Monday, October 31, 2011, 10:22 AM ET|Posted by Will RichmondAmid the drama and headlines surrounding OTT distributors (e.g. Netflix price increases and Qwikster decision, on-again/off-again Hulu sale, etc.), these companies' content strategies actually seem to be crystallizing, with each trying to stake out a somewhat distinct value proposition for their users. True, there is still plenty of blurriness between them, and each appears reluctant to be pigeon-holed, but recent deals suggest how each OTT distributor is positioning itself.
Below is a summary of the content strategies of most of the major OTT distributors (Netflix, Hulu, Amazon, YouTube, Walmart/VUDU, iTunes and Blockbuster) with a catchphrase that best describes their approach:
Netflix - "Rerun-TV, but please don't call us that" - Earlier this year, when Comcast CEO Brian Roberts was asked if he felt pressured by Netflix's growing array of content deals, he half-jokingly replied, "What used to be called 'reruns' on television is now called Netflix." At the time the comment seemed like it diminished Netflix, but eight months later it is quite accurate (in fact on last week's earnings call Netflix CEO Reed Hastings said it wasn't an unfair characterization, though he wouldn't want to labeled this way). Netflix is increasingly about catalog serialized programs, picking up where traditional syndication left off; recently it obtained the rights to CW programs and today renewed Disney-ABC programs. When the Starz deal expires in a few months the movies available on Netflix streaming will look even older and more obscure, the Dreamworks' movies don't appear until 2013 and originals like "House of Cards" are still a question mark. All that means Netflix's deep catalog is increasingly going to define the streaming service.
Hulu - "Catch up on broadcast TV programs, no DVR required" - Just when you thought you mastered your DVR's controls, Hulu is essentially saying "don't bother." After obtaining the rights to CW's current season episodes last Friday, Hulu now has all the broadcast networks except CBS available. And if you want quicker/deeper access, Hulu Plus offers that too. Beyond broadcast, Hulu has also snagged some cable programs (most notably "The Daily Show" and "The Colbert Report"), independent content (with surprising success in anime), and is also showcasing some of its own originals (e.g. Morgan Spurlock's "A Day in the Life"). Hulu's owners have decided to hang onto their stakes, rather than bank a short-term gain. Now the question is will Hulu get further resources to break out of its broadcast catch-up positioning?
Amazon - "Fired up to beat Netflix in streaming" - Amazon seems more serious than ever about being a streaming contender, and is employing a Netflix-like strategy for content acquisitions, recently signing up Fox, and today Disney-ABC, in a remarkably similar deal to one Netflix itself announced (so much for exclusivity!). I was critical of Amazon's decision to include video in its Amazon Prime shipping service which reduced its visibility, but more recently the company's decision to introduce the Kindle Fire "iPad killer" means that having great content is now a lot more important. Amazon has very deep pockets and could broaden its content acquisitions driving up prices for other OTT players.
YouTube - "Indies-R-Us" - Last Friday, YouTube finally announced the first batch of independently-created original programs, as part of its $100 million investment in higher-quality content. Under Google's ownership, YouTube had already moved a long way from its UGC roots, but despite incessant rumors that it would become a bidder for Hollywood shows and movies, YouTube is instead trying to nurture its own content that it hopes will be appealing to major advertisers, as well as audiences. That's not to say Google won't be opportunistic; it reportedly dangled a $4 billion offer in front of Hulu's owners in the recent auction, but was rebuffed due to aggressive demands. With more resources than anyone, Google can pursue any strategy it chooses to.
iTunes - "King of the non-subscription world" - Outside of subscriptions, the electronic sell-through (EST) and rental market has remained relatively small (my estimates here), but iTunes is clearly the king. iTunes benefits from its integration and branding with hundreds of millions of Apple devices, and so for the foreseeable future its dominance should remain unchallenged, with Microsoft Zune Video Marketplace and VUDU well behind it. With rumors of an Apple television circulating, it remains an open question whether Apple will at last pursue a subscription model to support this new device.
Walmart/VUDU - "Best access to HD movies and TV shows" - Under Walmart's ownership, VUDU has stayed consistent, emphasizing 1080p HD movies concurrent with their DVD release and more recently TV shows, through a growing array of connected devices. Just like iTunes, VUDU is exclusively rent or own, with no subscriptions available. VUDU has begun to get leverage from Walmart through promotions like $.99 specials, which broadens its user base. With the subscription field so crowded, it's hard to see VUDU going beyond its roots; rather it will benefit as DVDs diminish.
Blockbuster - "DVDs and streaming for DISH subscribers" - DISH cautiously introduced its new Blockbuster Movie Pass service, emphasizing DVD availability and some streaming, but making it available solely for DISH subscribers. No doubt it will be untethered soon enough, colliding with Netflix and Amazon, but only if DISH is willing to spend aggressively to gain more content.
Beyond these OTT distributors, it's also worth noting what's happening in the traditional pay-TV ecosystem. The premium networks, HBO, Showtime and Starz all seem committed to their pay-TV partners, not allowing their content to leak out onto OTT streaming services (though DVD is OK). HBO has taken the lead with its HBO GO app, which Showtime and Starz are expected to mimic shortly. EPIX, with limited pay-TV distribution has been the only premium network to make an OTT deal, with Netflix. Movie output deals are still important in the premium category, but original series increasingly define their brands.
Last but not least, pay-TV operators themselves continue to roll out VOD services and more recently TV Everywhere. Lacking a robust ad insertion capability, VOD viewing remains strongest for content from premium networks. TV Everywhere continues to be deployed, but faces 5 big challenges as I recently wrote. More broadly, the question remains whether pay-TV services might eventually spend more aggressively and/or demand under their retransmission consent agreements exclusive streaming rights to both broadcast and cable programming, putting the squeeze on all the OTT distributors.
Although the landscape remains very fluid, when you cut through the noise, each OTT distributor appears to be settling on its own content direction.