The Truth About Unbundling (Why It Won’t Send Your Cable Bill Plummeting)

Originally published at TDG Research on September 24, 2015

“Why am I paying for all these channels I never watch?” This has become the rallying cry for those who’d like to see their MVPDs offer stripped down “skinny bundles.” Or, even better, a la carte options, where viewers can piece together their own bouquets of channels, selecting only the networks they watch, at a price point that’s far more in line with what they consume.

But is that a realistic scenario or is unbundling just going to lead to higher prices and fewer choices as the networks claim?

It seems the networks may be in the right here. Most of the people doing the complaining don’t seem to get how bundling really works. The network groups set a price for their most popular properties and then throw in the rest for free, or close to it.

Say, for example, NBC decided that the fair price for NBC alone was $15 per subscriber per month, they might charge Cox $17 for NBC plus SyFy, Bravo, USA, Oxygen, E!, et al. For NBC, it’s a balancing act: while they might be able to get more money selling a newly resurgent USA on its own, what they really want is to get the network more widespread carriage. This in turn boosts ratings, which boosts ad rates and thus, ad revenue.

The bottom line being, of course, that stripping the bundle of everything but NBC to create a “skinny bundle” might wind up saving the consumer a whopping $2/month. Similarly, an a la carte package that includes NBC, USA and Bravo might wind up being more than $15/month because NBC will need to offset falling ad revenue with higher carriage fees.

Does that mean bundles are here forever? 
Not necessarily. The rapid decrease in live viewing and the concurrent decrease in ad revenue from live viewing may be the culprit. If the cost of maintaining The Esquire Channel as a 24/7 broadcast network seems too high, NBC may opt instead to produce 30 hours of On Demand Esquire content per week. This (on a larger scale, of course) may just be what it takes to undo the bundle.

It has long been our contention that many of the networks currently on air don’t need to be 24/7 broadcast networks, and would, in fact, be better served producing 20 to 40 hours’ worth of high quality On Demand programming each week. They’d likely get higher audience numbers for the On Demand shows, which would then allow them to charge higher ad rates. It would also free many of the networks from having to pay for the syndicated programming that currently fills out the schedule in the wee hours.

Who would benefit from this sort of unbundling?
The average consumer would not see any significant decrease in their monthly bill, as the fee for the primary networks would remain the same (or close to it.) They would, however, see more options and more opportunity for quantum viewing (the ability to watch on any device at any time.)

Viewers who are not heavy TV viewers would benefit, as they would be able to select the half-dozen networks they do watch and create a much less expensive package. Networks could continue to make money from these viewers by moving to a transactional model for their On Demand content, making each show or series outside of the viewer’s subscription package available for a fee. This sort of arrangement would benefit both parties: the viewer would be able to watch the shows they want and the network would gain both transaction fees and ad revenue from the additional viewers.

While there are numerous forces working to change the television industry, none is more powerful than the trend towards time-shifted viewing. Live viewing is becoming less and less common, and that behavior affects everything from ad revenue to carriage fees to the size and shape of the once ubiquitous bundle.

Three Big Takeaways From Last Night’s Emmys

Originally published at TV[R]EV on September 21, 2015

The 67th annual Emmy Awards were last night and host Andy Samberg, looking short-haired and dapper, managed to bring it in on time, to the relief of 11 PM local news producers across the country.
The show pretty much stayed the course, with only a few surprises, but there are three main takeaways for anyone working in the industry.

Ratings Were Down 20% from 2014. 
This was perhaps the biggest shocker: ratings are way off from last year despite some very close races featuring some excellent shows. (The best drama category in particular, featured Game Of Thrones, Mad Men, Homeland, House of Cards and Orange Is The New Black, all potential winners.) Our gut says this is in large part due to the wide availability of online clips—rather than invest three full hours in a show, fans figured they could watch the highlights clips online while they were binge watching their favorite shows. Fox also didn’t seem to invest a lot of money in promotions for the event, particularly on social media—most of the ads we saw were from other media outlets touting their live blogging of the Emmys. Using social to create buzz around an event is crucial these days as a way to drive live tune-in and making use of services like Periscope to bring behind-the-scenes action is also a must. But none of that makes a difference if people don’t know you’re doing it, so publicizing your social activity is very important.

