will be dead by 2025, and this is how it will happen
Mark Sullivan
@thesullivan Oct 8, 2013 3:00 AM
Look into your TV screen. You're watching the 2025 Emmy Awards preshow
coverage, and absolutely nothing looks familiar-unless you remember a pivotal
moment from the 2013 version of the TV industry's awards spectacle.
Victory Kinsky and Mia Hyndrix, 2025's most talked-about women on Popsugar,
stride up the red carpet with practiced nonchalance. They're at the show
representing Amazon Prime's hugely popular Harlot series. Martin Henry,
meanwhile, can't conceal his joy at being nominated for Best Male Lead in the
YouTube reality show Meat House. Verizon execs are also at the ceremony, lined
up in tuxes to see if Charlotte Wisk will win an Emmy for her hit one-hour
comedy special "Two-Headed Dog."
And Netflix content chief Ted Sarandos watches quietly, knowingly, from the
sidelines. He's been here before, and his company leads the nomination count
again in 2025 with 31 nods of recognition.
Meanwhile, viewers with long memories ask each other, "How did we get here in
so short a time?"
What could possibly happen between now and the year 2025 to transform
"over-the-top" video services like Netflix and Amazon into some of the most
powerful players in TV land-and conversely, to recast today's biggest networks
as supporting actors?
After receiving 14 Emmy nominations this September, Netflix shows took home
only one major award-a somewhat disappointing showing after "Netflix is taking
over the Emmys" had echoed through the trade press in the weeks before the 2013
awards. But Netflix's one win is hugely important because it marks the first
time ever that a show that may never appear on a television network captured a
major-category Emmy award.
Indeed, one day we may all look back at the 2013 Emmys as the night online TV
hit a tipping point. Netflix's nomination success is a powerful sign of an
industry in transition, retooling itself to produce and distribute content that
is streamed, not broadcast. As Netflix's Sarandos told an industry trade group
this summer, "We're leading the next great wave of change in the medium of TV."
Internet TV is following cable's path to stardom
Internet TV is evolving faster and growing faster than cable did in its heyday.
And much of that growth is spurred by critical acclaim and audience support for
streaming-only original shows like Orange is the New Black and House of Cards.
By the time the Emmys began accepting nominations for cable shows in 1988,
about 40 million households were already subscribing to cable service. But no
cable show won a major-category Emmy until 1999, when HBO's The Sopranos won
the award for Best Drama Series. By then, roughly 50 million households had
cable (although that number has since retreated to around 42 million).
Now let's look at Internet TV. When streaming TV shows became eligible for Emmy
nomination in 2008, Netflix had only about 3 million customers for its
streaming service, and Amazon and Hulu had a relative handful each. But from
that starting point, it took an online video company-Netflix-just five years to
win a major category Emmy (House of Cards director David Fincher won a "best
direction" award this September). At the end of the first half of 2013, roughly
55 percent of the U.S. population (age 13 and up) had some type of streaming
video subscription, says research house NPD. Of that total, 38 million
subscribe to Netflix, at least 7 million watch the Amazon Instant Video
service, and Hulu counts more than 4 million Hulu Plus subscribers.
Nielsen
Traditionally, streaming video services have focused mostly on volume, offering
as much high-profile Hollywood content as possible. But they're now entering a
new phase where the focus is shifting toward providing original content. "The
phase where everything they did was to reach a critical mass of subscribers is
over," says Albert Lai, CTO of online video platform company Brightcove. "With
the switch to original programming, that's when we see them starting to shake
things up in the industry."
Netflix has been operating as if it were a Hollywood network for some time now,
but it has only recently begun speaking out about it. In its "Long Term View"
statement to investors, Netflix refers to itself as a "movie and TV series
network."
The company is behaving like a network, too. Many people in the Hollywood
establishment were shocked when Netflix bought two seasons of House of Cards
for $100 million-and for good reason. "Netflix overbid for House of Cards. That
in and of itself may not be sustainable," says IDC digital entertainment
analyst Greg Ireland.
