Digital Hollywood Panel Ponders Fragmentation

23 Oct, 2016 By: Stephanie Prange

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The title of the panel was long, “The OTT, Cross Platform, Multiscreen Experience — Navigated by Set Top, Mobile Device or Console,” but panelists perhaps summed it up best: It’s a fractionalized digital world.

“We have a big problem,” said Alex Drosin, president of North America for Massive Interactive, at the Oct. 20 panel at the Digital Hollywood confab in Los Angeles. “We have a fractionalization of content rights.”

The home entertainment business from the beginning has been about choice, said panelist Thomas K. Arnold, publisher and editorial director of Home Media Magazine.

“It was a way to give consumers the ultimate in choice,” he said. “I can watch whatever I want when I want. It’d be great to have an app right now where I could call up any movie or describe any movie, the best car chase scene, the most romantic kiss, something like that, a really unique search term, and find it anywhere.”

Arnold called it “impossible” and other panelists agreed.

There are too many players with too much skin in the game (and too much money to lose or win) to give consumers exactly what they want, they said. Still, there’s a catch.

“Too much choice can stagnate adoption,” warned moderator David Leibowitz, managing partner of CH Potomac.

And consumers are restless, he noted, “Cord-cutting continues to accelerate.”

He cited a GFK study that found 25% of U.S. TV households live without cable or satellite TV and 17% of the households rely only on broadcast reception, which is up from 15% last year. Meanwhile, the study found 6% of households are using only internet services, including Netflix, Amazon Prime, Hulu and YouTube, with no pay-TV offerings and no broadcast offerings — a 50% jump from 2015.

“People are looking for reasons why they are cutting cords, which are primarily because of the availability of the video that you can get on the Internet,” he said, noting millennials are cutting the cord most.

Added to that are the variables in distribution, devices and video quality.

“The proliferation of OTT services is really increasing consumer confusion, and how do these services really differentiate?” said Dan Sweeney, VP of sales and marketing for Nevelex Corp. “Also, devices in the ecosystem continue to be fragmented. Will standardization clear up that problem? And then, finally, greater viewing quality and higher-definition viewing with 4K HDR [is coming]. There’s talk of 8K, VR. How are those going to play a role going forward?”

Panelist Virginia Juliano, previously an executive at Showtime, decided to create a company to cut through the confusion, she said. She’s now CEO and founder of Cobblecord.

“I had this idea to help people figure out how to cut the cord,” she said. “There are new OTT services launching every single day. The choices are overwhelming so I really felt there was a need in the marketplace to help guide people. … The power is now in the consumers’ hands much more than ever before.”

But the confusion isn’t only on the consumer side.

“It’s a bit of a mess out there in terms of many different DRMs and different devices,” said Robin Wilson, VP of business development for NAGRA, adding that despite the extra work involved, “It’s hard to monetize professional services.”

Meanwhile, the habit of buying content may be on the wane in the new digital world.

While stressing that “ownership is not dead,” Arnold said, “The pressure on the studios since day one has been to prove value of ownership. What is the value of owning something instead of renting it?”

Running through the history of the home entertainment business, Arnold noted that in the beginning, “The studios were aghast at video rental stores taking their movies and renting them on videocassette. The studios back then fought them tooth and nail in court because they wanted people to buy their movies.”

DVD, he noted, hit the ownership sweet spot because it was “cheap and easy.”

“Today it’s tough,” he said. “The studios looked at the Internet, looked at streaming and they had this great idea, ‘Well, we’re going to sell digital downloads, and that’s going to be a huge business and we’re going to still be able to sell our movies and TV shows, but we don’t have to worry about shipping or returns, about manufacturing.’ Well, the problem is the value proposition. Picture yourself at Christmas. There’s something magical about opening up a wrapped present and finding a boxed set of a DVD series. If somebody says, ‘I got you a download for Christmas,’ it doesn’t have the same appeal.”

The studios tried boosting ownership by offering digital copies early, but the growth has slowed.
“There was a brief moment where you saw double digit gains in EST, but this year it dropped to about 8% growth,” he said. “It’s still a tiny blip. Meanwhile, disc sales are half what they were 10 years ago.

“Is the business dead? Is the model dead? No. They just have to find a way to bring the value back in and get people to value ownership again.”

While the maxim is that content is king, panelist Campbell Foster, director of product marketing for video solutions at Adobe, maintains that data is queen.

“Media companies that use consumer data … are the ones that are going to win,” he said. “[Companies] that understand what consumers are watching and what consumers want and are able to sift through all their data and make meaningful connections for content programming choices, for recommendations, for actual content development, those are the types of companies that are going to win.”

He added, “Netflix is way ahead of the curve in using data, and their recommendations are phenomenal.”

“I’ve been predicting Netflix fatigue, but it hasn’t happened,” noted Arnold. “Each time they’re fighting the onset of fatigue with something pretty innovative.”

Noting they’ve innovated with better content and original content, he said, “The next step is … delivering content on the demand, the type of content consumers want to watch [using data].”

Juliano noted that the social networks have a “ton of data” on users that could help them in content creation and marketing.

“Social networks getting in the video business is a big deal that’s going to even accelerate,” she said.

Foster said that the use of Apple’s Siri, Amazon’s Alexa and Google Home services to navigate video will be a big factor in the near future.

Sweeney said MVPDs (multichannel programming distributors) adding online services, as Comcast did with Netflix, will be a future game changer. “Let that happen in one neat little box, that I can see my linear and I can see those services in a nice tiny little package,” he said.

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