ESPN, Disney OTT Service Offerings Seen as Tip of Programming Iceberg
Most or all major programmers are moving toward their own over-the-top video offerings by decade's end, following HBO Now, CBS All Access and -- as announced this week -- ESPN and Disney streaming services (see 1708080065), experts said.
All major broadcasters will have gone this route within two to three years, Imagine Communications CEO Charlie Vogt told us, saying AT&T likely would do the same with Time Warner content if that buy goes through, especially since there no longer are huge technology hurdles to going direct to consumer. He said ESPN's streaming offering might be the first outward sign of content companies seeing Netflix as a competitor, not a partner.
Customer data has become a key competitive asset in the media world, and content companies are trying to get direct access to customers, said Carnegie Mellon information technology and marketing professor Michael Smith. He said Disney's decision to go direct to consumer is easier because of the strong brand, but it's a harder play for others that never needed to establish a strong brand connection between studio and content.
Not everyone sees programmers rushing to OTT. For those that have services readily available on skinny virtual MVPD bundles and are seeing those bundles growing subscribers, "Maybe they say that's where I want to be," said Mediacom Group Senior Vice President-Legal and Public Affairs Tom Larsen. Given the investments involved, smaller content companies are highly unlikely to try to go directly to consumers, and it's not even clear ESPN can get enough people to sign up to justify such an investment, said Rahul Telang, Carnegie Mellon professor of information systems and management. He said some streaming platforms may end up consolidating: "When the dust settles, this will come down to two, three, four platforms."
Programmers moving to OTT could be a boon for MVPDs. They want to be content aggregators, but becoming an app aggregator "is fine, too," especially since it only helps in selling broadband subscriptions, Larsen said. When programmers go OTT, they start dealing with consumer complaints about costs and content that traditionally were aimed at MVPDs, cable consultant Steve Effros said.
Such a move also could sizably change the MVPD-programmer power dynamics in retransmission consent dealings, officials said. Larsen said Altice's recently encouraging its subscribers to move to CBS All Access amid talks with a CBS affiliate "was a perfect example of how one can be a substitute for the other." More programmers going direct to consumer also could mean more retrans disputes and more MVPDs opting to quit carrying particular networks, he said: "If there is a universal way for [subscribers] to get the service outside my packaging, maybe that's a better solution." As more of the big four go to OTT, it will make existing bundling arrangements harder to enforce, Larsen said.
Industry is partway through the early days of big pivots in strategy, with those early days starting in 2010 with the launch of Hulu and HBO Go, said University of Michigan communications studies professor Amanda Lotz. For the next five years, the legacy pay-TV business stepped back and watched, while prepping for such moves as the launch of HBO Now and CBS All Access, and it's hard to say whether the ESPN announcement is part of that pivot wave or something altogether new, she said. FCC moves on net neutrality make it harder to predict who will benefit and lose in an era of changing consumption patterns because a rollback of Communications Act Title II regulation could open the door to preferential treatment of affiliated content, Lotz said.
Not everyone is cutting the cord, and the market is moving to having various options for different consumers, Lotz said. Programmers going to OTT is actually "the begriming of the resurrection of the bundle," Effros said. After a couple of years of experimentation with OTT and a la carte options, significant numbers of consumers "will eventually say 'I prefer the buffet,'" Effros said. Reconstituted bundles will be skinnier as programmers ax networks that don't find a following online, he said.