HBO Is the New Normal.
Emmy voters are notoriously conservative and the subscription cable networks have not traditionally fared all that well at the show. But this year, HBO took home a record 43 awards. Could it be that, with the streaming services and their non-linear release schedules producing some very buzzed about new shows, that the Emmy voters are starting to see HBO and Showtime as part of the Old Guard? This could be a problem for the broadcast networks in particular, who’ve seen their share of Emmy statues shrink over the past few years and who were limited to a few strategic wins—no big breakouts a la Veep or Game Of Thrones. They’ll need to reexamine to type of programming they’re putting out and decide if they care whether ratings behemoths like Empire (which, to be fair, has received generally favorable reviews) are worth more to them than highly decorated by little watched hits like Mad Men.

The Line Between Comedy And Drama Is A Blurry One. 
As the second golden age comes into full bloom, it’s become clear that old formulas are being cast aside. So that the old paradigm by which comedies were sitcoms with laugh tracks and a set pacing and dramas were serious and had violins playing in the background to signal mood shifts is long past. Instead, we have hybrid shows like Orange Is The New Black, whose shift this year from the comedy category to drama is symbolic of the shift. Takeaway for the industry is that these very popular hybrid shows (HBO’s Girls is another one) are mostly coming from the premium cable networks and streaming services and the broadcast networks need to open themselves up to this type of programming.

Voting In The Time Of Social Media

Originally published at TV[R]EV on September 18, 2015

Social media has altered just about every other aspect of our lives, so why not the way we vote. And make no bones about it, this is the first real social presidential election. Sure social media was around in 2012, but it was still in its nascency, people were just figuring Twitter out, Instagram was first coming into its own and Snapchat was just a gleam in Evan Spiegel’s eye.

Obama got wild praise just for having a Twitter account and the inability to figure out social media (and other things “the kids” were into) was an oft-cited reason for Romney’s demise. But now that even aging Southern governors are setting up shop on Snapchat, the definition of “table stakes” has most definitely shifted.

If the first two GOP debates are any indication, social media will play a major role in this year’s election, and not always for the better.

Who was the winner of last nights’ CNN sponsored debate? According to People magazine, it wasn’t any of the 11 candidates up on stage.

No, it was Greg Caruso, the previously unknown 24 year-old son of a billionaire California real estate developer who was dubbed #HotDebateGuy and who somehow managed to get more social media attention than Donald Trump himself. (#HotDebateGuy was sitting in the front row directly behind moderator Jake Tapper and was thus on camera every time Tapper spoke.)

Even  The Skimm mentioned #HotDebateGuy this morning.

So how do candidates compete with a hunky 24 year-old heir? Very very carefully.

You see in today’s Gawkerized social media world, it’s the gaffes that count. Candidates can (and should) maintain accounts across the various platforms in order to ensure that their bases are covered and that their supporters have the right messaging and imagery to share. But that’s about all those accounts are doing, supporting the supporters. Best case scenario, they might actually help a supporter convince an undecided voter, but it’s not like an Instagram video of Jeb! giving a stump speech is going to go viral.

Unless.

Unless he does something facepalm-worthy. Awkwardly grabs for a bottle of water. Mispronounces his wife’s name. Sneezes on an unsuspecting voter.

That’s social media gold and here’s why it sort of sucks.

Because actual policy statements aren’t sexy. They require thinking and they’re not “fun” like a spilled cup of coffee on a woman wearing a white dress. Blame it on America’s Funniest Home Videos or skateboarding cats, but we’ve been trained not to get too deep on our social media. or risk being branded “boring.” So if Jeb! were to propose a well thought out alternative to Obamacare, if Hillary were to suddenly reverse her position on Iran, neither of those would see much traction outside of small circle of people for whom politics and policy is entertainment.

