Linear TV’s Moment of Greatness, Flickers

Linear TV has been having a tough time lately. Although rumors of its imminent demise are premature, those who confidently predicted the business was not being hurt by cord-cutting, for example, are being proven wrong. Long time sales executives, greatly respected by the industry, are being shown the door as sales revenues decline. 

As with T.S. Eliot’s Prufrock, I have seen Linear TV’s moment of greatness flicker. Here are some of the reasons why:

Wishful Thinking on Cord-Cutting

Back in 2013 at the VideoSchmooze Online Video Forum, industry analyst Craig Moffet stated that cord cutting de-accelerated in 3Q13, meaning that it was going down, unlike what was reported in the mainstream technology press at the time. According to Moffet, the fact that it was misreported as accelerating, “speaks to a desire in the tech press for parables – overthrowing the oppressive MVPDs. But the math tells you otherwise. There is no question that people are cutting the cord but it is not a torrent. It is a trickle.”

Obviously that was wrong. Less than three years later, the cord-cutting spigot went from a trickle to a rush and now in 2019, Mark Huffman writes that, “eMarketer predicts that the number of pay TV households in the U.S. will drop by 4 percent by the end of the year to around 86.5 million homes. It further expects the free fall to continue, with pay TV subscriptions falling below 80 million by 2021.”

Lesson: We have to stop feeling that others are out to get us and focus instead on the reality of the trends … and act.

Over-Confidence in the Loyalty of the Viewer

How many times have I read that today’s viewers still watch lots of live TV? In June 2019, the NCTA released the results of a study that showed that two out of three adults watch TV live. “Notably, of the people who said they watch TV live on a regular basis, two out of three (66 percent) are most likely to watch via a pay TV service such as cable. While apps and smart TVs are clearly on the rise for many, and especially among younger generations, the majority of people still favor sitting in front of a television to catch the latest episode of their favorite show, to stay up to date on the news, or to keep up with sporting competitions.”

But the Nielsen numbers tell a different story. According to Marketing Charts, which analyzes Nielsen’s viewing results, 3Q18 was the first quarter on record in which 18-34 traditional TV viewing (live + time-shifted TV) dropped below 2 hours per day and declined 23 minutes per day compared to 3Q17. The article stated, “In percentage terms, the amount of time 18-34-year-olds as a whole spent watching traditional TV (live and time-shifted) in 3Q18 dropped by about 17.2% from the previous year. Needless to say, that’s a huge chunk – a drop of about 1 in every 6 minutes in just a single year.”

So what is happening here? Digital has supplanted traditional TV for youth. In the same study, Nielsen reported that 18-34-year-olds “spent one hour more per day in 3Q18 using apps and the web on smartphones alone than watching traditional TV.” And notably, many 18-34s don’t watch traditional TV at all – only 73% versus 86% of all adults.

Lesson: Traditional TV is less important to younger viewers and time is on their side.

Dog Paddling to Retirement at the Networks

The inability of some top management at some companies to risk implementing momentous change (possibly forfeiting short term profit or even courting failure) is the silent killer of the network business model. Sometimes it is because the system rewards short term efforts - bonuses are bestowed on an annual basis based on the year’s performance. Sometimes it is from sheer shortsightedness where they just don’t see how innovations can help their business. Whatever the reason, these folks stick to the status quo, essentially dog paddling to retirement.

Without naming names, one company who didn’t see the value of set top box data 12 years ago is now struggling to catch up to the data wave and, perhaps somewhat relatedly, just reported an 11% drop in the company’s U.S. advertising revenue.

Lesson: Think and act long term, even if you are not around to see it.

“We have lingered in the chambers of the sea

By sea-girls wreathed with seaweed red and brown

Till human voices wake us, and we drown.” - Prufrock

What is Next For TV? Check Out the Next TV Summit.

If there is anything that is constant about television these days, it is the constant change. From digital compression a few years ago to today’s connected TVs, multi and cross platforming, second + screens, STBs, OTT, Big Data sets, authentication and  ACR, it is hard to keep pace. But thankfully there are conferences like  B&C MultiChannel’s Next TV Summit to help frame the changes and fill in any knowledge gaps.

Today’s TV landscape faces a viewer in transition. While there are still mainstream couch potatoes, according to keynote speaker Eric Free from Intel, there is also a burgeoning class of connected viewers who tend to skew younger and are not constrained by the current media business model. He spoke of three pillars of change: consumer behavior, technology infrastructure and current business models, which are all occurring right now, ready or not. Free is optimistic about this type of future. He believes that the best attributes of live television are merging with social features so as to offer better discovery and social activity for younger connected consumers that will encourage them to stay within the TV ecosystem. We should hope that he is correct. It may be that the advent of connected televisions will enable the television industry to maintain relevancy with these younger connected viewers. And so, this technology could not have come at a better time.

It is arguably within the current business model that television will find its greatest challenge for future hearts, minds and eyeballs. Content providers continue to experiment with forms of storytelling and methods for bridging platforms to complete the full viewing experience. But cord cutting, cord shaving and cord “nevering” will continue. And therein lies the rub: We as an industry continue to cleave to old and eroding business models, metrics and, yes, mindsets even as our world shifts to complete organic viewing experiences. Why still target demographically, for example, when the marketplace really needs to target psychographically? We say that measurement is critical but the old metrics are still silo-ed by platform and applied to business tracking.

MultiChannel News’ Todd Spengler moderated a panel on TV Everywhere: Disruption, Innovation & Invention which brought the measurement issue into focus. Thomas Siegman of RSG Media noted that the rights issue was impeding measurement possibilities - “We need rights for streaming and we need to gauge the total value of a view.” And John Heller of FreeWheel argued for speed because “moving too slow is worse than too fast.” Watermarking is another challenge. Is there an industry standard?

