Sinclair Broadcast Group‘s regional sports network unit Diamond Sports Group has signed a new deal with the National Basketball Association that gives its Bally Sports networks permission to offer streaming content including live games on an authenticated and direct-to-consumer basis.

The deal covers 16 NBA teams in their local territories.

Diamond Sports also said it made deals to raise $600 million in new capital from existing borrowers. The new funds are expected to be used to help build the DTC platform.

Sinclair has been looking to launch a direct-to-consumer service this year to bolster its RSN business, which has been under strain from cord-cutting and heavy debt.

Questions have surrounded Sinclair’s plan since Major League Baseball commissioner Rob Manfred suggested that Sinclair did not have sufficient rights to mount a DTC service.

Sinclair stock rose 2% Thursday morning after the NBA deal was announced.

Sinclair in December announced a renewal of its deal with the National Hockey League, that included direct-to-consumer streaming for 12 teams. 

“We are excited about our continued partnership with the NBA which allows us to bring the league’s in-demand and exciting basketball content to local fans across multiple platforms,” said Chris Ripley, Sinclair’s president and CEO. “Sinclair places the highest importance on connecting sports fans with live games and other sports content. We are looking forward to the launch of our DTC platform in 2022, ushering in a new era of local sports viewing with a more personalized and dynamic viewing experience.”

Also: Sinclair’s Bally Sports RSNs Set To Launch ‘The Rally’ on Jan. 24

Teams included in the agreement are the Atlanta Hawks, Charlotte Hornets, Cleveland Cavaliers, Dallas Mavericks, Detroit Pistons, Indiana Pacers, Los Angeles Clippers, Memphis Grizzlies, Miami Heat, Milwaukee Bucks, Minnesota Timberwolves, New Orleans Pelicans, Oklahoma City Thunder, Orlando Magic, Phoenix Suns and San Antonio Spurs. ■ 

We’ve now reached an inflection point with streaming TV advertising. While the shift toward cord-cutting and streaming was well underway, the surge in streaming audiences during the pandemic has forever changed TV viewing habits. And as streaming growth spiked, so did the proliferation of ad-supported OTT (over-the-top) services and platforms — bringing more media buying options and more complexity for marketers to navigate.

By every measure, streaming TV saw astronomical growth. Connected TV (CTV) and over-the-top (OTT) have become the fastest-growing advertising channels — and we’re now beginning to close the gap between viewership and advertising spend. CTV continues to outpace other formats, and shows no signs of slowing down, according to IAB’s Video Ad Spend 2020 and Outlook for 2021 report, which finds that nearly three-quarters (73%) of CTV buyers plan to shift budget from broadcast and cable to CTV in 2021; advertisers, on average, spent $20 million on CTV in 2020; and more than one-third (35%) of buyers expect to increase CTV video ad spending in 2021. Moreover, eMarketer projects that U.S. CTV upfront spending will double to $4.5 billion this year and $6 billion in 2022, with overall CTV ad spending hitting $13.4 billion this year and $21.4 billion by 2023.

Consumers have embraced ad-supported OTT and ad-based video-on-demand (AVOD) offerings in a major way. In fact, 76% of those who regularly stream video have watched ad-supported OTT, according to IAB. The major media owners are investing significantly in free ad-supported television (FAST) services, such as Tubi (Fox), Pluto TV (ViacomCBS) and Xumo (Comcast), and an ad-supported HBO Max just launched in June joining recent entrants, Peacock, Discovery Plus and Paramount Plus. As such, the U.S. is expected to triple AVOD revenues by 2025, reaching $24 billion, according to Digital TV Research.

As marketers attempt to make sense of the growing array of CTV and OTT advertising options available across many different streaming platforms, the priority should be on understanding the nuances of buying direct versus working with premium aggregators, the role of attribution and the differences in the valuation of impressions between OTT and linear TV. Amidst the increasing fragmentation, it’s important to consider the structural differences between sellers when it comes to inventory quality, targeting, frequency management and measurement approaches.

With that in mind, here are three prevailing buying myths surrounding CTV/OTT advertising and how marketers can navigate them for the post-pandemic era. 

