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On-Demand TV: Press Play

Can Cable’s Legacy VOD Service Compete With OTT? 6/15/2015 8:00 AM Eastern
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New developments such as TV everywhere, “stacking” and EST are poised to help cable VOD services hold their own against over-the-top rivals.

NEW YORK — Can video-on-demand score with consumers while keeping pace with the momentum generated by streaming rivals Netflix, Hulu and other over-the-top services?

 

Recent announcements — including Showtime’s summer launch of an OTT subscription service — reflect the shift in consumer viewing of quality TV content to the Web in general and mobile devices in particular.

 

As a result, TV everywhere, video-on-demand, digital ad insertion, electronic sell-through and over-the-top streaming are now mission-critical goals for distributors. Meanwhile, advertisers are experimenting with new platforms that are easier for consumers to access — and more difficult for distributors and advertisers to measure and monetize.

 

Some of the television industry’s brightest leaders deconstructed the VOD business at the OnDemand Summit, staged here last week by Multichannel News and Broadcasting & Cable. The conversation revealed major trends in the VOD portion of the TV ecosystem.

 

TVE: PROGRESSING, BUT CHALLENGED

 

The cable industry’s TV everywhere effort — granting pay TV customers online access to cable fare once their payment status has been verified — continues to bulk up on programming even as competing OTT services continue to establish a bigger footprint in U.S. homes.

 

Nearly 10% of U.S. homes subscribe to broadband and an over-the-top video service, but don’t subscribe to a traditional cable bundle, per a recent Parks Associates study, TV Everywhere and the New World of OTT.

 

The firm also forecasted that OTT video-service subscription revenue will climb from nearly $9 billion in 2014 to more than $19 billion in 2019. “While operator attempts at TV everywhere have made little impact, OTT video services are experiencing a boom,” Brett Sappington, director of research at Parks Associates, said.

 

While some industry observers may argue about the significance of the inroads that TV everywhere has made over the past year — the Cable & Telecommunications Association for Marketing reports that more than 55% of consumers recognize and use TVE services from cable networks — it is clear that the category still has an uphill climb to slow down or stop the momentum garnered by the likes of Netflix, Hulu and Amazon.

 

More than 90 networks are offering TV everywhere services on a subscriber-authenticated basis — with MLB Network last week becoming the first sports league-owned network to offer a TVE extension — but CTAM CEO John Lansing said creating a cohesive, TV everywhere message remains a challenge. A simpler subscriber-authentication process is also a factor that has hampered TVE’s development.

 

“The biggest limitation is that TV everywhere is not a consumer-facing brand,” Lansing said. “To communicate the value of the product without a single handle to the consumer is the biggest challenge.”

 

Developing a strong marketing message that spells out to consumers the virtues of TV everywhere offerings will also go a long way toward establishing a richer, deeper relationship with viewers.

 

Sean Riley, president and founder of Sean Riley Consulting, said the industry should use its promotional time to market the various TV Everywhere offerings that exist online and through other platforms.

 

“Once you hook your fans on your great content via digital platforms and VOD, you’ll deepen the relationship with those viewers, and they will come back to your linear channel on Thursday night to watch that big series premiere,” he said.

 

One of the advantages that MVPDs have over OTT services is the ability to offer recent episodes of cable network series almost immediately after they’ve aired on the linear channel, and distributors are beginning to exploit that advantage.

 

‘STACKING UP’ VOD USAGE

 

VOD is allowing viewers who normally wouldn’t have watched a particular show to “catch up” with it — especially if a program has generated buzz on social media or elsewhere — weeks after it premieres.

 

“This is how VOD is changing the economics,” Rentrak vice chairman and CEO Bill Livek Livek said. “After the third day, the majority of viewership is happening; in primetime, content with the Big Five [broadcast networks], in five or seven days, almost half of viewership is cumed up.”

 

The amount of programming available on VOD has helped drive its popularity, especially as full current seasons become more available. Called stacking, the practice of letting current-season eposides pile up so viewers can catch up has been a major initiative for Comcast, which has more than 550 series stacked on its VOD platform.

