Wednesday, September 6, 2017, 12:38 PM ET|Posted by Will Richmond
Here’s a somewhat counter-intuitive move: Newsy, a millennial-focused OTT news property, is buying the pay-TV carriage agreements of Retirement Living Television covering around 26 million multichannel TV subscribers in order to get a position on the cable dial. The deal will cost Newsy’s owner E.W. Scripps approximately $23 million, or 93 cents per RLTV subscriber. Newsy also expects to get to 40 million pay-TV subscribers by the end of 2018.
The deal is predicated on developing Newsy into a “prominent multi-platform news network with dual revenue streams,” according to Scripps president and CEO Adam Symson. Newsy already has carriage deals with skinny bundles YouTube TV and Sling TV and clearly believes it can extend its audience reach and advertising potential by being available in multichannel bundles. Scripps also sees Newsy’s programming as helping pay-TV operators appeal to younger audiences.
While Newsy’s acquisition of the RLTV subscribers is at an attractive price, it’s not without risks. First, because its programming represents a change of format vs. RLTV, pay-TV operators could object and not want to carry Newsy, as they have periodically done with past channel programming switches. Second, if they don’t value the Newsy content, they may not renew when the deals come up, especially since all pay-TV operators are trying hard to contain programming expenses. Third, and potentially most significant, the audience and advertising gains Newsy is hoping for may not materialize.
RLTV is no doubt positioned well down on the cable dial wherever it’s carried, meaning that most subscribers never even notice it, especially younger viewers who lean more heavily toward on-demand viewing rather than channel surfing. So Newsy will need to promote the fact that it’s now available and where to find it. But since Newsy’s app is already available on all major connected TV devices, lots of potential viewers already have access to Newsy. They’ll wonder what will be different on the linear channel than on the app, even assuming they’re open to watching a linear feed in the first place.
Connected TVs already have a big footprint, with over 70% of U.S. homes now having at least one TV connected to the Internet. Roku’s recent IPO filing highlights how viewership through these devices has soared, even as multichannel TV subscriptions have shrunk. Viewers - especially younger ones - are actively moving their consumption to apps and devices, and away from multichannel TV.
It’s possible that at the modest price Newsy paid for the RLTV agreements, even a small bump in viewership and advertising will pay off. These days even established TV networks are pursuing their own OTT initiatives, so to see an OTT provider turn the tables and seek a pay-TV deal is pretty unusual (Viceland being an exception). It will be interesting to see how things play out for Newsy.