Myth 1: Buying directly from a publisher is efficient for local OTT

While there are perceived benefits of buying directly from a publisher, such as content control and delivery prioritization, a media buyer would need to work directly with many publishers to achieve the necessary scale to reach their desired audience. As such, a brand or agency ends up making disparate buys with many walled gardens. Beyond the issue of crossplatform frequency management and reach limitations beyond their subscribers, delivery pacing becomes a continuous challenge. Rebalancing underdelivered impressions between publishers is time consuming and often unachievable mid-flight with multimarket local campaigns.  

A more effective approach is to work with a trusted aggregator that has curated many direct connections to premium and prioritized inventory to achieve the advantages of reach and scale. Agencies and marketers need to achieve audience scale for targeting, ensure proper frequency capping and consolidate reporting under one dashboard. More importantly, focusing on trusted providers with established premium content relationships ensures campaigns run in brand-safe and fraud-free environments. 

Furthermore, as the OTT ecosystem becomes increasingly crowded, it’s important to vet providers thoroughly, as there are some aggregators that may claim to have premium content and prioritized reach. Instead, they may, in fact, be bidding on remnant inventory from open exchanges where there is little control over where ads may run — and thus presents greater brand safety and transparency risks. 

Myth 2: Only performance marketers need attribution

While CTV and OTT have become proven customer acquisition and brand-building channels, there’s a misperception that only performance marketers need attribution. Beyond video completion rates as a key metric of success, the advent of closed-loop attribution capabilities allows advertisers to connect CTV and OTT viewership to direct business results. This could be as granular as running a quick-serve restaurant ad on CTV and then determining how many people visited the restaurant or website after viewing an ad, or an auto dealer matching the outcome of a campaign with verified car sales.

For advertisers solely focused on driving brand awareness, having outcome metrics such as website or in-store traffic can offer real-time feedback on creative responsiveness. Since a brand can run multiple pieces of ad creative in different markets, they can determine campaign creative effectiveness, as well as audience engagement, by geography. Marketers are now A-B testing approaches with audiences and creatives to reach maximum awareness.  

Attribution insights can also be used to measure brand favorability and purchase intent. For instance, we conducted a brand lift study for a leading home furnishings retailer that measured the impact of our OTT campaign on consumers’ attitudes toward the brand. The study revealed that adults aged 25-54 reached by the campaign were three times more likely to be aware of the brand and almost half would consider purchasing furniture from the retailer after exposure to the campaign.

Myth 3: The shift to impressions-based buying puts local TV on par with OTT 

While media buying is largely moving from linear gross rating points (GRPs) to impressions, measurement systems are still catching up to the emerging impression-based ecosystem. With the shift to impression-based buying in local TV, it’s important to understand how the valuation has changed. Today, not all impressions are created equal since inventory environments may differ. CTV and OTT offer higher value impressions as it’s not just about audience desirability but the value of audience engagement. 

As such, marketers should consider the differences between OTT and linear TV in the specifications that go into the valuation of impressions. For instance, most co-viewing of CTV is not always calculated, ads are non-skippable in OTT, length of ad breaks are shorter in OTT and OTT measurement is based on ad server measurement of delivery and not probabilistic panels. Furthermore, OTT audiences are not passive channel surfers but are highly engaged viewers watching on-demand content. As advertisers increasingly combine OTT and local TV buys to extend their reach, the adoption of impression-based metrics will further accelerate the effective measurement and optimization for crossplatform campaigns.

As ad dollars follow the consumer, streaming TV is now entrenched as an essential marketing channel. With the continued proliferation of OTT services and platforms, and to overcome the prevailing buying myths, marketers should partner with trusted aggregators that deliver brand-safe premium content, local audience targeting at scale and outcomes-based measurement for long-term advertising success.

IBM said it expanded the IBM Watson Advertising Accelerator for over-the-top video, using artificial intelligence to dynamically optimize ad creative to improve campaign effectiveness.

IBM is working closely with AT&T’s Xandr to help Accelerator scale for buyers, including those using programmatic buying technologies.

