Multiplatform Plays Strengthen Multichannel Players

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Looking back at 2010, one of the biggest stories of the year about the changing use of video in 2010 may well have been reports showing that multichannel subscribers declined in the 2nd and 3nd quarters of 2010.

The losses were small—only 216,000 in the 2nd quarter
and 119,000 subs in the 3rd, according to SNL Kagan —
but they were the first declines their tracking service had
ever reported and the news prompted widespread pronouncements
that over-the-top video had fi nally emerged
as a serious competitive threat, capable of wounding if not
wrecking the traditional multichannel business.

Proponents of that theory pointed to the fact that Netflix
subscribers already account for 20% of the downstream
traffic on fixed line networks during peak hours, according
to a report issued in the fall of 2010 by Sandvine. With
comScore reporting that 172 million American engaged in
more than 5.2 billion online video viewing sessions during
the November 2010 alone, online and over the top-video
seemed poised for even more explosive growth in 2011.

Viewer Watch 2010

VIEWING ON RISE

Less publicized was an equally impressive bit of data. “Last
year [2009] the total viewing per person per week was
around 33.7 hours,” notes Jack Wakshlag, chief research
offi cer for Turner Broadcasting System. “This year [2010]
it will be 33.9 or 40 hours a week. And, TV viewing isn’t
just growing. It is at an all-time high.”

In fact, as alternative ways for consumers to watch video
online or on mobile devices have proliferated over the last
decade, the amount of overall TV viewing in U.S households
grew by over an
hour a day between the
1999-2000 TV season and
the 2009-2010 TV season,
notes Matt O’Grady, executive
VP of product
leadership at Nielsen.

Very importantly, this
growth has occurred for
all age groups, including
the younger groups that
are supposedly ready to
abandon traditional multichannel
TV. Television
viewing by those aged
18 to 24 increased from
3 hours and 4 minutes
a day in the 1999-2000
season to 3 hours and 49
minutes in the 2009-2010 season, a 24% jump.

The simultanious growth in the online, mobile and traditional
TV viewing, O’Grady adds has strengthened the
whole industry. “It is the old analogy of the incoming tide
raising all boats,” he notes. “Online video has not cannibalized
traditional TV usage.”

Other research suggests it maybe strengthening the industry
because heavy users of alternative video platforms
are also big consumers of traditional TV.

For example, a recent Cable & Telecommunications
Association for Marketing (CTAM) study focused on the
11% of the population that have used TVs connected to
the internet to watch a TV show or a movie from an online
source within the last month. “We found that 92%
were subscribers to pay
TV services and only 3%
said they were planning
to transition way from
paying for a TV service,”
notes Char Beales, president
and CEO of CTAM.
“It showed these people
just want more video.
In fact, 84% said they
were watching the same
or more regularly scheduled
TV programming
and that they were regularly
seeking out regularly
scheduled TV programs
that they had discovered
on the Internet.”

That view was confirmed by a recent study
by Frank N. Magid Associates,
which found that
at least 40% of Americans
are watching TVs
and movies online but
that only one percent had
cancelled their pay TV
subscriptions in order to
access content on the Internet.

Brian Weiser, executive
VP, director of global
forecasting at Magna Global, who has been tracking online
video technologies for years, adds that while over the
top video is an important trend, it will remain a relatively
small part of the TV business for years to come.

Magna Global, for example, is projecting that there will
be about 110.3 million digital multichannel homes in 2015
and only about 5.9 million subscribers to over the top video.
Likewise, in 2015 advertisers will spend about $73.2
billion on TV but only $3.4 billion for online video. In 2010,
online video advertising will bring in about $1.4 billion
compared to a total TV ad spend hit $57.2 billion.

“Compared to overall TV advertising, online video today
is still almost a rounding error,” Weiser says.

Some multichannel providers that have been aggressive
in providing video across multiple platforms would also
argue that they’ve been less affected. DirecTV, which has
rolled out a whole-home DVR and made its NFL Sunday
Ticket available on TV, online and mobile, had 18.9 million
subs at the end of the 3rd quarter, up from 18.4 million
a year earlier.

“We’re positioning ourselves to offer content across all
platforms, just like what we’re doing with NFL Sunday
Ticket,” notes Derek Chang, executive vice president, content
strategy and development, DirecTV, who adds the firm
also expanded VOD, HD and 3D offerings.

AT&T’s president of content, Dan York, says U-verse offers
subscribers 100,000 titles online on demand. “We were the
first to offer a single integrated app for mobile in August
[of 2010] where you can control and consume your content
right now on 10 selected smart phones.”

“We’ve added more subscribers than any other provider
in the country for the past five straight quarters,” York
notes.

CABLE’S ‘AGNOSTIC’

Cable operators aren’t about to be left behind. In addition
to putting up around 30,000 titles on its traditional VOD
platform, Comcast is now offering over 150,000 titles
online to its subscribers. It has also launched several
mobile apps and in a few weeks the MSO will be making
content available to iPads, notes Matt Strauss, senior VP
and general manager for Comcast Interactive Media.

“Our point of view is almost to be platform agnostic,”
Strauss notes. “If a customer wants to watch on a computer,
an iPad or a TV, we want to give them that capability
and flexibility of choice.”

Such moves are making the old polarized debate over
the impact of online and over the top video on the traditional
multichannel business increasingly irrelevant,
some researchers argue.

“The argument about over the top video is now kind
of sterile,” notes Howard Horowitz, president of Horowitz
Associates. “When you hear people saying people will
continue to watch regular TV that is a meaningless statement.
Of course they will. The question is who will and
how many. And when you hear that people will go over
the top that’s meaningless as well. You need to know the
demographics, the number of people, what they want to
watch. The reality is that both sides of the eco system are
expanding. In the end video is simply expansive.”

The key for operators, Horowitz believes, will be embrace
the changing use of video and use it to strengthen
existing business and build new ones. Th ose emerging
multiplatform business models are the subject of the next
section.

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