Media Execs on the Cable Bundle, the Ad Market, Time-Shifting and Netflix
Media executives convened at the annual UBS media and communications conference this week in New York City to discuss the changing landscape of the TV industry.
Here's a look at the biggest takeaways:
On a web-based pay-TV service to compete with cable and satellite:
Viacom CEO Philippe Dauman predicted that the industry will see a web-based pay-TV service finally arrive in 2014, but he wouldn't suggest which company might get there first. There are plenty of challenges facing would-be digital disrupters here. Intel had promised to introduce a slick web-based pay-TV service before 2013 was out, but more recently has been seen looking for a buyer to take the stalled effort off its hands.
Even predicting the time frame was further than Walt Disney Co. Chief Financial Officer James Rasulo would go, although he that virtual pay-TV services were coming. Like other content providers who spoke, Mr. Rasulo said his company would be happy to license programming to such services as long as they bought packages similar to the ones cable and satellite companies buy -- which is to say, no cherry-picking channels.
Echoing that sentiment, CBS Corp. CEO Leslie Moonves said he's eager to see the development of a virtual pay-TV product. "The more people that want to pay us for our content through however they want to deliver it, that's a good thing for CBS," Mr. Moonves said.
Time Warner CEO Jeff Bewkes may have been the most skeptical, seeming open to a web-based pay-TV service but questioning what need it will answer. A digital pay-TV provider could potentially provide a better consumer interface and allow viewers to access programming on mobile, Mr. Bewkes said. And the quality of a virtual TV provider is going to depend on the internet infrastructure it relies on, he noted. There's only so much bandwidth to go around (something Netflix usage reminds the industry every night).
On paying for time-shifted commercials:
Don't expect C7 -- commercials time-shifted by as much as a week -- to replace C3 as the primary basis for TV's annual upfront negotiations next summer, Mr. Rasulo said. Disney has already done some C7 deals, however. "I think that the hesitation has to do more on the advertiser's side than on the content provider side," he said.
Discovery Communications CEO David Zaslav said moving ad buyers to C7 from C3 isn't as big a priority for him as it seems to be for broadcasters. Discovery sees about 80% to 85% of its viewing take place in the three days after shows air, Mr. Zaslav said.
Mr. Moonves said C7 will become a bigger part of CBS's upfront deals, but he isn't stopping there and will eventually look to get paid for a month of playback. "I think there's the realization, when 85% of our advertising at the network is not time sensitive, what's the difference if you watch it in five days or six days from now, versus three days from now?" he said. "I think, eventually, it's going to be even greater than C7."
"We may not get paid as much," he added, "but if you're advertising Kraft Macaroni and Cheese, what the heck is the difference if you watch it tonight live or 21 days from now?"
And Mr. Moonves seemed to have a potential ally in Chase Carey, president, chief operating officer and director at 21st Century Fox. "I don't see C7 as a sort of magic line," Mr. Carey said. "I mean, the reality is that people are still watching on the eighth day. C7 is better than C3, so it's an improvement, and I think we will move to a measure that sort of starts to reflect the patterns of viewership .... It's not C3 versus C7 because if you look at it in 28 days, there's still an enormous amount of viewership that is happening from the 7th day to the 28th day."
On breaking up the cable bundle:
Cable programmers didn't give even lip service to the idea of breaking up the cable bundle.
"I think at its core a la carte is a farce," Mr. Carey said. While consumers may want to buy different types of bundles, Mr. Carey said he doesn't believe a la carte is the solution, calling it more of a negotiating tactic (presumably by pay-TV companies that don't want to carry certain channels) and a way to drag Washington into the discussion. The TV business could do better by improving the bundle, adding value with services like TV Everywhere streaming, he suggested.
Mr. Zaslav wasn't any more enthused. "It's hard to define what unbundling means," he said. "I certainly don't see a la carte."
Scripps Networks Chairman-President Kenneth Wayne Lowe said he doesn't think a la carte has legs. "It's just not something we see on the immediate horizon,' he said. "Having said that, there is a lot of experimentation going on with over-the-top time-shift viewing."
On approaches to streaming-video-on-demand:
Disney recently struck a deal with Netflix to develop four programs and a miniseries around the Marvel franchise. "The fact there are more people demanding your product is a good thing," Mr. Rasulo said, "and I think that we try to be even-handed and of course advantageous to Disney in how we look at using the different players in the market."
Robert Marcus, chief operating officer at Time Warner Cable, said he doesn't view services such as Netflix as a substitute for cable, but said they do highlight the value of Time Warner Cable's broadband internet service. Mr. Marcus noted that Time Warner Cable would be open to making services like Netflix available on the set-top box.
Discovery has typically held back recent content from streaming platforms, Mr. Zaslav noted, taking more of a wait-and-see approach. But thus far, the company has been happy with the results. "We are looking at putting maybe some newer content on there because the stuff that we did was two years, three years, four years old, and we haven't seen degradation in audience," he said. "And it's too early to tell, but some of the content that has a story arc seems to maybe even help the viewership."
Noting that he planned to see Netflix CEO Reed Hastings the following week, Mr. Zaslav called streaming platforms "very good for us right now."
"It provides another bite at the apple and it provides for better returns for us and will probably for the next several years," he said.
On TV Everywhere:
The industry is still committed to TV Everywhere, under which paying cable and satellite subscribers can also stream programming over the web, but acknowledged uneven progress so far. "We think TV Everywhere is a real -- it's a very good platform," Mr. Zaslav said. "We hope it gets rolled out. It's slower, taking longer, but it is measured. And for us, if we can get fair value for it. We think that TV Everywhere could give us incremental revenue, incremental value, and would be good for consumers."
While TV Everywhere is on the right path, Mr. Carey said it has been poorly executed to date. The industry needs to put more energy into making TV Everywhere a simpler proposition that is easier to use and more accessible, he said.
Scripps has been proactive in TV Everywhere, with about 75% of its distribution tied to TV Everywhere deals, according to Mr. Lowe. "We think it's good for both us," he said. "We think it's good for the industry."
On the state of the advertising marketplace:
Visibility in the ad market remains limited, and while the ad market in general is good, over the last month there has been softness in the U.S., Mr. Carey reported. But international markets remain strong.
Mr. Bewkes said the last month has been slower, and in Time Warner's case, some ratings shortfalls pressured ad sales. "But what we see in the market is the scatter pricing was pretty healthy," he said.
"We see the volume demand starting to come back, having been a little weaker," he added. "Cancellations for the first quarter are not high …. It seems like maybe it might be recovering in the general market."
Mr. Moonves said he hasn't seen the same softness. "We see scatter as fine," he said. "It truly has never really been an issue. Our ratings have been fine all year. Sports is way up, the numbers are way up. People are in demand … I'm very pleased with the pricing. We're closing the year with very good results … It's going to be a record-breaking year."