“Brands continue to follow their consumers to OTT and CTV, especially now as streaming audiences grow across all age groups," said David Olesnevich, head of product at IBM Watson Advertising. "However, brands are too often faced with creative resource constraints, fragmentation, and measurement and frequency challenges. The market is in need of advanced technology to help deliver optimal creative at scale, and IBM sees AI as the solution.” 

“Accelerator is designed to help brands make their campaigns effective, perform against business goals and derive measurable results and insights. All at scale – which requires working together with industry leaders. Using Watson AI, marketers can now develop personalized OTT creative for each user and ultimately help improve campaign performance over time,” he said.

In initial Accelerator for video tests on The Weather Channel’s O&O digital property, IBM exceeded VCR benchmarks by nearly 20%.

The Watson Advertising Accelerator was original designed for display advertising.  It uses AI to predict and generate impression-level ad variations. Then Watson Machine Learning analyzes cookie-less data signals to predict and subsequently assemble a customized video creative for each impression based on the likelihood of a consumer converting against a KPI.   

“The fragmentation of media consumption habits in an evolving identity landscape underlines the need for intelligent, data-driven technology solutions,” said Doug Hurd, head of corporate strategy and business development at Xandr. “Xandr and IBM’s first-to-market capability will power more relevant ad experiences in Converged Video, Connected TV and OTT environments for brands, publishers and consumers alike.”

Just when things were starting to settle down in TV land, Roku hit Google up with some serious charges: the internet giant was making “unfair” and “anticompetitive” demands around surfacing YouTube and YouTube TV content in response to user search requests.

Roku claimed that in order to get it to knuckle under, Google was threatening to pull the popular YouTube TV virtual multichannel video programming distributor (vMVPD) from its platform. Google (sort of) denied that move, claiming it was in the middle of normal negotiations, and then — boom! — Roku decided to hit the nuclear button as a negotiating technique.

Ouch.

So what to make of it?

To begin with, it’s not a good time for Google to be accused of anticompetitive anything, given how it is under the microscope in Washington.

It’s anyone’s guess whether Google was indeed getting all Sopranos on Roku or whether Roku was going all Karen on Google, but this is clearly a charge that Google does not want to hear right now. It only serves to reinforce the worst fears of Google critics and, let’s face it, there are far more people who are aware of Google and its potential misdeeds. 

In terms of who has the most to lose, that’s an open question.

Consumers who are big fans of YouTube TV will likely just watch it on their smart TV interface: It’s available via Samsung, Vizio, LG and Sharp TVs. Once there, they may be surprised to discover that the original equipment manufacturers (OEMs) have been hard at work on their interfaces. In addition to improving ease of use, they’ve added their own FASTs (free ad-supported streaming TV services) with hundreds of free channels, including all of the popular new Flixes. 

So it’s possible Roku loses some customers that way, as is the even-less-likely notion that YouTube TV viewers are so loyal, they’ll go out and buy $29 Amazon Fire TVs or $49 Chromecast 2.0 sticks in order to ensure they’re never without the platform. 

Viewers with Roku TVs (TVs with the Roku OS built in) have no such option and are likely to drop YouTube TV (it’s a monthly subscription) and switch over to Hulu Live TV, which offers a markedly similar package. Ditto for users who really like their Rokus, have them set up on multiple TVs and feel no great loyalty towards YouTube TV.

(In fact, if Hulu was smart, they’d even run an offer targeted at Roku users looking to switch from YouTube. Even more clever if they can get Roku to chip in.)

YouTube TV also faces a different kind of potential fallout from this move: Viewers who have been on the fence about why they’re paying more than $50 per month for a service they barely use but hold onto like a security blanket may finally take the plunge and cut the cord. Given that there is more and better programming on streaming these days for considerably less money, I doubt many of them will be disappointed.

There will be some sporting events they can’t watch and they’ll have some trouble finding cable news channels, but I suspect many viewers won’t look back — especially given that vMVPD subscriptions seem to have peaked as of late. 

Another point for Roku.