 

Stacking is particularly effective with serial dramas, where missing one week can discourage a viewer from going back to a linear program.

 

Comcast vice president of video strategy and analysis Steve Meyer added that stacking can make a big difference for some shows. On average, he said, if a distributor has four episodes of a primetime series on VOD, that leads to a 20% lift in the ratings. When that same program is stacked, ratings rise about 40%.

 

Turner Content Distribution executive vice president of brand distribution Jennifer Mirgorod is a strong believer in stacking: Turner this month agreed to stack 15 series from TNT and TBS — basically its entire summer primetime original drama lineup — on Comcast systems.

 

Turner began stacking last year, with shows such as The Last Ship, Murder in the First and Falling Skies, and saw a sharp spike in ratings. Stacked episodes of The Last Ship attracted 30% higher ratings in the 18-49 live-plus-three-day demo on average in Comcast households. For Murder in the First, 18-49 L3 ratings averaged 40% higher through the season in Comcast households.

 

Other networks are also joining the fold. Meyer said that FX has stacked almost its entire lineup with Comcast, and the Fox broadcast network has stacked a double- digit number of shows, as have NBC, CBS and ABC. On cable, AMC has had success stacking shows such as Halt & Catch Fire. Of the top 50 shows on TV, Meyer estimates that 30% are stacked on Comcast systems.

 

“And you’re going to see more,” Meyer said.

 

Mirgorod said that despite earlier concerns, full-season VOD stacking helps drive viewers to the linear show after they’ve caught up. But once they have, they don’t abandon VOD all together; many hop back and forth between real-time showings and on-demand episodes throughout the season.

 

“It’s better to start promoting after a couple of weeks,” Mirgorod said. “It’s that Netflix behavior — people expect a lot of shows to be available at one time.”

 

SUCCESS THROUGH MEASUREMENT

 

New developments in measurement have also boosted the stature of VOD. Rentrak’s Livek said recently that VOD is taking the place of the digital video recorder, which — with the hectic lifestyles of today’s consumers — is even becoming too burdensome to program specific shows. With VOD, customers must merely click a button to watch their favorite shows when and where they want to.

 

And in what should be good news for advertisers and programmers alike, consumers are willing to make a tradeoff , watching advertising embedded in VOD shows (and with fast-forwarding disabled) in exchange for convenience.

 

In Demand CEO Bob Benya, in an interview related to the cable operator-owned content distributor’s 30th anniversary, noted free VOD offerings are growing because of better audience measurement efforts from Nielsen, which is now measuring content with C3 (live programming, plus total DVR playback three days after airing) and C7 ad loads.

 

“Cable operators and others have disabled fast-forwarding, benefitting advertisers,” Benya said. “The networks are getting [monetization] credit for it, and that’s unlocked the rights. Now, you’re seeing a massive catalog available to viewers. The good news is that VOD keeps growing like crazy in terms of users as well as hours of usage.”

 

Along with inroads in advertising and measurement, electronic sell-through of content is a product industry executives are hoping will boost the usage and revenue for the category.

 

While EST, which is the digital sale of movies and TV shows, is still in its infancy, revenue from fi lm and TV titles is expected to reach $2 billion this year, up nearly 30% from 2014, Warner Bros. president of worldwide home entertainment Ron Sanders said at an On- Demand Summit panel session.

 

“It’s a way to keep your consumers inside the cable infrastructure, instead of letting them stream a movie on Netflix or order a movie on iTunes,” Sanders said.

 

Comcast, which launched its EST service in 2013, said the category generated $100 million in revenue during its first year, with 99% of those transactions coming via the remote control, according to Comcast Cable executive vice president and general manager of video services Matt Strauss.

 

One of the things that could entice operators to consider offering EST to its consumers is the continued shrinking of the window between theatrical and EST availability, which is currently around 90 days — well before OTT services such as Netflix and Hulu gain access to films, according to Sanders.

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