Sunday, October 19, 2014

Do Programmers Really Believe in Streaming, or Just Business Leverage?

The latest moves by HBO, CBS, ESPN and Starz in the area of channel unbundling have been heralded as the beginning of a wave of over the top streaming moves by a wider range of networks.

Such moves, it is said, will put pressure on the distributor relationships that have anchored the linear video subscription business. And that might be precisely the point, some argue.

In that view, the whole point of launching over the top services is two fold. Such moves--irrespective of actual take rates by end users--puts more pressure on big distributors including cable TV, telco and satellite TV distributors, giving the networks more negotiating leverage when contracts are up for renewal.

For CBS, which often earns $2 per subscriber in payments from distributors, the existence of a rival $6 a month direct-to-customer service raises the threat of direct competition to linear video services.

A programming network might rightly guess that the existence of the threat makes more likely an increase in program fees paid by distributors.

At the same time, CBS is offering linear video distributors wholesale access to CBS All Access, so the streaming service can be sold directly to linear video customers. That would mirror existing business relationships, where programming is sold by networks on a wholesale basis to distributors who in turn sell at retail to end users.

Part of the reason Time Warner is launching a standalone HBO product is to gain more leverage against the cable companies that it feels do not do enough to promote HBO as a premium channel, some argue.

Some cable systems have as few as 14 percent of their subscribers taking HBO, while others have as much as 44 percent take rates.

So whatever benefits consumers might reap, there is at least some element of jostling within the ecosystem for business advantage, not necessarily some newfound belief that streaming’s time has come.

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