Mostly, though, there’s math: Roku has around 50 million registered users versus around 2 million for YouTube TV. That’s a sizable margin, and while Google does have YouTube itself, few people are likely to be worried that they can’t watch YouTube on their big screen TVs (though to be fair, the number of people doing so is most definitely growing).

Data and Privacy Concerns

The bigger issue here isn’t so much Roku vs Google but rather will OEMs become the industry’s new MVPDs, engaging in frequent and costly carriage battles with programmers that mostly leave consumers frustrated.

That’s a distinct possibility, especially as the lines between programmers and distributors continue to blur.

All of the major OEMs — Roku and Amazon, plus Samsung, Vizio and LG — have their own FASTs, and Roku and Amazon are starting to produce original content for theirs.

They have the advantage now, too, in that few streaming programmers are popular enough at this point to cause real harm by withholding their programming.

The difference though — and it’s an important one — is how consumers will perceive all this. 

When satellite TV provider Dish Network engaged in one of its many, many, many carriage wars with the various networks, viewers got that it was about money: The networks wanted more, Dish wanted to pay less and let consumers know that if they had to pay the network more money, then, unfortunately, their viewers would too.

But the current battle is over issues that are less black and white and potentially make both parties look bad.

Talking about who controls viewer data and whether search results can be cooked only serves to remind consumers that “yes, they are tracking all my viewing data and selling it to advertisers” and “yes, those results I see when I search and the recommendations I get may be based on who is paying more, not on what most closely matches my request.”

That messes with viewers' sense of fair play and only serves to underscore all the negative things we’re hearing about the power of Big Tech and its “algorithms,” and all the harm they’re causing.

That’s not a win for anyone in the industry and reason enough to tread lightly, especially as far as consumers are concerned.

Caveat venditor.

The E.W. Scripps Co., which acquired Ion Media in part for the broadcast spectrum controlled by Ion, said it plans to take its digital multicast networks over-the-top to cash in on the streaming gold rush.

“We don’t really see it as being an either-or sort of proposition for consumers,” Adam Symson, CEO of Scripps, during an investor day presentation to analysts Wednesday.

Scripps acquired Katz Networks for $302 million in 2017. Katz manages a group of networks in the growing over-the-air digital multicast market, where cord-cutters can watch if they connect with a digital antenna. Scripps acquired Ion Media in January for $2.65 billion. Scripps created a new national networks business composed of Katz, Ion and Newsy, the streaming news service.

Analysts noted that while Scripps was focusing on over the air, most media companies were placing their bets on streaming. Scripps execs said they would be taking advantage of streaming as well.

“We will continue to expand distribution everywhere the consumer wants us to be, OTA [over the air], OTT, FAST services and pay TV,” said Lisa Knutson, president, Scripps’ national networks business. “We have plans for each of our networks to build on Newsy’s success, as they have been a leader with ubiquitous OTT distribution.” FAST is an acronym for free ad-supported TV, also called AVOD streaming services.

“We’ve also taken Court TV, for example, and taken that stream into the FAST [free ad-supported streaming television] ecosystem and also used it in the AVOD [ad supported video on demand] world,” Symson added. “So I would expect that we will continue to run plays from that playbook, moving more of our free network programming into the free ad-supported streaming marketplace.”

Benefits Of Free Broadcasts

That said, Scripps likes the over-the-air business. “There are significant barriers to entry. Obviously in order to reach the over-the-air consumer, you have to have a broadcast license and the government isn’t really handing more of those out,” Symson said. “We already have a commanding share of the audience and we don’t expect to do anything other than expand upon that.”

Scripps’ local TV stations also eyeing ways to put their new content and other programming over the top. 

“We've been in a digital space for a long time but OTT is the most meaningful revenue we've seen off of our main channel of any of these other platforms,” said Brian Lawlor, president of local media at Scripps.

“Our focus and the last 18 months is really been about building out and establishing an OTT presence in our markets. I think we've been aggressive really making them local and local news focused,” Lawlor said. “I think that great dividends last year when so much of the country wanted news and wanted that trusted source of information on local, and we were able to stay engaged with our customers when the networks were into regular programming.”