But Netflix's content chief Ted Sarandos has been very public about his desire
to make a grand entrance as a new kind of content buyer, and he proved it by
paying the asking price for Oscar-level acting, producing, and directing talent.
Ted Sarandos: 'We're leading the next great wave of change in the medium of TV.'
Whether Netflix's investment in House of Cards will pay off in real dollars is
anyone's guess, but the company reported that it had picked up 3 million new
streaming subscribers during the quarter when House of Cards debuted. If all
of those additions were spurred by the new show, Netflix very quickly recouped
almost a quarter of its creative investment.
Perhaps more importantly, House of Cards and the latest Netflix exclusive,
Orange is the New Black, have made it into water-cooler chitchat everywhere.
"Just like people used to talk about cable-produced shows like The Wire and
Entourage at work, they are now talking about shows like House of Cards,
produced by Netflix," says Brightcove's Lai.
At any rate, 14 Emmy nods and one major-category win give Netflix a sheen of
credibility, and will certainly encourage Netflix and other streaming-only
content providers to offer more original shows in the future. Netflix has
already announced it plans to double its volume of original content it will
stream next year.
Amazon has a good shot at a place in the water-cooler small talk as it debuts
its nerd comedy series Betas, and its Capitol Hill comedy Alpha House (written
by Garry Trudeau of Doonesbury fame). Amazon will also release three children's
shows: Annebots, Creative Galaxy, and Tumbleaf.
Not to be left out, Hulu and Lionsgate are now working with Brad Pitt's Plan B
Productions to make Deadbeat, a "supernatural comedy" series.
How the TV sausage gets made
As streaming-only players like Netflix and Amazon enter the content space, the
traditional production pipelines for TV shows are becoming less relevant. In
the past, television writers, producers, and network suits followed the same
rules and worked in concert. But now long-exclusive relationships are suddenly
up for grabs.
Craig Anton: 'With the emergence of online content, it's become the Wild West
again.'
"With the emergence of online content, it's become the Wild West again," says
Craig Anton, a comedian/actor who has appeared in Showtime's Weeds and AMC's
Mad Men. "Everyone is taking meetings with everyone," is a phrase you hear over
and over when talking to people within the industry today. But Anton says one
thing remains constant: The way to sell shows-whether to ABC or to Netflix-is
by pitching them with hot, battle-proven writers and producers, or with an
A-list star (like Kevin Spacey in House of Cards) attached. "The more firepower
you can bring to the networks, the better the chance of success," Anton says.
This "packaging" technique, Anton explains, became the norm back in the 1980s,
when Hollywood talent agencies began serving as a one-stop shop for their
friends at the networks. Because these agencies managed not just actors but
also writers and producers, they could carefully assemble just the right mix of
talent to a show concept and then pitch it to a network as a fully baked idea.
These days a production company, rather than a talent shop, is often
responsible for assembling such packages. So if a writer and her agent can't
sell a concept directly to a network, they may go directly to a production
company like Sony TriStar. If the people at the production company like the
idea (and have relationships with other talent who would be good for the
project), they may put money behind it, and try to sell it to a network.
Or in the more modern version of the story, they'll pitch it to a Netflix,
Amazon, or YouTube.
Nerds in Hollywood
Netflix's Emmy recognition notwithstanding, the streaming media services still
face challenges on their way to becoming visible, viable players in the
Hollywood content pipeline. Anton considers it likely that Netflix has been
holding meetings with various agents, managers, and production companies around
town to make its intentions known, and to appear on the radar of writers,
producers, and actors. Judging by the shows and talent Netflix has already been
able to attract, it must be doing something right. (TechHive reached out to
Netflix for comment, but received no reply.)
Netflix became interested in the women's prison comedy/drama Orange is the New
Black mainly because the series showrunner, Jenji Kohan, had a very hot name in
Hollywood as the writer/producer of the hit series Weeds, which ran for eight
seasons on Showtime. Kohan, who says she loved Piper Kermit's novel Orange is
the New Black, called Lionsgate contacts immediately after finishing the book,
and asked them to "get it for her." They did, and Kohan began adapting the book
for TV.
