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Where Are the OTT Video Subscribers?

29 Feb, 2016 By: Erik Gruenwedel

OTT is the wave of the future, analysts have been saying.

Pay-TV has been hemorrhaging video subscribers. Upstart demos called “cord-cutters” and “cord-nevers” have exceeded 10 million households, mandating rollout of standalone OTT video alternatives to the bloated pay-TV bundle.

Now, a year after the “build-it-and-they-will-stream” mindset helped launch Sling TV, HBO Now, PlayStation Vue, Showtime OTT and Spectrum TV Plus, among other services, some analysts are saying newcomers are off to a slow start.

When HBO Now bowed last April, CEO Richard Plepler said the $15 monthly service would quickly attract 1 million to 2 million “low-hanging fruit” consumers.  Yet, 10 months later the service has 800,000 subs, Plepler disclosed on the Time Warner fiscal call.

"I wouldn't say only 800,000 subs," Plepler said. "We're just getting started … I think we're going to make a lot of progress."

Industry reports say Sling TV has 600,000 subs. RLJ Entertainment’s Acorn TV has 150,000 paying members, while Cinedigm’s Dove Channel has 22,000. Comic-Con-themed CONtv has 100,000 downloaded apps and an undisclosed number of actual subscribers. Sony’s PlayStation Vue remains limited to select markets and CBS hasn’t revealed data for Showtime OTT and and stimates peg CBS All Access at 500,000 subs.

Research analyst Bruce Leichtman characterized the sub data as disappointing but not surprising considering he’s found that 57% of households subscribe to Netflix, Amazon Prime Video, and/or Hulu Plus. Overall, 48% of adults stream any of these services on a monthly basis.

“You have to keep in mind that HBO Now and Sling are both in their first year of existence,” Leichtman told The International Business Times.

Plepler said HBO Now is just one component of the premium channel’s growth strategy targeting incremental subscribers and revenue in-and-out of the pay-TV ecosystem. He said there are no plans to lower the SVOD service’s $14.99 monthly price — the highest among all streaming services.

“We think our [Now] price makes sense, and we’ll access it as we go forward. But what we’re seeing is an enormous amount of [HBO] growth in [the pay-TV] ecosystem,” Plepler said, adding that HBO has grown domestic subscribers by 8 million over the past four years, and is open to incorporating the brand in any distribution channel.

“There’s growth opportunities for [pay-TV distributors] and parenthetical growth opportunities for us. That’s what we’re excited about.”

Indeed, HBO has more than 40 million subscribers bundled with their existing cable service. Wedbush Securities media analyst Michael Pachter argues that if HBO offered its service as an add-on to Amazon Prime (versus licensing catalog programing), millions would adopt it. 

“It’s really hard to gauge the overlap between cable households and Hulu/Netflix, but I think it’s substantial,” Pachter said. “In other words, most Hulu/Netflix customers who want HBO already have it, so HBO Now is not necessary.”

Regardless, OTT video for many of the smaller or newer players remains a work in progress, according to John Martin, CEO of Turner Network Television (TNT), which is a sister company to HBO at Time Warner. The media company offers five networks to Sling TV, Spectrum TV Plus and PlayStation Vue.

Speaking Feb. 23 to an investor group in New York, Martin characterized Sling TV as an “interesting and innovative” offering to a particular market segment, and one that is not necessarily intended for mass appeal. He said the arrival of additional online TV bundles offers incremental revenue opportunities to media companies.

The executive said TNT, HBO and Warner Bros. would be working more closely with non-traditional distributors, helping to build businesses that circumvent the traditional ecosystem and go directly to the consumer. In fact, Warner Bros. this month purchased DramaFever, a South Korean video subscription service.

“The TV business is moving toward viewer engagement,” Martin said. “It’s not about brand awareness. You have to have brand resonance.”

He said current skinny bundles offered by pay-TV operators have been “haphazardly slapped together” based more upon what they’re allowed to do by contract than appealing to targeted consumers.

“What I’m talking about is picking the best networks and making those available,” Martin said. “That concept could have the benefit of better matching consumer supply and demand.”

Martin said the market is still developing, but looks promising.

“Being out of the gate with 600,000 subscribers is good, and we’re getting paid on those [Sling TV] subs. With HBO Now, we, collectively as a broad company, are going to learn a lot about consumer behavior. What people like. What they don’t like.”

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