Earlier this week, Scripps announced plans to launch two new networks, Doozy and Defy TV, which will follow the Katz Networks design for creating networks aimed at specific demographics important to advertisers. 

The networks will feature mainly acquired programming and the programming on the new network features shows that have never been available free over-the-air previously.

“We’ve dabbled in a bit of original programming and we’ll continue to do that where we really see the economic return, but by far our networks will be licensing programming,” Knutson said.

Because Scripps is taking advantage of Ion’s spectrum the networks will start out with distribution in at least 75% of the country. And unlike the Katz Networks, Doozy and Defy TV won’t have to pay other broadcasters for carriage in most of the country, including the biggest markets, making them profitable sooner.

Scripps expects revenue at its national networks unit to increase 10% annually for the next several years and generate profit margins of about 40%.

Knutson said Scripps has already begun making upfront presentations to media buyers for its expanded roster of national networks.

About half the division’s revenue is general market sold in the upfront and scatter market, with nearly 45% direct response and the rest OTT and programmatic advertising. Ion is a top five market in terms of ratings, but is only 25th in terms of revenues, a situation the company will work on. The strategy for growth is to maximize yield and maximize rates. Last year Ion sold about 55% of its inventory in the upfront and expects to do the same this year, Knutson said. “We’re not going to give too much of that inventory away early as we know this year [the economy] is going to build.”

Opportunities To Bundle

In some cases, Scripps will sell its networks as a bundle reaching a variety of demos that sometimes overlap. For example, Ion’s viewership skews a bit higher in terms of African Americans, and some advertisers have made cross-network buys that include Ion and Bounce, she said.

The networks offer the largest over the air source of national direct response inventory in the country, which Knutson said was a good thing. She said the over-the-air DR market in the U.S. was worth between $12 billion and $15 billion and growing.

“Many people wrongly dismiss DR as low rate, low quality ads,” Knutson said. In fact, Procter & Gamble and American Express have become big DR spenders. “Direct response is performance based advertising. It’s a flexible, efficient and measurable way for advertisers to reach their customers.”

In some cases on ION, the rates for DR were 50% higher than general market rates, Knutson said.

Tegna said it is relaunching its Justice Network multicast channel on July 27 as True Crime Network, which, in addition to broadcast, will offer its programming as an on-demand streaming service.

A promotion campaign debuts Monday to let viewers know about the brand.

Tegna’s stations and other affiliates will continue to carry the 24-hour, seven-day a week, linear network on secondary digital channels, while the company tries to cash in on the fast growth of over-the-top viewing. 

Premion, Tegna's OTT ad company, will manage the ad sales for the streaming platform, which will include a mix of Premion’s direct sale inventory and programmatic ads. 

With True Crime, Tegna is diving deeper into a competitive arena already populated with networks including Discovery’s ID, E.W. Scripps’ Court TV and Dan Abrams' Law&Crime Network.

“True Crime Network capitalizes on the rapid growth of several distinct segments of media and entertainment: over-the-air television viewing, on-demand and binge streaming, podcasting and the true crime genre,” said Brian Weiss, president and general manager, Tegna’s entertainment multicast networks. “Our audience has spoken passionately about their desire to binge true crime mystery content. True Crime Network serves our highly-loyal, growing audience of true crime enthusiasts,while our streaming service will offer a free, easily-accessible and exciting experience for all true crime fans.”

The service will launch with hundreds of hours of on-demand content from the network’s library. True Crime Network's programming will include Cruise Ship Killers, Poisonous Liaisons, The Last 24, Dr. G Medical Examiner and Handsome Devils, according to the promo.

The promo promises “more suspenseful moments that will shock you and make you wonder why,” and describe the new brand as “the only 24/7 true crime broadcast network plus free episodes online, podcasts, news and more, all in one place.”

The network will also continue to air its popular BeSafe Safety Tips. Hosted by Atlanta Police Sergeant Ralph Woolfolk, the segments provide helpful tips to keep viewers’ families and neighborhoods safer.

