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  • Binge-Viewing Popularity Exposes Tensions Between OTT and VOD, TV Everywhere Priorities

    Binge-viewing is a bona fide phenomenon that's not only changing consumers' TV viewing behaviors, but also creating fissures in the TV industry. Recently, in "For U.S. Cable Operators, Netflix Partnerships Are Fraught With Risk," I outlined how binge-viewing is driving a competitive dynamic over content rights between Netflix and pay-TV operators' VOD and TV Everywhere plans. Adding further detail, this past Friday, Vulture published an excellent article with specific examples of how this battle is brewing.

    According to Vulture, FX and Turner are telling studios from which they obtain TV shows that they need rights to stream the full current season of shows (known as "stacking" rights) not just the most recent 3-5 episodes. Part of the networks' rationale is they need to give late-coming viewers an easy path to watch from the beginning of a season, rather than just enabling existing viewers a way to catch up.

    Though the networks would clearly benefit from expanded streaming rights, the bigger picture here is that these enhanced streaming rights would enable pay-TV operators to beef up their VOD and TV Everywhere offerings - 2 key priorities of theirs in order to keep up with subscribers' multi-device expectations that Netflix and other OTT providers have set. In other words, with shifting consumer behaviors, enabling binge-viewing is becoming a strategic imperative for the pay-TV industry (a good recent example is MTV's decision to release all episodes of "Wait 'Till Next Year" on its app, ahead of the show's linear premiere).

    As Vulture explains though, a key sticking point is that Netflix is arguing it's a zero-sum game. It believes that if a full season has been made available on VOD and TVE then this enhanced exposure makes a season less valuable to Netflix (apparently Netflix applies a 20% discount when a studio has given a network stacking rights). And because Netflix has become a critical financial partner to studios' (and networks') profitability, it's a delicate balance for all parties. One example of how compelling Netflix (and other OTT) licensing has become for Hollywood, is that digital distribution rights emerged as the biggest hang-up in the recent CBS-Time Warner Cable retransmission consent fight.

    All of this plays into the points I was making in my post about Netflix and potential cable partnerships - most notably regarding content rights. We're already seeing the outlines of an escalating skirmish between Netflix/OTT on one side and cable networks/pay-TV operators on the other, with the studios smack in the middle. Pay-TV operators, which write the biggest checks to Hollywood, are clearly trying to exert their influence.

    I expect this tension will only increase as more viewers adopt binge-viewing with their newly-acquired tablets, smartphones and connected TVs. In fact, as heated as the dynamic is already, just wait until data begins to emerge about how binge-viewing old seasons of popular shows actually makes it harder for new shows to break through. I'm starting to hear anecdotes from time-crunched friends/colleagues who say x, y or z new show looks intriguing, but that they've already committed their limited TV time to binging season 2 of "Breaking Bad" or something else from several years ago. Current research that binging drives higher current season ratings may soon look like the exception, not the rule.

    How all of this plays out is anyone's best guess. The one thing that is for sure is that with over 30 million domestic subscribers now and its own original content aspirations, Netflix's disruptive potential in TV is only going to grow. Anyone who thinks there isn't a looming competitive issue over content rights between Netflix/OTT and the traditional pay-TV ecosystem isn't being realistic.

    (Note: We'll be discussing all of this and much more at the Dec. 3rd VideoSchmooze in NYC. Register now for the early bird discount and win great prizes too!)

     
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