Comparing premium cable networks like Starz, HBO and Showtime, with their subscription-only requirements, to Netflix (NASDAQ: NFLX), Amazon (NASDAQ: AMZN) and Hulu, which rely solely on subscribers for revenue, Starz CEO Chris Albrecht told investors this week that established players in the media and entertainment industry--networks, distributors and MVPDs--need to start playing the same game as subscription video on demand providers. And that means creating more original content and finding innovative ways to expand their subscriber base.
Noting that the current premium cable bundle is "constrained by price increases" and a shaky economy, Albrecht told attendees at the Citi 2015 Global Internet, Media & Telecommunications Conference that despite the economic squeeze, demand for content has actually increased.
"So if we can get those to consumers in more innovative ways through any of the above, that's good news for the premium brands that are already SVOD services, that already have the technological platforms to deliver the programming the way that the consumer wants to have it delivered to them," he said.
Starz has made original content the "lead dog" in a strategy that will help the network compete with not just its pay-TV counterparts but the increasing number of online video services (AOL and Yahoo Screen among them) that are banking on original content to grab a bigger stake in the OTT opportunity.
Albrecht emphasized that individual series were not what would carry Starz financially.
"(W)hen you're selling an SVOD product, which in a sense is what a premium channel is, you're selling a product, you're not selling it on particular shows."
Of course, Starz does not have plans to go all-OTT at the moment; it offers an authenticated TV Everywhere service for its subscribers, who must also subscribe to a pay-TV provider that carries the network.
Albrecht, who once helmed HBO in a job he described as "CEO with training wheels" compared to the complexities of running Starz, danced carefully around the topic of HBO's planned all-OTT service, noting that the company still hasn't confirmed that it will go direct to consumers.
"At HBO, the initial strategy was to sell the entire service. And then sell a lighter version direct to consumers so that we didn't piss off our distributors," he said.
"If they go direct to consumer and they are successful, would Starz go direct to consumer? Maybe."
In any case, he feels originals are the way to go if traditional TV wants to compete effectively, noting that HBO "invented that playbook. A lot of people have copied it because it works. We're employing it at Starz because it works; we're a little late to the party but certainly not too late."
He also took the opportunity to make some veiled digs at Netflix. The SVOD service basically rides into the subscriber home on top of a service that cable and IPTV operators provide, he noted. And OTT providers' claims that their shows are successful, without providing Nielsen-like ratings, sound similar to a strategy Albrecht once promoted to HBO's then-CEO Michael Fuchs in the late 1980s when he was trying to convince the executive to create original series.
"He said, 'How do we know they're going to be successful?' I said, 'We'll say they're successful. Who's gonna know? We'll just keep ordering them.' I think there's a little of that going on, in places where there's not measurement."
Media companies need that measurement now, he said, in order to effectively license, sell ads, and figure out where to place their content. "If you don't have that information … Sopranos was a failure on A&E, whereas Sex and The City, it's still playing and making money for everybody."
Additionally, Starz is moving forward with plans to expand internationally. In more developed countries, Albrecht said, the network will sell content rights directly to providers; in less developed countries (meaning countries with less penetration by competitors), Starz will work with investors to create "Starz-branded platforms" that either go directly to consumers or through local pay-TV operators.
Albrecht feels the best days for premium channels are ahead, with online and international opportunities looming. "We don't have to be the first one in. We're in. We're not the first one in now, and we're in. For all these new opportunities that are made, we just want to get in, and I'm pretty sure we're gonna be invited to every party that's thrown by anybody."
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