TV station affiliates of ABC, CBS, Fox and NBC are asking FCC chairman Ajit Pai to revive a years-old proposal to regulate some over-the-top video providers, providers currently beyond the agency's reach in terms of program access and must-carry/retransmission consent rules. 

The major network affiliate associations held a joint teleconference with Pai last week to talk about the current state of the video marketplace, including the competition from virtual MVPDs, according to an FCC document.

Related: Cable Operators Push Back on OTT Definition

One of their concerns was the "rapidly developing trend toward streaming of video content," the "increasing competition for advertising dollars from the largest companies in the country," and "the virtual MVPD development and displacement of traditional MVPD’s in the distribution world," according to a summary of the meeting.

They asked Pai to "take a fresh look at the virtual MVPD proceeding that has been pending for a number of years."

The FCC voted back in 2014 to approve a Notice of Proposed Rulemaking that would define some over-the-top (OTT) video providers as multichannel video programming distributors (MVPDs), at a minimum to qualify for nondiscriminatory access to programming, similar to the way the FCC opened up cable programming to satellite competitors in the 1990s.

The idea behind the NPRM, the handiwork of then FCC chairman Tom Wheeler, was to give over-the top providers offering an online service that mimics a linear cable offering the same FCC-enforced access to vertically integrated programming. Wheeler was trying to promote new video competition to traditional cable, but eventually backed off the item after there was pushback, and an order was never voted on.

"Consumers have long complained about how their cable service forces them to buy channels they never watch," Wheeler said at the time "The move of video onto the Internet can do something about that frustration – but first Internet video services need access to the programs. Today the FCC takes the first step to open access to cable programs as well as local television."

Related: FCC Considering Making Some OVDs MVPDs

OTT video delivery has grown by leaps and bounds since then and affiliates clearly think it is time to revisit an order that would give them retransmission consent and must-carry rights on that new medium.

The 2014 item would define an OTT that delivers a linear stream of programming as an MVPD. That means those OVDs would have access to content through the FCC's program access rules, but also have to negotiate retransmission consent with broadcasters. It would not apply to IP-delivered versions of a cable operators traditional service, to which program access rules already apply.

Exactly which OTTs should be defined as MVPDS and what other obligations or rights might apply beyond that access--PEG channels, exclusivity--were all teed up in the many questions posed in the NPRM.

The NPRM, if the FCC did vote to approve it, would reverse a tentative, bureau-level conclusion in the Sky Angel program-access complaint. That decision held that having a facilities-based transmission path was necessary to be an MVPD--something cable ops argued was necessary. The FCC tentatively concluded that an MVPD has to have control of both the content and the transmission path—copper, fiber, satellite signals--to be delivering a channel, and that an over-the-top distributor lacks that path since it is not using a facilities-based channel.

Roku on Tuesday said it agreed to buy Dataxu, a demand-side advertising platform, for $150 million in cash and stock.

The acquisition will give Roku new tools to let advertisers plan and buy using programmatic technology ad campaigns to reach Roku’s streaming and over-the-top viewers.

“TV advertising is shifting toward OTT and a data-driven model focused on business outcomes for brands,” said Roku CEO Anthony Wood. “The acquisition of dataxu will accelerate our ad platform while also helping our content partners monetize their inventory even more effectively.”

Ad tech and data firms have been merging and getting acquired as demand for over-the-top and streaming video advertising grows. Last week, AT&T’s Xandr unit said it was buying clypd, another ad tech company.

According to media buying firm Magna Global, OTT accounts for 29 percent of TV viewing but so far has only captured 3 percent of TV ad budgets. As viewers continue to migrate to streaming, automated media buying solutions are expected to unlock more advertising investment into OTT, Roku said.

The consolidation of ad data and tech has sparked questions about what the industry will look like in the near future.

"Roku acquiring Dataxu is a complex deal to unpack. On one hand, it's supportive of Roku's aspirations to compete with Amazon and Google. Roku now looks a lot more like those guys. They sell ads. They have a data walled garden. And now they have a self serve buying platform," said Frank Sinton, founder and president of Beachfront, a video ad management platform. 

