Don't fear the reaper: Netflix, HBO competition may also be broadcasters' salvation

Samantha Bookman, FierceOnlineVideo

This week, broadcasters and networks presenting at the UBS 42nd Annual Global Media and Communications Conference in New York City spent a good chunk of their time trying to calm investors who are, understandably, a little rattled by the last few months' events in the over-the-top world. With traditionally linear TV companies now at the point where they must invest significantly more in IP video delivery, and no clear monetization strategy yet gelling, attendees wanted to know if TV was still a good bet.

And while some could interpret network executives' comments as polite defensiveness, the truth is, TV's profitability isn't going to fall off a cliff--and they may have online video to thank for it. Eventually.

Right now, industry analysts and investors alike are staying warm by fretting about where TV advertising dollars will go, as audiences increasingly drift to OTT--a medium that meets many of their demands for things like affordable entertainment, rapidly updated interfaces, and a stunningly robust amount of content. But those dollars aren't necessarily going to disappear. Managed correctly, and with a little out-of-the-box thinking, broadcasters, networks and pay-TV providers could shift ad dollars to their TV Everywhere or standalone streaming platforms without significant impact.

I'm not sure exactly how they will do that--the OTT ecosystem is a complex one--but I do know that decisionmakers need to shift their perspectives and knead their company cultures a bit to effect real change. There's evidence that it's already happening.

Both CBS and Netflix, speaking at the conference in separate sessions, pointed out that traditional television and OTT viewing are either complementary, or present little competitive problem.

CBS has been famously recalcitrant about taking a stake in the online video industry. For the past year and a half, Les Moonves derided OTT startup Aereo's technology and business model at almost every opportunity. But the broadcaster's message has been shifting slightly as of late, as it works on its own SVOD entry, CBS All Access.

CBS chief research officer David Poltrack explained broadcasters' complicated relationship with Netflix at his UBS presentation, as reported by The New York Times. Yes, the SVOD provider is probably a contributor to the 3 percent drop in linear TV viewership this year. However, Netflix is also a valuable outlet to which CBS can license its older content. That makes the provider somewhat complementary to the broadcaster's efforts.

"Wouldn't you prefer that your competition relied on old episodes of your programs as opposed to new content from someone else?" Poltrack said. "You have to look at the big picture. Yes, Netflix is a formidable competitor. But they're a valued partner as well."

Ted Sarandos, Netflix's content guru, explained that networks' TV Everywhere services still have a long way to go and a lot of improvements to make before they can offer services comparable in breadth and quality to Netflix. And they need to figure out how to profit from TV Everywhere to really get it going. "If they can better monetize that content, they could and they should," he said.

So, how will TV's OTT plays progress? To move quickly enough, it's becoming increasingly apparent that most networks will need outside help. Many networks wouldn't have considered a third-party provider for their streaming in years past; now, it's not unusual to see networks turning to them more often, rather than figure out OTT infrastructure on their own. And those that aren't ready to go all-in on an online solution are at least trying to increase their visibility and reach: Discovery Communications, for example, finally gave in to Hulu and agreed to license its content to the streaming provider.

HBO, reportedly faced with an ambitious April launch date for its new standalone streaming service, dumped its in-house "Maui" project this week and instead signed on with MLB Advanced Media. The move generated some drama as CTO Otto Berkes resigned, presumably in protest over the hit to his digital unit.

Expect more drama in the media and entertainment vertical as companies make the shift, because if HBO's new service is a hit--and probably even if it falls flat on its face--online video is rapidly becoming a dominant force. Networks will make the shift regardless of whether or not doing so will cannibalize linear TV content. To make money at it, the current TV culture has to change.

Broadcasters and networks need to take better control of their IP video strategy. They have access to the technology. They can rebuild their advertising base. They can be better, faster and stronger in an OTT world.--Sam

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