Online video's expanding impact on the bottom line

editor's corner

One more time around the block, since it's earnings season, on whether online video, Netflix (Nasdaq: NFLX) and its ilk, are the kryptonite to pay-TV and broadcaster's Superman, or whether they actually are more akin to Popeye's spinach.

We had a trickle of an idea last week when CBS chief Les Moonves said digital licensing had a "huge impact" on the network's revenues in the first quarter.

"Content is forever and quality content never goes out of style. Nowhere is this more evident than the way we monetize our content digitally," he said. "In addition to the deals we struck with Netflix and Amazon, other online video distributors are looking to license our library content. These deals are... adding meaningful, very high margin dollars to our bottom line."

Since then, as more companies have reported earnings, that trickle has become a torrent.

This from Time Warner (NYSE: TWX) CEO Jeff Bewkes:

"Based on the deals that we have already got to date, that we have already contracted to date, we would anticipate this year 2012 to recognize somewhere in the area of about $200 million (for SVOD money). And we have got constructive discussions ongoing with numerous other parties as more and more entrants seem to be interested in acquiring the types of shows that we have."

His CFO, John Martin, said the deals also carry a "considerably, considerably higher" margin than for the overall segment.

Rural telco Frontier Communications (NYSE: FTR) CEO Maggie Wilderotter, in a response to a question during the company's earnings call, meanwhile, said the company was looking at multiple ways to get video to its customers, and was even more focused on over-the-top (OTT) delivery.

"Video is very important," she said. "We think over-the-top video is probably more important than anything else."

But Dish Network (Nasdaq: DISH) chairman Charlie Ergen had a considerably different take on the impact of OTT distribution.

Ergen, during the satellite TV company's earnings call, said allowing streaming of programs like Mad Men, The Walking Dead and Breaking Bad on Netflix and iTunes was diluting their brands, and cutting viewership on Dish.

"One of the things that programmers have done is they've devalued their programming content by making it available in multiple outlets," Ergen said. "Our customers are not really saying ‘we want to pay more money,' they're saying ‘we want more flexibility in our programming and we don't want to pay more.'

"We believe the product has been devalued, not that there are not some good programs, but it's been devalued because you can get it multiple ways and customers have more flexibility to get the programming. It's not quite the same as if something were exclusive."

His comments come, of course, as Dish is immersed in a battle with AMC, the network that owns those shows, over carriage rates, so they might be taken with a grain of salt.

Of course Netflix CEO Reed Hastings contends that the opposite is true. He said Mad Men saw a 20 percent ratings boost for its opening episode specifically because its past seasons are available online.

"Even now, the most watched episode of 'Mad Men' on any given day on Netflix is the first episode of the first season," he wrote in an April 23 letter to shareholders. "This means we are still growing the fan base for this show nearly six years after it first premiered on television."

Disney (NYSE: DIS) CEO Bob Iger has overseen the company's expansion of its digital play, approving high profile deals with Netflix and YouTube, for example. He's also aggressively managed the company's presence on digital platforms.

The key, he said, is to achieve a balance.

"What we believe we've done is to strike a pretty good balance between protecting the core or the traditional business and platforms and taking advantage of new opportunities on new digital platforms," he said. "We have not seen any negative impact from the presence of Disney Channel shows on these new platforms."

Spinach, anyone?--Jim

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