Showtime's Christie: OTT subscribers are 'just too big a segment to overlook'

Tom Christie, Showtime

Christie (Image source: Showtime)

with Tom Christie, Chief Operating Officer, Showtime Networks

Tom Christie has been with premium network Showtime for more than two decades, and has seen the cable industry rise and fall and now, possibly, rise again thanks to changing technologies and consumer demands. In the midst of all the industry sturm und drang, however, he says the last five years have been the best of Showtime's existence.

Recently promoted to Chief Operating Officer, Christie leads network operations, new business development, sales, affiliate marketing and distribution efforts for the premium channel. Showtime waded into the digital video fray over the past year with the launch of Showtime Anytime, its authenticated TV Everywhere app for pay TV-based subscribers, and its direct-to-consumer Showtime app. But more interesting is its willingness to partner with established SVOD providers Hulu and Amazon, attracting a new base of cord-nevers and cord-cutters. Samantha Bookman, editor of FierceOnlineVideo, spoke with Christie at the INTX Show in Boston about Showtime's online video strategy and his view of the changing multichannel industry.

FierceOnlineVideo: A year ago the big word being thrown around the pay-TV industry was cannibalization. A channel like Showtime going over-the-top would be essentially cannibalizing those viewers from the pay-TV ecosystem. Has it happened?

Tom Christie: We see very little evidence of it cannibalizing Showtime. But I will say we watched for a couple of years the cord cutting that was going on, and were growing a little concerned about that multichannel video universe shrinking. When the cord-nevers and the former cord-haves which represent by many estimates 10 million homes, maybe more today, it just became too big a segment to overlook.

And frankly, the other thing that weighs in on our decision to do this is, there's other products out there, Netflix, Hulu, Amazon Prime Instant Video, that if we didn't enter into the fray, they were going to command a huge share of the marketplace.

FierceOnlineVideo: The whole dynamic of the cable industry is getting interesting, not just how they've had to pivot but how they're reshaping themselves to meet the way the market is changing.

Christie: Yeah, I think we heard about that this morning (in NCTA President & CEO Michael Powell's INTX keynote). They've had to pivot and they are. These are very good indications of a continued opportunity for Showtime.

FierceOnlineVideo: Why make your Showtime app and Showtime Anytime available through Amazon Prime and Hulu as add-on offerings? Why not keep Showtime as a standalone, the way HBO Now has?

Christie: Think of Hulu and Amazon as distributors. We do. They're offering Showtime as a subscription service. And … Hulu's announcement about entering into deals with broadcasters, to sell a broadcast tier, kind of confirms that a video distributor is indeed what they are.

FierceOnlineVideo:  Are you seeing the online video market in general starting to come around to that distribution model?

Christie: We've been joking about it being "back to the future." As those of us who've been around for a while know, we literally had hundreds, maybe thousands of independent cable systems start out in this business 30 or 40 years ago. We've seen massive consolidation. But here we go again, that consolidation has resulted in spawning new platforms which is essentially what the internet represents for Showtime, and a bunch of new distributors.

FierceOnlineVideo:  Is that at the core of your strategy in partnering with Hulu and Showtime?

Christie: Very much so. We in the business have seen a platform emerge almost every decade. The DBS guys launched in the mid '90s, telco comes along in the mid-2000s, and here, although the internet has been around a long time, as a platform for video distribution of channels like ours, its day has come. It's welcome. It's really creating a dynamic marketplace.

FierceOnlineVideo:  Do you still see Amazon and Netflix as direct competitors?

Christie: With Amazon and Hulu, they've become distribution partners. Maybe there will be a day when Netflix is the same. They've changed from being pure competitors, to partners in this world.

FierceOnlineVideo: The Amazon Streaming Partners program is bringing in companies that might have been potential competitors to its Prime streaming service, such as Starz, Showtime, and smaller SVOD providers. That is a different shape from the old pay-TV distribution model.

