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Cable's SVOD Dilemma

16 Sep, 2013 By: Erik Gruenwedel

Media companies and multichannel video program distributors continue to grapple with over-the-top video services and the business model

Time Warner Cable has no interest in rolling out a standalone subscription streaming service similar to Netflix, pending CEO Rob Marcus told an investor group last week. At the same event, Steve Burke, CEO of NBC Universal, questioned whether over-the-top video services represent a legitimate business model.

Two senior executives expressed definitive (if not controversial) opinions on subscription video-on-demand at a time when Wall Street and many media pundits can’t get enough of streaming.

Speaking Sept. 11 at the Bank of America Merrill Lynch Media, Communications and Entertainment Conference in Los Angeles, Marcus said he remained skeptical of over-the-top video services as a viable business model for Time Warner Cable.

“At this point we don’t really aspire to delivering an over-the-top service,” Marcus said. “Our value proposition [to subscribers], is delivering video via our [current] facilities, as opposed to being a retailer of somebody else’s video, which is a somewhat commoditized product.”

The COO said in the foreseeable future TWC would focus on delivering video within its subscriber footprint, which he said would increasingly include out-of-the-home access.

Indeed, last month the company launched software that enables subscribers to access repurposed programming on the Xbox 360.

The No. 2 cable operator continues to implement infrastructure that will enable it to provide service to subscribers without a required cable box. The COO said it remained key that consumers be allowed to access the multichannel video program distributor via technology they were most comfortable with, including the traditional cable box, the Roku streaming player, the Xbox or an Android device, among others.

“Over the next year, we will be knocking down some of the current obstacles that are in the way of not just having [on demand video] being a complementary experience, but also a replacement service,” Marcus said.

He said allowing TWC subs to singularly access video content through a Roku device, for example, still requires encoding local programming networks (about two-thirds completed, Marcus said), closed-captioning, emergency alerts and contractual sports blackouts, among other issues.
“Sometime over the next year or so we’ll be in a position to deliver that box-less [option],” he said.

While it may appear to be a Netflix world, the business of over-the-top video distribution is apparently a non-starter to NBC Universal’s Steve Burke.

“Personally, I’m skeptical over-the-top is a good business,” Burke told attendees. “I’ve looked at it many, many times, and with or without high-definition, 4K or new technologies, I’m not sure [OTT] is a real business.”

The executive’s comments seem strange since NBC Universal for some time has generated significant incremental revenue licensing content to OTT services such as Netflix. The media company also licenses content to Hulu Plus (which it co-owns) and Amazon Prime Instant Video, among others.

Then again, he could have been referring to Xfinity Streampix, Comcast’s proprietary subscription video-on-demand service that allows the cable operator’s users to access back seasons of TV shows and movies on
connected devices for a $4.99 monthly charge. Comcast has revealed little data on Streampix, including subscriber retention.

A NBC Universal representative was not available for comment by press time.

Meanwhile, releasing past seasons of popular series such as “The Walking Dead,” “Breaking Bad,” “Hell on Wheels” and “Mad Men” on disc and SVOD weeks before their next-season broadcast premieres is a strategy AMC Networks won’t abandon anytime soon, said CEO Josh Sapan.

Speaking at the same Bank of America Merrill Lynch Media, Communications and Entertainment Conference, Sapan said the idea is to lengthen as much as possible the window for multichannel video program distribution (MVPD) partners, while at the same time creating momentum at the retail and streaming channels as well.

“If you want to watch it when it’s happening, you have to watch it on MVPD for just about a year, and if you want to catch up, you can do that on a Netflix-SVOD opportunity,” he said.

Sapan said the release schedule strikes a balance between pay-TV and alternative distribution channels.

“It is fair to say, [the strategy] has had the effect of bringing new people to our shows who have not caught up on the linear premieres,” he said.

Indeed, ratings for the final installments of “Breaking Bad” are tracking nearly 100% higher than for last year’s season.

“We are pleased with the performance of ‘Breaking Bad’; it’s continued on an upward trend,” Sapan said, adding that its success is a testament to the multiplatform distribution strategies as well as the creative team behind the story of a high school chemistry teacher with cancer who begins manufacturing and selling crystal meth.

AMC has given the green light to “Better Call Saul,” a “Bad” spinoff featuring ethically challenged lawyer Saul Goodman, played by Bob Odenkirk. The final season of “Bad” concludes its initial broadcast run Sept. 29.

Indeed, Sony Pictures Home Entertainment will release a collector’s edition Blu-ray Disc set of “Breaking Bad” Nov. 26, packing the 62 episodes on 16 discs and including more than 55 hours of bonus features, all in a collectible, replica barrel.

Sapan said he is pleased with consumer response to packaged-media releases of “The Walking Dead,” including the third season on Aug. 27. The fictional account of post-apocalypse survivors outside Atlanta dealing with roving armies of zombies has generated AMC’s highest-ever ratings.

The CEO said AMC worked with the show’s home entertainment distributor, Anchor Bay, to capture the essence of the show in special features and packaging.

Indeed, The Walking Dead: Season 2 and the boxed set’s special features are nominated for Home Media Magazine’s Reaper Awards.

“We are owners of the show, so we are the beneficiaries of its consumption on multiple platforms around the globe,” Sapan said. “We do treat it with great care, and if one examines every [retail] incarnation, the recent DVD [and] Blu-ray Disc packaging was actually sort of exquisite, fanciful and engaging.”

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