So what’s a candidate to do?

They can start by adopting the language of social media. When in Rome and all that. So that if I were Hillary’s campaign team, I’d go find that meme of her with sunglasses on being all badass and sink a nice chunk of change into it. Keep it authentic and resist the urge to stick obvious talking points in there (no one is going to share those) and then sit back and watch the poll numbers go up. If I were Team Trump, I’d take those “Trump Face” gifs and do the same thing.

This sort of behavior is anathema to the sort of serious people who populate campaign staffs. They’ll feel it diminishes their candidate and makes a mockery out of the whole process. But like we tell brands and celebrities, that conversation is already happening, with or without your participation, so you might as well bite the bullet and join in so you can have some control over what’s being said.

It might make you feel a little sleazy, but it’ll also get you more exposure than #HotDebateGuy. And in a tight race, that could be the deciding factor.

"Over The Top" Reviewed In New York Review Of Books

The cover story in this week's New York Review of Books, Will TV Beat The Internet, by Slate editor-in-chief Jacob Weisberg is a review of both my book, Over The Top, How The Internet Is (Slowly But Surely) Changing The Television Industry and Michael Wolff's new book, Television Is The New Television.

While Weisberg takes Wolff to task for overstating the problems of digital media, he has nothing but kind words for Over The Top.

Two excerpts:

Whatever he believed ten years ago, is Wolff right that it’s now springtime for the old television machers? To answer that question, it’s necessary to step back from his latest embrace of the pre-digital in favor of more evidence-based analysis. An excellent place to start is Alan Wolk’s self-published book Over the Top: How the Internet Is (Slowly but Surely) Changing the Television Industry. Wolk, a well-connected industry analyst, points to a very different future for the television business than the one Wolff depicts. Wolk thinks that the sector is poised for major disruption, even if it’s unclear from which side or how quickly the transformation is likely to come.

and

Wolk’s book is also more interesting than Wolff’s about the way media economics is changing the shape of filmed content. The all-at-once release model, which Netflix pioneered with the Norwegian-American crime comedy Lilyhammer in 2012, was the experiment that immediately expanded the market for television auteurs. When a twenty- two-episode season was shown over six months, writers could introduce or kill off characters and plot lines in response to audience reactions. Now writers must rely mainly on their own instincts to deliver a finished season designed for binge viewing. This is another factor making scripted TV more novelistic. 

You can read the entire review here. 

Verizon’s Go90 Makes All The Right Moves

Originally published at TDG Research on September 10, 2015

This week Verizon announced the launch of its new Go90 service to a small group of existing customers. Go90 is Verizon’s own version of a standalone TV service though, as we shall see, it is a unique offering that has little in common with conventional pay-TV services.

At the same time, Verizon also announced that it would begin rolling out a new 5G mobile service in 2016. 5G promises to be a marked improvement over 4G, with much higher bandwidth and greater stability.

So what’s going on here? Is Verizon, a mobile powerhouse, going to be the company that brings us the future of television?
Well, sort of. Verizon appears poised to bring us a future of television, but not the future of television. Go90 is a well-crafted ‘snacking’ system that allows mobile viewers to partake in both short- and long-form content, which more or less reflects the way people watch video today.

An Ad-Supported Network That’s Free
While many scoffed at Verizon’s AOL purchase, the service has proved to be a boon for Verizon as it launches Go90. AOL’s short-form properties like AwesomenessTV provide ‘snackable’ content that viewers can watch on the go, while the mobile ad monetization platforms Verizon inherited in the deal have helped them to create a monetizable ecosystem.

By combining short-form video from YouTube creators with clips and programs from TV networks like Comedy Central and Discovery, Verizon has pulled together a content bouquet that should prove quite attractive to viewers, particularly at the current price point (that is, zero). That’s right: the service, which is ad-supported, is currently offered for free.

