Hower: The 4 new trends impacting digital TV content distribution

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Digital distribution has opened an abundance of monetization opportunities, in contrast to previous television models that relied on advertising and subscription revenue from pay-TV service operators. Average monthly spending on subscription video on-demand services (SVOD) among U.S. broadband consumers has increased from $3.71 per month in 2012 to $6.19 per month in 2015, opening additional opportunities to monetize television content beyond the live and VOD windows. Live digital streaming of sports content, the early authenticated and transactional VOD window, early and mid-subscription VOD window, and digital syndication are all impacting digital TV content distribution.

 

Live Sports Streaming

Sportscasts, or live streaming of sporting events, draw large audiences and are expensive to distribute due to the high cost of broadcast rights. The value of sports programming is greatest for live viewing, and the quality of experience is critical for sports viewers. Sports content providers employ streaming primarily for supplemental broadcast coverage, allowing displaced fans to watch their favorite teams. Applications like WatchESPN and Fox Sports Go provide live streams of programming from multiple markets.

In addition to out-of-market access, sports streaming apps often carry secondary content exclusive to the app. In 2015, ESPN began offering a specialized streaming application to subscribers specifically for cricket fans. The streaming platform carried matches for the ICC Cricket World Cup and the Indian Premier League for its duration before the branded service was rolled into its broader WatchESPN app. For its duration, the service offered ESPN additional revenue opportunities to market to a select but dedicated fan base.

That same year, the National Football League broadcast a game worldwide and exclusively on an Internet streaming platform for the first time ever. Yahoo live-streamed the game between the Jacksonville Jaguars and the Buffalo Bills at London’s Wembley Stadium as part of the NFL’s annual International Series. A reported 15.2 million unique viewers watched the stream worldwide. However, much of the advertising airtime sold for less than half of what Yahoo expected, reportedly bringing in under $100,000 per spot after paying a sum of $20 million for the broadcast rights.

There are several key takeaways from Yahoo’s NFL experience. The game was aired in an undesirable time slot (9:30 a.m. Eastern Time on Sunday morning), and both teams serve small markets. The streaming metrics should not be compared to a primetime game on Sunday afternoon or Monday night. However, that an Internet company outbid major broadcasters for an NFL game is noteworthy. The trend continues with Twitter’s broadcast of Thursday-night NFL games, albeit simulcast with broadcasters.

Authenticated & Transactional Video Models

Authenticated and transactional VOD are also key content distribution models in the digital age. Access for the earliest VOD window for television content varies depending on the content provider, network or channel, and content access platform. For pay-TV networks, the model is fairly consistent. Customers of authorized TV providers can access a specified number of episodes of a show through authenticated platforms. The digital platform may be a catch-up app from the network, or it may be a catch-up app from a pay-TV service provider like Sky GO. Many programs are also available through the video on-demand interfaces in a pay-TV provider’s set-top box.

Broadcast network VOD windows are more complicated, depending on the market. Most networks offer a selection of 5-10 episodes on their websites and through web applications. However, licensed pay-TV providers hold the first window by authenticating customers. Most recently run episodes are typically available 24 hours after broadcast for a period of seven additional days before the episode is open to any user.

For viewers who are ineligible for authenticated viewing, or for networks that do not have catch-up players, the next window option is transactional sources. Services like iTunes, Google Play, and Amazon offer transactional streaming or downloads of television content, with episodes typically priced between $0.99 and $3.99 each. These retail services allow consumers to purchase a “season pass” for a series, which grants them access to every episode of the purchased season. Season pass purchasers are granted access to new episodes when they are available for transaction, usually 24 hours after the original broadcast. The main advantage of a season pass is a discount per episode on the purchase, up to 40% per episode.

Direct-to-Consumer Streaming

Content providers use their own direct-to-consumer subscription VOD services to extend or prolong the earlier TV windows. The joint venture of ABC-Disney, 20th Century Fox, and NBCUniversal that formed Hulu was a groundbreaking arrangement between three of the largest content providers in the United States, offering both current and library television content.

SVOD services employ three key windowing strategies, including current content, library content, and network-owned services. For current content, services incorporate a TV Everywhere model that promotes current season content from television networks if available. Even though they are subscription services, interfaces will display more recent and current season content at the top to catch viewer attention. For an SVOD service that licenses third-party content, current season TV content is more expensive than library content, and positioning assets for a higher likelihood of viewership helps to ensure a provider can justify its investment.

For network-owned services, television networks launched their own direct-to-consumer services to distribute content to subscribers. For example, CBS Corporation launched CBS All Access and HBO launched HBO NOW as standalone video services that do not require a pay-TV subscription. All services distribute a library of previous season programming in addition to their current programming, hoping to justify their investments and earn a share of recurring customers.

Digital Syndication Model

The newest frontier of digital exploitation is the digital syndication model. Syndication as a TV model has assisted content rights holders in monetizing older content, particularly for series that have long closed their runs. Television syndication generally involves the concept of episode stripping, through which a broadcaster licenses a block of episodes and airs them in a convenient order that might not necessarily be in the same order of the original broadcast. As such, serialized content generally achieves less success in syndication than with programming that relies less on long-arc storytelling.

As with live sports, the value of scripted television programming tends to decline over time, though at a rate of years instead of hours. In defiance of these odds, there are certain television series, such as Friends or Seinfeld that stand the test of time and become highly valued cultural artifacts to television aficionados. Ultimately, that is the goal for content providers—a hit series, though expensive to produce on a per-episode basis, is a lucrative gift that keeps on giving. Given the often-topical nature of programming and sentimental affection felt for television one “grew up with,” television is a culturally valuable medium.

That value will have implications for cord-cutters and -nevers, OTT video providers, broadcasters, and pay-TV providers, who will soon require higher fees to allow customers access to their catch-up applications, current and library TV content, and exclusivity of owned broadcast rights.

Glenn Hower is a Research Analyst with Parks Associates.

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