Jenji Kohan (speaking in an NPR interview): 'I think it is the future in a lot
of ways, of how people consume media, and it's great to be in there early.'
When Kohan was done writing, she went shopping for a buyer. "I took it to HBO
and Showtime and Netflix," Kohan told Terry Gross of NPR during a Fresh Air
interview. "And the greatest thing about going to Netflix was that I pitched it
in the room, and they ordered 13 episodes without a pilot. That's miraculous.
That is every showrunner's dream, to just 'go to series' and have that faith
put in your work. They paid full freight. They were new; they were streamlined;
they were lovely; they were enthusiastic about it."
And then there's House of Cards, produced by an independent studio called Media
Rights Capital (Elysium, Babel), which had bought the rights to the source
material for the show-a 1990 BBC miniseries set in Parliament-on the advice of
an intern who worked there. The studio then pulled in director David Fincher
and writer Beau Willimon to work on creating a new series.
Though it originally expected to sell the show to a cable network, Media Rights
Capital put out feelers to Netflix's Sarandos to see if he was interested in a
licensing deal. Indeed he was, and the Netflix boss made a move that surprised
everyone. The production house thought Netflix might be interested in streaming
House of Cards episodes after they had run on cable TV, but Sarandos offered
$100 million for exclusive rights to 26 episodes.
Given the company's reputation for deep pockets and a hands-off approach toward
content creation, a meeting with Netflix has become a highly desirable get in
Hollywood.
Why we're witnessing the beginning of the end
Have the streaming content companies proved anything other than that they can
outbid traditional networks for hot shows? Is there something about Internet TV
that both consumers and the Hollywood establishment prefer over the scheduled
TV we're used to getting from broadcast and cable networks? The numbers seem to
suggest so.
"Over-the-top video is not small anymore," says Brightcove's Lai. "Netflix has
100 million subscribers, 38 million of those are [U.S.] streaming customers.
Apple has sold 13 million Apple TV devices. Compare that to the cable
operators. The biggest of them, Comcast, has no more than 22 million
subscribers. All the pay TV operators combined have about 95 million
subscribers."
Albert Lai: 'Over-the-top video is not small anymore.'
The beginning of the end for linear, scheduled TV will come when the Internet
players have too many subscribers for the content rights holders to ignore, Lai
says. When that happens-and it may happen more quickly than many people
expect-the content owners will begin to break their exclusive content
agreements with the pay TV carriers. Instead, they'll begin streaming their
shows on their own websites, on video services like Amazon and Netflix, and via
apps on platforms like Roku and Apple TV.
IDC's Ireland believes we may be moving into a period when people will have to
choose between pay TV subscriptions and online video subscriptions. "You'll
have a lot of consumers deciding whether Orange is the New Black or House of
Cards outweighs Game of Thrones or Breaking Bad," Ireland says. "They will buy
one or the other, but not both. They may decide the Netflix shows are more
important, but then they might watch all of those shows and then go back to
Comcast."
Absent their traditional monopoly on premium TV content, cable and satellite
companies won't have much left to entice new subscribers or retain existing
ones with. Content costs are high, and companies like Comcast and Time Warner
Cable must pass those costs on to customers to earn a profit. When consumers
can get much of the same content on the Web à la carte, the sound of cords
being cut should begin to get very loud.
A Nielsen report last month showed that 88 percent of Netflix members and 70
percent of Hulu Plus members say they've watched three or more episodes of the
same TV show in one day.
Right now, the old deals are still in place: Content owners are honoring their
exclusivity agreements with pay TV operators. Sure, you can watch lots of HBO
video on mobile devices using the HBO Go app, but not before showing proof that
you've already paid your cable company for HBO service. However, content
owners, led by sports leagues, are starting to flirt with models that dismantle
the fortresses built by cable and broadcast TV companies.
Why online TV will destroy cable
The main reason online, on-demand TV will eventually overcome closed-network,
scheduled TV is simple: People want to choose when they watch their favorite TV
shows. They don't want to be locked down by a rigid network schedule. Pivot to
the Internet, which respects schedules about as much as it respects geographic
borders.
