MVPDs Training Viewers to Expect High Content Quality at Low Cost, Needham Says

Cord-cutting trends and network experimentation with lower advertising loads only explain some of the declining market values of large public content companies -- a $57 billion drop over the past 13 months, a Needham analyst wrote investors Wednesday. Investors also worry that multichannel video programming distributors are undermining their own revenue growth by putting identical content on less lucrative distribution platforms, said Laura Martin. Content companies putting their content also on digital platforms with low or no ad loads "are undermining their most valuable asset -- the dual revenue stream business model of linear TV -- because they retrain a consumer to expect high content quality at a significantly lower cost to that consumer," she said. When VOD contains full ad loads that can't be fast forwarded through, those viewers "are more valuable" than DVR views, she wrote. Meanwhile, 15 percent of ads are being blocked by consumers, and Apple's announcement this fall it would enable ad blocking apps points to accelerated adoption of consumer ad blocking, Needham said. But ad blocking "makes it less likely that the online video ecosystem will be a successful disrupter of the TV ecosystem," said the analyst, saying any possible demise of TV will come from incumbent companies shifting viewing identical content from high-value linear TV viewing hours to lower value digital platforms. A la carte channel offerings ultimately will likely account for less than 10 percent of total U.S. TV revenue "owing to the 'tyranny of choice,'" Needham said: "Too many choices overwhelm consumers and often leads to lower customer satisfaction levels or, worse, stops them from buying anything at all."