Operators champion pay TV even with low margins and market confusion

Pay TV Show panel
L-R Gary Schanman, Charter; Scott Ehrlich, Sinclair; Roy Cho, AMC Networks; Bob Greene, Liberty; Jon Watts, moderator (Fierce Video)

DENVER—Speakers on the kickoff panel for the Fierce Pay TV Show today agreed that pay TV (if it should be called that) was a tough business.

There have been a lot of changes this past year in streaming video: Disney bought Fox, NBCUniversal is launching a streaming service. And just today, Comcast announced it reached a deal allowing Disney to take full operational control of Hulu.

RELATED: Comcast relinquishes full control of Hulu to Disney

Bob Greene, managing director of business development at Liberty Global, said margins are still going down for cable operators. But he said, “I don’t think you should get out. I think you have to continue to compete.”

He said that although it’s tough for cable operators, it’s also tough for direct-to-consumer providers. “I think you’ll see a lot of these guys try to get in; blow through their libraries; and then turn back. OTTs come in, and each time the  incumbents rise up. I think it’s very healthy.”

Gary Schanman, SVP of video products for Charter Communications, said the company has just over 16 million video subscribers in the United States. He noted that people are watching the same, or even more video, than ever before, they’re just watching it on a plethora of platforms. “Our subscriber base is under pressure,” said Schanman. “Even people that don’t subscribe to our service watch the same amount of video on other platforms. The switching costs for people to go into and out of a virtual product is a lot lower. As you have more services, people are picking and choosing how they want to consume.”

The panel agreed that there are too many OTT services as well as a lot of new players, causing marketplace confusion.

Roy Cho, VP of distribution with AMC Networks, said distributors such as Charter are getting into original content; Apple is getting into original content. “It’s a bit of a wait-and-see to see who the actual players are,” said Cho. “There’s all this optionality, but also customer confusion. The way to cut through it as a programmer is to create hits.”

Cho also pointed out that many OTT offerings are very niche. And Scott Ehrlich, VP of emerging platform content at Sinclair Broadcast Group, joked that he has scores of channels on his office TV, “One channel is a Hyundai commercial on a loop.” 

Ala Carte

Ala carte is a conversation that never ends. “Every couple of years you have this ala carte conversation,” said Greene. “Today we have this proliferation of ala carte at very expensive rates. Consumers are having a lot more difficulty figuring out what to subscribe to and how long to subscribe”

Charter’s Schanman predicts that in the future, “You’ll see more smaller bundles, multiple bundles, better aggregation and easier access. Whoever provides that is going to do very well.” But he warned that it’s hard to make money. “For some companies, it’s going to be a decision as to whether it’s worth it,” he said. “Video has really poor margins right now, especially if you’re licensing content.”

Despite the tough business, the panelists agreed that video is exhilarating. "We’re fortunate to be in an industry that has not only survived but has proved very resilient," said AMC's Cho. "It's an exciting time to be in the business."

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