Advertisers are motivated to support streaming content, too. Unlike broadcast
and cable TV, streaming video is relatively easy to quantify. A service like
Netflix, for example, can provide advertisers with precise numbers on audiences
sizes and viewer demographics.
"For advertisers, IP may have a slight advantage because it's easier to know
what person the content is being delivered to," says IDC's Ireland. "Set-top
boxes are communal devices, so advertisers can't really know who is sitting
around watching the program running through the set-top box."
The lack of à la carte programming has long been the bane of pay TV subscribers
everywhere. For a variety of reasons that we won't get into here (read the
cable association's explanation), pay TV operators have always sold big bundles
of channels to subscribers, while denying customers the opportunity to choose
and pay for just the ones they want to watch. Sites like Netflix and Amazon
have no channels to bundle. You pay a monthly subscription fee in exchange for
the right to browse, search, and stream thousands of titles.
Streaming media companies should also benefit from the wild popularity of
serial dramas. Indeed, the TV content we love the most just works better on
streaming TV platforms. Think about it: The modern serial drama isn't so much a
TV show with a series of loosely connected episodes as it is a 13-hour movie
broken into 13 hour-long segments. That model is perfect for binge viewing, and
nothing facilitates binge viewing better than Netflix.
Netflix
Many Netflix subscribers 'binged' on the prison comedy-drama 'Orange is the New
Black.'
And people like to binge. According to a Nielsen report last month, 88 percent
of Netflix members and 70 percent of Hulu Plus members say they've watched
three or more episodes of the same TV show in one day. Viewers in the
millennial generation are embracing streaming video like no other demographic,
and they're not necessarily glued to a 46-inch screen in the living room.
Nielsen says the amount of time spent in front of TV sets by people in the
12-to-17 and 18-to-24 demos has consistently decreased since 2011. And since
these demographics are prized by advertisers, Hollywood will be forced to
deliver its content where viewers want to receive it.
The content owners call the tune
TV's migration to the Internet is ultimately a matter of evolution, not
revolution. There will be no explosions, no network chiefs diving out of
windows onto Wilshire Boulevard. That's because the TV content owners-networks
like NBC and HBO, big studios like Sony TriStar, and cable network
conglomerates like Viacom-hold the cards today, and they will still hold the
cards when Internet TV becomes the norm.
They own the TV shows. Everything else is just distribution.
Content owners were terrified by the gutting of the music industry by Steve
Jobs and the Internet during the 1990s and 2000s, and they will make sure the
same thing doesn't happen to video. Content owners will continue to nervously
restrict the ways TV content can be distributed and consumed-until it makes
financial sense not to.
Content owners and their exclusive distributors (cable, satellite, and telco
TV) have carved out a big slice of our monthly paychecks for themselves-$86 a
month on average, according to NPD Group, though NPD says the number could
reach $200 per month by 2020 due to the rising cost of content (and that's $200
just for video content, without broadband or phone service). Over the next
decade, as TV distribution moves from traditional platforms to streaming
platforms, content owners will make sure they get their usual share of that
money.
Kevin Spacey (writing in The Guardian): 'So you have this incredible confluence
of a medium coming into its own just as the technology for that medium is
drastically shifting. Studios and networks who ignore either shift will be left
behind.'
If cable and satellite companies are forced out of the business of buying and
distributing content, they'll naturally fall back on the business of operating
broadband networks. They are, after all, the de facto postal service for
delivering streaming content, charging both senders (Netflix et al.) and
receivers (consumers) to carry video streams into tablets, laptops, and
living-room TVs.
It's not a bad business to be in, says cable industry analyst Craig Moffett.
"Being a dumb pipe would actually be a more attractive future for the cable
operators than their current business," he wrote in a recent note to investors.
"Their competitive advantage is in distribution infrastructure, not in
packaging and marketing."
And here's the tragicomic punchline: When TV shows flow into our households
through a broadband pipe instead of through a cable, the service may come with
a "suggestion engine" instead of a "programming guide," and the brand names on
the devices might be different. But we'll almost certainly pay every bit as
much for the content itself as we do today-if not more.
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