Even though consumers are embracing TV Everywhere and online/mobile video in even greater numbers both at home and on the go, multiscreen content licensing is still a major headache for pay TV operators—and there are plenty of twists and turns involved in getting subscriber content out across networks and devices.
According to Infonetics Research, negotiations with content and media companies about delivering live and file-based video content to subscribers across multiple devices is the No. 1 obstacle to achieving true TV Everywhere.
"Significant challenges remain, particularly when it comes to securing licensing arrangements with content owners who are concerned about the security of their content in a multiscreen world,” said Julien Blin, Infonetics' directing analyst for consumer electronics and mobile broadband. “This is also one of the major hurdles to offering á la carte cable content, a hot topic these days."
Pay-TV operators are facing into the wind in many respects. Hollywood studios, cable networks, sports leagues and others have a twin set of business imperatives that cablecos and others have to accommodate. One, they want to embrace digital distribution to make their content available to subscribers on-demand and across devices, thus opening up new revenue streams—but they want to do it in the context of protecting the video distribution network from unauthorized consumption and distribution. That means that content security investments by distributors are a requirement, even though they become technologically more difficult to implement when delivering video across a third-party unmanaged network, like a mobile broadband link on the go.
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The second driver for content companies relates to business modeling. The content ecosystem is a delicate balance of control; media providers need to protect the value of their content by not making it available ubiquitously or in a non-differentiated manner. AMC Networks recently felt that bite when DISH Network dropped its four networks from its lineup, despite the fact that AMC itself is home to blockbuster favorites like Walking Dead, Mad Men and Breaking Bad. That took AMC out of 10 million homes.
Among the many justifications for DISH in dropping the basic-cable stalwart was the fact that it’s available across every major provider as well as Netflix. AMC was asking for 75 cents per subscriber, a hike over the 40 cents that it previously asked for to allow carriage—a hike that DISH felt was unjustified. "Our customers aren't really saying, 'We want to pay more money,' " CEO Charlie Ergen said at the time. "They are saying, 'We are more flexible in our programming, and we don't want to pay more.'" He added, "It’s not as if something was exclusive."
The landscape gets more complex when one peels the layers of the onion back. “The decisions that content owners make about business models for content are also often informed by market dynamics in general, and more specifically by intent to avoid what they perceive as mistakes made by the music industry,” content security vendor Verimatrix noted in a white paper. “Even more particularly, the studios are determined to avoid the prospect of a downstream entity getting a dominant market share and thereby being able to control economic terms, as Apple did for music.”
Also, cable and telco operators could also exert undue control over downstream economics, given that most geographic areas are only served by one or two operators.
“With the rise of “pure play” OTT services such as Netflix, iTunes, and Hulu, cable operators are trying to compete by offering any content on any device services to their subscribers,” Verimatrix noted. “Content owners are concerned that TV Everywhere-type systems will lure consumers into walled gardens, where the pay-TV operators will have more control over programming economics. For this reason, they tend to favor open-Internet services. Content owners are also concerned about walled garden schemes that restrict users to certain device-service combinations, i.e. Apple’s iTunes/Apple TV/iPhone technology stack.”
Consumers, however, are in the catbird seat. Despite the expense and the effort involved in securing multiscreen rights, the need to reduce churn and increase customer loyalty was rated a top business driver by the pay-TV operators surveyed by Infonetics. Moreover, as traditional content licensing costs escalate, adding new revenue streams in the form of monetizable digital services (think new advertising streams) is becoming a mandate.
Operators are working on executing on the business model: nearly half of them support tablets as part of their multiscreen service today, which will grow to 100 percent by 2014.
"Multiscreen services are quickly becoming a critical service for pay TV operators worldwide," notes Jeff Heynen, directing analyst for broadband access and pay TV at Infonetics Research. "By keeping attention focused on the content they're providing, operators keep subscribers and advertisers happy."
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