Those of us in the over-the-top video delivery space have had an interesting seven days. Not only did we learn that the three biggest cable companies are all testing streaming video services, but the operator of a major broadcast network also said it will offer an anticipated new show exclusively on its SVOD platform.
Meanwhile, a number of major media conglomerates are signaling their pullback from Netflix (NASDAQ: NFLX).
Indeed, a lot of OTT stuff has happened lately.
In terms of strategic coherency, I'll start with the announcement I understand the least: CBS Corp.'s decision to let the next TV-series iteration of Star Trek live exclusively on its CBS All Access SVOD platform. The 50-year-old Star Trek franchise has always enjoyed a rabid -- if niche -- following, and it's easy to imagine hundreds of thousands of Trekkies willing to pony up $5.99 a month just to binge on this exclusive original show.
However, CBS Corp. concurrently aims to double its annual retransmission and reverse-compensation revenues over the next five years. Thus, it seems to be rowing the wrong direction with its new Star Trek strategy. If many of CBS' big-bang program assets are living on its SVOD platform in 2020, it's hard to understand why operators are going to agree to pay twice as much to license the network's programming as they are today. Along those same lines, how lucrative a market will pay-TV be for retrans and carriage fees be in five years if all the best content is delivered by programmers themselves over-the-top?
What makes more sense are the revelations made this week by media companies including Time Warner Inc. that they're going to cut back on syndication through third-party SVOD platforms like Netflix and Amazon (NASDAQ: AMZN).
"We are evaluating whether to retain our rights for a longer period of time and forego or delay certain content licensing," Time Warner Inc. chief executive Jeff Bewkes told investors. "This would effectively push the [subscription video] window for content on our networks to a multiyear period more consistent with traditional syndication."
In other words, Bewkes wants to change SVOD windowing so that shows like the Fox crime drama Gotham -- produced by Time Warner's Warner Bros. Television studio division -- don't show up on SVOD so fast. For example, season one of Gotham, which only ended in May, is already available for binging on Netflix.
Back in the halcyon days of syndication, it would take years for repeats of a show like Gotham to show up on off-network re-runs. As a result, producers would collect both program licensing fees and national advertising.
But thanks to Netflix, viewers don't watch re-runs -- and their associated commercials -- on linear television nearly as much these days.
For example, earlier this year Viacom wrote off $784 million, most of it in the form of anticipated after-market value for its programming that was wiped away when consumers started binging on Nickelodeon reruns on Netflix, rendering these older episodes bereft of viewers -- and value -- on linear channels.
Removing Netflix money will hurt programmers in the near term.
Jefferies analyst John Janedis estimates that Time Warner's 2016 operating income could suffer by as much as $100 million by pulling back from SVOD coin.
But longterm, extending SVOD windows so that programmers have a little time to monetize their content before it's poured into Netflix's buffet bucket, then devalued into oblivion, makes sense to me.
What I can't understand is the timing. Media companies like Time Warner have watched linear ratings, particularly for re-run programming, crater steadily for the last 24 months. And analysts first started tying those declines to SVOD streaming more than a year ago.
What took Bewkes so long to act?
But the news that made the most sense to me this week was the announcement by Time Warner Cable that it will test a new streaming service in New York. Although TWC chief executive Rob Marcus refuses to call it an OTT product, the offering would stream on standard OTT devices (TWC is shipping trial customers a free Roku 3 box) and won't require a leased set-top box.
Unlike streaming services being tested by Comcast (NASDAQ: CMCSA) and Charter (NASDAQ: CHTR) -- and actually deployed by Dish Network (NASDAQ: DISH) -- TWC's product would feature a complete programming bundle.
So that means I could get things I don't have now with Sling TV, like regional sports networks and broadcast channels -- the Full Pay-TV Monty -- but I could still save a few bucks by not having to lease equipment or indirectly pay for truck rolls.
Even better, the service would fulfill the promise of TV Everywhere by allowing me to watch my Lakers lose games anywhere in my home -- and rights permitting, out of my home.
TWC said 82 percent of its customers still profess a fondness for the big bundle. So the company is basically stripping out the stuff consumers don't like about pay-TV -- tech visits, equipment leasing, being chained to the living room -- while still delivering a robust program offering at a reduced price.
Again, I'm confounded. Why did it take so long for someone to execute on this idea? --Daniel