Why would Verizon do that? The easy answer is bandwidth. Remember, Verizon is first and foremost a mobile network operator. The more people watch bandwidth-heavy video, the more likely they are to increase their monthly data plans, and the more likely they are to incur monthly overages. Since Go90 is being presented as a complement to the viewer’s existing pay-TV service (not a replacement), the extra five or ten dollars per month a user may pay to increase their data plan might not seem like a big deal given the convenience and the amount of available content. But multiply that five or ten dollars over tens of millions of users, and you’ll see why Verizon is so excited about Go90.

But Go90 is just Step One in Verizon’s version of the future of television. Step Two will likely come next year, when 5G starts to roll out. That’s when Verizon will be able to start converting all those Go90 customers to full-on pay-TV customers, because 5G should be able to provide the bandwidth necessary to power a home television experience. Since Verizon already has rights to everything from HBO to the NFL, recruiting customers for a full mobile-based pay-TV service may not prove all that difficult. Especially if that service were free to Verizon Wireless customers who’d already signed up for higher monthly bandwidth allotments.

That’s not as absurd as it may sound. Keep in mind that pay-TV is already a loss leader for cable companies who today make their real money selling broadband service. So why shouldn’t Verizon follow suit and use its mobile pay-TV service to build up its wireless customer base? In addition to drawing in new users, the service will help create stickiness, as users will be less prone to leave if they know they have to give up Go90 in the process.

A single business model will not define the future of television. Rather, it will be built from a combination of models, with different incarnations expressed relative to the type of company that provides the TV service. Verizon, whose mobile business is many times the size of its FIOS broadband business, is building its own version of a television bundle to increase its value for its mobile customers at a time of increased competition. With 5G looming on the horizon, look for others to try and copy the Go90 model, making mobile an important piece of the television equation.

Where’s The Wow? The New Apple TV Is Just Playing Catch-Up

Originally published at TV[R]EV on September 9, 2015

So Apple closed out today’s event with the band One Republic playing their two year-old hit “Counting Stars.”

Which only seemed to confirm the day’s theme, at least as far as Apple TV was concerned.

While there were plenty of upgrades to the AppleTV box, most of them were things their competitors have been doing for a while. Which, if our social media feeds are any indication, left many people feeling like Apple was playing catch-up rather than forging ahead.

Apple’s big announcements around TV centered around four new features: a new remote,  Siri integration, universal search, and a new SDK for games. And while they all had individual pieces that were innovative, nothing really overwhelmed us.

A Sleek New Remote
The most impressive new feature was probably the new remote control, which featured a glass touch pad that will allow you to swipe through the on-screen menu and tap to select. That’s a unique feature but without a keyboard to do the things you really want to do (e.g. search for specific shows) it’s still a hassle. Which is why a mini-tablet or smartphone based remote continues to make more sense.  Still, points to Apple for the sleek design.

Voice Commands Via Siri
The next big feature was Siri integration. You can use Siri to search, to pause, to rewind and fast-forward (in specific increments of time), even to call up the cast of the show you’re watching.
All of which Amazon Fire already does.

And here’s the rub with Siri: voice recognition systems circa fall 2015 do a good job with “find me Brad Pitt movies.” Less so with “find me Angelina Jolie movies.” And don’t even try “shows with Mariska Hargitay.” (Hence the aforementioned need for a keyboard.)

The voice-activated rewind and fast-forward and “what did she say” feature (Siri rewinds 15 seconds and includes closed-captions) should work well though, and we agree with Apple that voice commands are the future. It’s just that we’re not there yet.

Universal Search
Universal search was another feature Apple was pushing. Though for now it’s still not-quite-universal search—AppleTV will only look through Netflix, Hulu, HBO, Showtime and iTunes for you. Here again, Roku’s had this feature for a while now,and it works across every app you’ve installed. Roku has no voice integration (yet) but, well,  Mariska Hargitay. As well as any foreign film you might be interested in watching. (“Hey Siri, find me La Nuit de Varennes.”) Typing is just easier.