Michael Bishara of Synacor went one step further, listing the top five challenges of TV Everywhere. They are: 

1.       Marketing in the form of awareness, early stages of VOD, education, rights and gaps in content and its availability.

2.       Economic.  How can we monetize?

3.       Competition. Content alternatives out there that are equally compelling. 

4.       Technology… but it will become automated in future.  Authentication. Credentials.

5.       Consumer experience. Don't make consumers work. Unify and make sense for the consumer.

So how can we as an industry best face the future, overcome the challenges and succeed in an evolving landscape?  Mark Greenberg, President & CEO of EPIX may have provided the best advice. He admonished us to change the rules. There is a lesson to be learned from the music industry versus Napster. We need to battle arrogance, indifference and ignorance and find new ways to monetize content on every platform and build relevance among younger viewers. “Cable used to be the revolutionaries” he said. “Cable used to be the destructive force bringing value to the consumers. Now we are the problem. Disrupt or be disruptive. Don't rest on our laurels. Let’s get back into the disruption business.”

Amen.

Q&A Interview with Glen Friedman - Ideas and Solutions

Glen Friedman, owner of Ideas & Solutions consultancy, has been involved in the cable operator world for 30 years. In that time he has seen many changes and challenges to the business. In this in depth interview, Glen gives us his insights into the changing television landscape and the impact that new technology has on the current operator model. Flexibility and prescience is required in navigating the MSO landscape.

CW: Glen, can you tell me your background- how did you get to where you are today?

GF: I joined the industry in 1981 as a Marketing Manager for ATC, now Time Warner Cable. I worked for ATC / Time Warner for 10 years in a variety of field and corporate positions ending my tenure as Vice President Marketing, Programming and Ad Sales for Manhattan Cable. I then joined Century Cable as the General Manager for the West L.A. systems and was then recruited to DIRECTV where I was a key architect of the launch plan as Vice President of Consumer Marketing.


CW: Tell me about your current company, Ideas & Solutions! Inc.

GF: I formed Ideas & Solutions! 16 years ago. We provide outsourced business development, business and marketing strategy and due diligence services to leading and emerging media and technology companies. Recently we have been focusing on the changing landscape of television, specifically, cord cutting and cord shaving. We recently published a study of Gen Y consumers (18-29 year olds) and their orientation and thoughts towards traditional subscription television vs. getting the services without cable, telco or satellite. Interestingly, we found that there was a large, loyal segment of television only viewers but almost 60% have or would consider switching to Over the Top-video service in the future. For this group, cost and value are driving factors as is their comfort with new technology and their desire to get what they want when they want it.


CW: 60% is a large consideration set for the next generation of cable customers. Do you think cord cutting or cord shaving is a business changer for operators?

GF: Both cord shaving and cord cutting will have tremendous impact on all aspects of the cable business for both operators and programmers. It will impact RPU and marketing costs. For programmers it will be very challenging to hold package positions for networks not secured by retransmission leverage or sports.


CW: What do you recommend the operator do to avoid losing a substantial part of their future business?

GF: I believe TV Everywhere is a great step in increasing the value and usability of cable to customers who want content when and where it’s convenient for them. But TV Everywhere is not a sliver bullet and must be combined with a strategy that focuses on building a valued brand, meeting and hopefully exceeding customer expectations related to customer service and technological innovation. Comcast, for one, is doing a good job on all fronts as demonstrated by its investment in marketing the re-branded XFinity brand, its focus on fulfillment/service delivery service windows and the company’s overall focus on UI and technology (expanded broadband delivery). In addition the cable industry needs to focus on the cost of content, which poses a real risk/challenge to programmers who are trying to hold onto distribution and increase their rates.


CW: Is the future for MSOs in wireless? Why or why not?

GF: More and more consumers will demand wireless access to content. I doubt that wireless will replace wired delivery for a long term, if ever. But it is critical for operators to provide their customers with solutions that deliver content remotely and TV Everywhere is a great start. It’s a challenge for operators to gather sufficient spectrum to compete effectively with the major carriers on a national basis y. It will be very informative to follow the Cox roll-outs of its bundled wireless services.


CW: If you were a cable operator today, what would you be doing to plan for the future?

GF: Invest in service and reliability, identify most at-risk groups and develop specific marketing plans and approaches. Also, measure performance by segment, not just across the entire base. Invest and take actions to secure new revenues from business services, interactive advertising and home security/home automation.


CW: What are other challenges for cable operators?

GF: Content costs associated with Sports rights and retransmission, preparing for new competitors including other operators. The fulfillment and delivery of more and more complex customer offerings both via call centers and in the field is an immediate challenge. In addition operators must work to enable meaningful measurement of multi-screen viewing to help programmers protect their advertising revenue stream.


CW: What are some opportunities for cable operators?

GF: I believe there are exciting and meaningful opportunities to derive new revenues from Interactive advertising, further penetrating the delivery of voice and data to business customers and through the sales of security and home automation.


CW: Glen, please give me three predictions for the next five years.

GF: Without a doubt, the consolidation of operators will continue. Also, in the next five years operators and DBS providers will compete on a national basis meaning that franchise areas will be much less meaningful as a marketing territory for cable operators. In order for this to happen the technology needs to continue to evolve and the distributors need to get the rights to distribute the content outside their franchise areas -- or in the case of satellite providers deploying other technologies like DISH Network is attempting. The major distributors are already seeking these rights. This will further increase the movement to consolidate on the operator front; I would not be surprised at least one of the top 5 operators is merged within the next five years. And finally, connected sets and proliferation of online content will lead to more cord shaving/cutting. The ease of getting content outside the walled garden of cable will impact RPU and how services are packaged.


CW: Thank you for your time. Great interview.