with Sherry Brennan, senior vice president of sales strategy and development for Fox Networks
Sherry Brennan has been with Fox Networks for the past seven years, and today she oversees the business' efforts to reach into the digital realm. Fox's digital operations stretch across a wide range of technologies and business models, and include millions of streams of Fox programs. The company offers content through Hulu, TV Everywhere, mobile apps, Xboxes and more, and Brennan's job involves ensuring that the placement of content continues to net Fox the most possible revenue. This means Fox continues to rely on free, freemium, paid and subscription-based business models. During the recent OTTCON conference in Santa Clara, Calif., Brennan sat down with Fierce Executive Editor Mike Dano to discuss Fox's digital goals and its current endeavors in online video.
FierceOnlineVideo: Fox's content is available across a range of platforms and business models. Can you talk about where Fox is focused?
Sherry Brennan: TV Everywhere is probably our most important online strategy. We're very mindful of the need to retain the value of the pay TV ecosystem, and help our distribution partners continue to grow their businesses as we continue to grow ours. And TV Everywhere is a perfect meeting of technology and distribution.
We're not focusing on one [platform] to the exclusion of all others. Our business is selling content. And we will sell our content into all of the environments that it makes sense to sell into.
TV Everywhere has great potential because almost 90 percent of TV homes in the U.S. pay for television, so the opportunity to market in conjunction with our linear distribution partners is tremendous. We're also in the free, ad-supported television business and similarly in the free, ad-supported online video business.
FierceOnlineVideo: So is it fair to say you're testing all these business models?
Brennan: No, I don't think we're testing. These are established business models that we're participating in. We're selling content into every marketplace that wants to buy it.
FierceOnlineVideo: There is a small but loud minority that wants HBO to take its content straight to consumers, rather than tying it to a pay TV subscription. Would Fox consider this kind of approach instead of TV Everywhere?
Brennan: First of all, the marketing potential through the pay TV distributors is huge. The ability for them to make it available in a seamless way to consumers--the back end, billing functionality, customer service--none of those are trivial efforts. And I don't know that HBO really wants to sign up to do all that.
One of the things the pay TV providers bring to the table is huge efficiencies of scale and economy and scope that an individual content creator, even for one like HBO or Fox--it just doesn't make a lot of economic sense to replicate that over and over again for every single brand. So the ability of the pay TV distributors to bring together all the content and make it available through an integrated, aggregated service makes a lot of sense economically. This is true from a customer point of view too: Imagine if you had to have a different remote control for every network's TV shows you wanted to watch? Fast forward wasn't always just a right arrow, sometimes it was an "F" and sometimes it was an "ahead" and sometimes it would be "onward." It just doesn't make any sense.
Also if you looked at how much it would cost HBO to provide their service directly, how much money they would have to make from each customer who bought it online, I'm not sure there would be an outcry to buy it that way. When you're buying it in a bundle from your pay TV operator, you're probably paying less for it than you would have to pay to buy it on an a la carte basis directly from HBO. I don't know if HBO could sell enough subscriptions to be able to keep making things like "Game of Thrones."
How do you create and launch a new hit? That doesn't happen in a vacuum.
I think consumers who think they want that don't realize what would likely fall out of the system if they got their wishes. There might not be enough money in the system to keep creating the shows they enjoy watching.
FierceOnlineVideo: How do you decide how to allocate Fox content? Some content is available for free online, some is withheld for a week or so and only available to paying customers and some is kept permanently for paying customers.
Brennan: Basically we make our content is available first to our best customers, the pay TV subscribers. So the broadest set of content and the earliest windows is available to the pay TV subscribers. We might take a new show that's premiering and make it available right away with no hold-back window, and that's for a promotional purpose. So there are a lot of factors that go into deciding when a particular show goes online and under what business model.
FierceOnlineVideo: How do you decide which new platforms to support?
Brennan: One of the things we care deeply about is content protection and security. So we go through a very extensive evaluation process before we license content into any new platform and make sure that it can't easily be stolen. I mean nothing is bulletproof, 100 percent, but we have a lot of standards that we require to be in place before we'll allow content to be put into a new environment so that people can't steal it, so that people can't rebroadcast it to the rest of the world for free. We take a good deal of time and effort to evaluate that. So we're not likely to be first out on every new platform.
FierceOnlineVideo: Can you give me any data about online usage and viewership numbers?
Brennan: I can't share much about usage. The vast majority of viewing of television content is still on television. Live linear TV is still about 90 percent--for certain categories it's more, for others it's less. And then another 7 or 8 percent is time-shifted by DVR. So the share that we are talking about [online video] is like 2 percent. But it's obviously growing and it matters a lot.
I expect that there will be more on-demand viewing through TV Everywhere versus through DVRs. I think you'll see viewing shifting away from DVRs because by definition to watch it on your DVR you have to have planned ahead. I think people will shift their viewing away from DVR and over to other devices.
FierceOnlineVideo: Have there been any surprises in the development of Fox's online business?
Brennan: The viewing of current episodes, meaning the most recent four or five episodes, continues to be the lion's share of video-on-demand viewing, whether you're talking about viewing through a set-top box or online. So current [TV] continues to drive viewership, and that's as we expected it to be.
You can see it in time shifting: The lion's share is within seven days on DVR, and the same pattern holds true for online and video on demand. And the lion's share is within five episodes and the lion's share within that is the first episode.
FierceOnlineVideo: So do you view online as a way to grow the overall business?
Brennan: Yes. We see that people who stream the most also watch the most TV. And the people who watch the least TV also are the people who stream the least.
And so we saw this in video on demand 10 or 15 years ago and also in the premium TV market, like HBO: People who like video content and like to consume it, continue to like to consume more of it in more places. So those people are not going away from platform A to watch on platform B, although I do think there will be some shifting of where people watch time-shifted programming, away from DVRs and towards devices as TV Everywhere proliferates. But that's not really cannibalization, that's platform shifting.