The final new feature was a new operating system called tvOS that comes with an open SDK that seems to be geared towards game developers. While our Twitter feed was full of people mocking it as Apple reinventing Wii, there may be a market for “good enough” games—experiences that don’t require the intensity of a World of Warcraft, but are still fun and engaging. That said, other streaming device manufacturers (Amazon and Roku) have already been down this path without much success and beyond the remote, Apple doesn’t seem to be adding anything different. (And showing off the Gilt app certainly didn’t help their cause. We’ve already learned people don’t like to use the static interwebs on their TVs.)

Having neglected the Apple TV for quite some time, it is only natural that today’s update included a lot of catch-up features. The problem is that there was nothing ground-breaking either, nothing that really makes the new AppleTV stand out from its competitors. The new remote and voice-activated Siri are nice enough features, but neither one seems to justify the extra $100 Apple is charging for the new box. (Which still, interestingly enough, is priced to factor in users downloading large amounts of content, an idea that seems very 2010.)


If Siri’s ability to understand what we’re saying to her vastly improves, Apple may have something. But until then, we’re not seeing much reason to upgrade from the original AppleTV. Or switch over from Roku.

Hulu’s Double Whammy

Originally published at TDG Research on September 3, 2015

Hulu made two very big moves this week, building on the momentum it began earlier this year when it announced an original content play along with a multimillion dollar deal to stream the Seinfeld catalog.

The first bombshell dropped Monday, when Epix confirmed it was leaving Netflix for Hulu, giving the latter a deep catalog with a wide array of popular current movies. The second came yesterday, with Hulu announcing a $12/month ad-free option in addition to its current $8/month ad-supported SVOD service. (But seriously — is anyone really not going to pay an extra $4/month to avoid commercials?)

Together, these changes signal a newer, stronger, more vibrant Hulu. But, as some have asked, might Hulu’s $12/month price tag be a bit much for prospective customers currently paying $8/month for Netflix or slightly more for Amazon Prime, a service that also includes free two-day shipping on thousands of items?

The answer is ‘maybe’— it all depends on how Hulu decides to market itself. It has all the pieces in place to make subscribing a no-brainer. Now it needs to get the right message out.

Some Strong Selling Points
Hulu has one big advantage over its rivals: the current seasons of shows from NBC, ABC, and Fox. Having three major networks as parents gives Hulu exclusive rights to their current season series, while Netflix and Amazon typically only get shows from previous years.

Hulu needs to make potential subscribers aware of this difference, along with talking up its new movie catalog (featuring hits like Mockingjay and Star Trek) and its slate of original content from names like Amy Poehler and James Franco. Factor in the new ad-free model and this should prove to be a very compelling proposition, both for those without pay-TV (who can still keep up with current network series) and for those without it (who don’t ever have to worry about missing an episode).

Moving Forward: New Features We’d Suggest
While Hulu’s offering is currently quite strong, there are things it can do to make the service even more compelling.

For starters, it should take a page from Amazon, who this week announced that both iOS and Android users would be able to ‘offload’ shows (i.e., download shows for offline viewing). That will likely prove a highly popular feature with commuters and road warriors. While rights issues may hold things up, we believe having the feature is definitely worth pursuing. It’s a huge benefit for users and, if Amazon is offering it, there’s a good chance Netflix will follow suit. Hulu cannot afford to be the odd man out.

Second, Hulu should introduce an auto-play option, so that when the user launches Hulu, a show immediately begins to play. That decision can be based on a user’s viewing history and the program they were watching the last time they had the app open. It’s a feature that may not appeal to all viewers, so it’s best to make it optional. That said, if Sony Crackle’s experience is any indication, the feature should prove popular with the majority of Hulu users and create an experience that feels more like ‘watching TV’ than ‘watching TV on an app.’

Finally, Hulu should give users the ability to create personal accounts for each member of the family. Not only will that help improve the user experience (e.g., parents won’t get children’s shows as suggestions), it will also allow Hulu to collect better data about both it’s users and its original programming; data that can then be used to better target marketing efforts aimed at attracting new subscribers.

