Studios, Networks Like Some Aspects of Web Video, Investors Told

The nascent online video distribution market could be good for content owners because it adds competition among distributors seeking access to their programming, studio and network executives said last week at a Bank of America investment conference.

"Every day the value of content goes up,” said Joe Ianello, CBS chief financial officer. “I don’t see any way it can be viewed negatively to have new entrants and more demand in the market for content and people paying up.” A recent deal with Epix for Netflix to expand its online streaming catalog is evidence of how much new distributors value programming rights, said Tom Rothman, co-chairman of Fox Filmed Entertainment. “Any time another company puts a billion-dollar valuation on something that’s less good than something that you have, it’s a good thing."

Studios aren’t rushing to license their movies and shows to these new platforms, partly because they have long-term deals with other distributors. Long-term agreements of Warner Bros., Universal and Fox give HBO digital rights to new movies, said Barry Meyer, chairman of Warner Bros. “We're very happy with our relationship with HBO,” owned by Warner Bros. parent Time Warner, “and they pay us a lot of money for those rights,” he said. Warner Bros. welcomes new competition into the market “but only to the extent that those new participants don’t upset and don’t diminish the economic infrastructure that is in place and that affords us the money to make this stuff in the first place,” Meyer said

Part of the problem with online video viewing in the TV Everywhere model is measurement, said Discovery Communications CEO David Zaslav. “We have to make sure we can measure it and we have to have a discussion with the distributors about what value exchange there is to move our content on to other platforms,” he said. “We have been very careful about not putting our content on other platforms when the economic model doesn’t support it.” Online, Discovery has been more aggressive in social media than in video distribution, Zaslav said. Social media can be a very effective way to promote its shows on pay-TV platforms, he said. “We do not want to encourage people to consume our content on platforms that cannot be measured or monetized,” Zaslav said. “In the end it’s not a sustainable model for creating quality content."

Disney is willing to distribute video online, but it needs to keep control over the content, so exclusive arrangements won’t work, said CFO Jay Rasulo. “We never want to lose our ability to go directly to the consumer and have our own relationship.” Disney is experimenting with distribution models, including Apple’s 99-cent rentals for TV episodes, because there’s no clear frontrunner in online distribution, he said. “I don’t think we have any specific … insight as to what’s going to emerge as the most consumer-demanded form of watching content,” he said. “We have really tried to be across the spectrum."

The willingness of Netflix to pay for online streaming rights could raise prices for other premium pay-TV aggregators such as HBO, but studios aren’t about to raise rates on their traditional partners, Rothman said. “You don’t usually pay less when there are other competitors,” he said. “But I want to be very clear, that is not our intention or ambition at the moment.” Now that the FCC has approved the selectable output control waiver (CED May 10 p1), studios and cable operators will probably start experimenting with new premium VOD offerings next year, Meyer said. Questions about pricing and the amount of time after movies are released in theaters before they're available on the new VOD platform still need to be worked out, he said. “My own view is that a 30-day window after theatrical is way too short. But I don’t think there has been any conclusion on the window or the price.”