Christie: It's a fantastically different shape. Amazon is a company unto itself, as you know, reaching into a lot of different industries. But I can tell you that one of the reasons provided to me for why they wanted to enter this video space was that they believed that offering video was going to help them continue to grow their underlying Prime subscription for shipping. As I'm told -- this is not an advertisement for Amazon -- but to the extent that they can get customers to become Prime subscribers, the consumer's dynamic with Amazon changes forever thereafter. So using this program to help expand the footprint (through) Amazon Video is core to their business goals and objectives.

FierceOnlineVideo: The Showtime DTC offering gives you a direct audience measurement metric as well. Is there any demographic that stands out among your subscribers?

Christie: This is probably something you would expect, but the saying 'the bigger the screen, the better the subscriber or the more engaged the viewer is,' happens to be true. So those devices that are immediately linked to the big screen in the home -- Apple TV, Roku, Fire TV -- they have great conversion rates, great retention rates, a lot of usage. And as the screen gets a little smaller, whether it's tablets or phones, usage diminishes in a parallel fashion. So that's not really a surprise.  But we are seeing growth in usage on mobile phones and tablets. But most of, a lot of the viewing is happening in the home, we suspect on the big TV.

FierceOnlineVideo:  How much of an increase in time spent on the mobile app have you seen?

Christie: Overall viewership has increased dramatically. If you allow us to look at the combination of viewership on all the screens, the overall viewership has increased quite a bit. Interestingly enough -- and maybe it's a function of just, there's so much consumer choice in a big MVPD bundle, that you would expect this to be true -- but the engagement of our OTT subscriber is very high. A lot of usage.

FierceOnlineVideo:  How many subscribers do you have for your direct to consumer offering?

Christie: What I will tell you about our OTT app is, we're ahead of budget. It's exceeded my expectations.

FierceOnlineVideo:  What's driving that takeup?

Christie: You'd have to go back to the combination of the shows. Homeland, The Affair, Billions, Shameless, Penny Dreadful is on right now and we're coming back to the next season of Ray Donovan and a new show called Roadies in June. The combination of great originals and the more accessible price point has fueled our growth. And obviously there was a lot of demand for it, so we're just trying to meet that demand.

FierceOnlineVideo:  Subscriber churn in OTT tends to be higher -- for example, people will sign up for a live event or to binge watch a single series, and then discontinue. Do you see a lot of churn on Showtime's online app, and is that a concern?

Christie: We've always seen subscriber churn in the premium business. The churn is almost correlated to the size of the video screen. The bigger the screen, the lower the churn. We've not been out in the marketplace for even a year yet, but subscribers that come in through a phone tend to not be as reliable a subscriber as those that come in through a "net-top box" device like Roku or Fire TV. And also, the contributions from Hulu and Amazon Video, those are very good subscribers as well.

We have a lot of on-demand content, so I think that's very helpful in minimizing churn rates. We have a lot of original content, and you're going to see a lot more coming from Showtime. We've learned it's important to keep bringing new content on a regular basis to these subscribers. Keep them engaged.

FierceOnlineVideo: You've been with Showtime since the heyday of cable. Describe the last five years.

Christie: The last five years have been the best five years of Showtime's existence. It's been a wonderful confluence of a marketplace opening up and becoming more dynamic. We had the introduction of DBS in the mid-90s, telco in the 2000s, and now the internet creating a very dynamic marketplace -- that coinciding with the great job that [Showtime President] David Nevins has done on the programming front has really raised the profile of Showtime with consumers and within the industry. And the network today is a far cry from what it was when I started back in 1988.

FierceOnlineVideo:  What about the next five years for Showtime -- and the industry?

Christie: There's a lot of encouraging trends for Showtime. We believe that one of the biggest constraints in our ability to grow subscribers has been the expense of the video bundle. Consumers had to pay $70 or $80 before they'd generally buy premium. To the extent now the consumer can either buy it by itself if they want, buy it in a skinny bundle with Hulu or Amazon Prime Instant Video, or in the future will be able to buy it in a skinny bundle through Xfinity or potentially Charter or others, like AT&T - DirecTV, I think all bodes very well for Showtime. It's going to be a product that is much more attainable by consumers because it's not going to be as expensive a proposition to reach for it.

Showtime's Christie: OTT subscribers are 'just too big a segment to overlook'