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James Murdoch Limiting Love of OTT Video to Hulu — For Now

5 Dec, 2016 By: Erik Gruenwedel

21st Century Fox CEO James Murdoch

Since his appointment as CEO of 21st Century Fox, James Murdoch, son of media icon Rupert Murdoch and brother of Fox co-chairman Lachlan Murdoch, has made no secret his affinity toward direct-to-consumer digital distribution.

It’s been a reversal of sorts from former COO and current executive vice chairman Chase Carey, who approached digital distribution at arms length while favoring lucrative traditional affiliate revenue streams from pay-TV and packaged media.

And while Netflix and Amazon Prime Video have raised the profile of OTT video, including lavish spending on original content, consumer love toward subscription streaming video is no sure thing as evidenced by the 80-plus third-party services willing to pay Amazon to market their platforms.

Speaking Dec. 5 at the 44th UBS Global Media & Communication confab in New York, James Murdoch reiterated his love of OTT while also admitting the business model is challenging as a mass-media distributor.

“We have to be a little bit careful that we don’t fragment the business too much,” he said, alluding to the reality that Fox is not a broadband provider and thus unable to recapture lost pay-TV revenue the way AT&T, Charter, Verizon, Comcast and others can.

The executive said direct video distribution enables Fox to better evaluate its consumers for advertisers and media buyers, but pulling off such a business model is “super hard.”

Indeed, as co-owner and managing partner of Hulu, Fox is following a mandate from his father to establish a legitimate OTT contender in Hulu.

“As an industry, we need a competitor, a serious competitor to Netflix and Amazon,” the elder Murdoch told the WSJD Live confab in Laguna Beach, Calif., two years ago.

Thus, Fox will focus on widening Hulu’s subscriber base (about 25% of Netflix’s domestic base) while readying online TV platform Hulu Live for launch in early 2017.

Unlike competitors such as Showtime, Starz and HBO, Hulu does not market itself (and pay fees) to Amazon Channels, the e-commerce giant’s OTT video platform for third-party services.

Hulu has avoided making complete seasons of original series available for binge-viewing from the first episode debut. The SVOD service now offers a commercial-free option at a premium price. The service has also spent big acquiring exclusive rights to programming, including “Seinfeld” and “Homeland” catalogs.

At the same time, under James’ guidance, future Fox TV affiliate deals include flexibility how content can be distributed, including on-demand access.

“We are monetizing our content in exactly the same way [with OTT] … we are with traditional multichannel video program distributors. So, we’re not out of pocket, regardless of how they package [our channels],” he said on a November fiscal call.

Regardless, the executive is confident streaming video is a “more fluid” opportunity to understand the consumer via data analysis, contending consumer-direct services for Fox content remain an option going forward.

“The streaming environment is a better environment for consumers in terms of user experience for scripted programming, and also really a better business environment for us in terms of monetization.”


About the Author: Erik Gruenwedel

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