It’s not easy to turn a company around, particularly in the television industry, but Hulu has been making all the right moves and appears to be well on its way to becoming a serious competitor for Netflix and Amazon, providing viewers with attractive additional options for OTT viewing.

Apple’s Original Content Play: Desperate Times Call For Desperate Measures

Originally published at TV[R]EV on September 2, 2015

Apple might not be launching their own internet-based pay-TV service any time soon, but if the rumor mill is correct, they may be getting ready to produce some original content. And whether that content consists of iMovies or iSeries, one thing seems pretty clear: Apple will do whatever it takes to keep users tightly ensconced within their closed ecosystem.

A closed system is an anomaly at a time when consumers demand access to content on any device, at any time, in any place. It’s a system that’s served Apple well in the past when the iPod-iTunes loop dominated the music industry back in the mid-00s. But will it work for them ten years later with TV?
The jury is still out on that one, particularly because, when it comes to streaming television, Apple is operating from a position of weakness. Their decision to cling to the TVOD (transactional VOD) business model for iTunes, when everyone else was moving to subscription has left them behind the pack, to a point where it’s seemingly impossible for Apple to pivot, as almost all the existing network content of any value has been snapped up by Netflix, Amazon and Hulu, and all that’s left for Apple are the scraps. Hence original content becomes Apple’s ticket to a subscription model, but original content is expensive and it will take Apple years to produce enough of it to catch up with its competitors.

That said, Apple’s decision to pursue original content may be less about software and more about hardware.

Apple is preparing to launch the latest iteration of its Apple TV and (credible) rumors put the price point at either $149 or $199. That’s a good $100 more than Chromecast, Amazon Fire TV and (especially) Roku and unless there are some significant bells and whistles (which there don’t appear to be—improved Siri integration doesn’t count, nor do the “good enough” games the SDK and app store will churn up)— it’s going to be very hard to convince anyone other than a hardcore fanboy to cough up the extra cash.

Enter original content. If Apple can produce a number of can’t-miss series that can only be seen on iTunes, that may well be the straw that breaks down resistance to  Apple TV’s high price point, bringing new users into the Apple ecosystem, where Apple can monitor their moves and collect their data. It’s a high-risk move, however, because if there’s one thing we know about original content, it’s that it’s very hard to predict what will stick.

And then, of course, there’s Apple’s long rumored pay-TV service.

Here’s where it gets tricky. Apple’s pay-TV service hasn’t launched because the networks don’t want to cut them any kind of a deal. More than YouTube loving, cord-nevering Millennials, the one thing the TV Industrial Complex fears is an Apple with a virtual stranglehold over the industry, the way iTunes once had a stranglehold over the music industry. It sounds almost quaint today, what with Spotify rising and the new Apple Music sinking, but it was once the music industry’s cold hard reality, and the television industry is resolute about not letting it happen again.

So the thought of Apple with it’s own pay-TV bundle plus original content plus a closed ecosystem to play it all on is the stuff of many a Brentwood resident’s nightmares.

In other words, don’t hold your breath for an Apple pay-TV service any time soon.

What does this all mean for the industry?

It means another entrant in the already saturated race to produce “quality” content of the sort that appeals to well-educated urbanites living on the coasts, quality, of course, being in the eye of the beholder. That leaves a big opening to produce the sort of “quality” content that appeals to the remaining 75% of Americans.

It means the possibility of a seeing the TV ecosystem bifurcated into Apple and non-Apple, the way the mobile universe currently is, which makes data collection, production and encoding more of a hassle, but opens up the door to those with the ability to work both sides of the room.

Finally, it means that there’s a real possibility that Apple will actually fail at something, that they waited too long (or were forced to wait too long) to actually enter the TV race, and that no amount of shiny Jonny Ives design will dislodge the existing players, who are already well entrenched with products no one seems all that chuffed about.

Which leaves us… right back where we are today, where Facebook’s hoodie-wearers pose far more of an existential threat to the television industry than the mock turtlenecks of Cupertino.

Time will tell.