"On the other hand, there is economics conflict between the Roku and Dataxu businesses. Demand-side platforms work for ad buyers with a goal of driving prices down. Roku is in the business of increasing the yield of its inventory. It will be interesting to see this complex dynamic shakes out. Additionally, it remains to be seen what Roku's strategy will be in terms of monetizing third-party OTT inventory, which will be an interesting development that will impact the broader industry," Sinton said.

Others saw consolidation as a more positive force.

“We continue to see a lot of consolidation in the next generation of TV advertising space, as major players are lining up total solutions – WarnerMedia with Xandr acquisition, and Comcast/NBC initiative, noted  Aman Sareen, CEO of ZypMedia. "We continue to see strong and robust growth and believe that the future for demand-side-platforms is linked to strong integrations and relationships with inventory owners, and strong trusted channels with large national and local advertisers."

"This is a great buy for Roku. They already have one of the largest household audiences with 30mm active account. Dataxu will not only enable them to offer self-service capabilities, but it will also expand their supply side representation. It’s encouraging to see the continuation of the demand getting closer to the supply,” said Morgan Rigsbee, VP, Product, Programmatic at Fluent.

Roku's acquisition agreement with Dataxu has been approved by each company’s board of directors and is expected to close in the fourth quarter of 2019, subject to customary closing conditions, including regulatory approvals.

Roku will discuss the acquisition on its upcoming third quarter financial results conference call.

One of the most glaring revelations that came out of Apple’s recent press conference about their new streaming service was that the company intends to launch it on a variety of existing platforms, including Roku, Amazon Fire TV and via smart TVs. Even Apple, which has been notorious for keeping to its own ecosystem, is acknowledging that in today’s TV market, the only strategy that makes sense is to be available across as many platforms and devices as possible.

But being distributed on a multitude of platforms isn’t necessarily the only recipe for success in the long run‚ and especially for programming services without Apple’s deep pockets. There have been a lot of conflicting headlines about the viability of various TV business models: “Linear is Dead!,” “Linear is Still a Majority of TV Viewing,” “No One Watches Ads — SVOD is Soaring,” “Subscription Fatigue has Curbed the Growth of SVOD,” “AVOD is the New King of Streaming.” Which path is the right one?

Rather than change the course of your business plan every six months, it’s probably best to take a wise investor’s approach and diversify your portfolio.

Whether its linear, subscription video-on-demand or ad-supported VOD, by offering MVPDs, vMVPDs and apps the customized version of your service they need, you’re already giving them a compelling reason to want to consider adding it.

I’ve spent most of my career in cable TV and while the TV business looks very different now than it did when I started, it’s still a business of mutually beneficial relationships and content is still king. But once you establish a standout brand and content offering that you know viewers will want, it’s no longer good enough to deliver it in a one-size-fits-all format. Whether you’re trying to launch your service on a traditional cable platform, an OTT service, as an app on Android or iOS, on smart TVs or via social media channels, it pays to have a business model that fits the platform and its audience.

One of the biggest factors in how the TV business will morph and evolve in the next few years is purely an economic one. How many services will consumers be willing to pay for? Certainly, the recent rise in AVOD channels and platforms is an indication that subscription-only services may struggle for market share if the average consumer is only subscribing to 2.1 services. Can a channel that relies solely on subscription revenue reach the kind of critical mass needed to support a robust commercial-free programming offering?

“Once you establish a standout brand and content offering that you know viewers will want, it’s no longer good enough to deliver it in a one-size-fits-all format.”

The rollout of 5G will also have an impact on the industry. The increased bandwidth that is brought by 5G will bring yet another reliable path to deliver bandwidth-heavy UHD content, driving UHD further.

Channels that produce and own all rights to their content can deliver that content everywhere and anywhere by taking advantage of all of the different routes to market, including linear, SVOD, and AVOD. And having content that is poised to take advantage of upcoming technological advancements and innovations like 5G is a way to future-proof your business.

By controlling, delivering and marketing content to relevant audiences via linear and digital platforms, channels can create the size, scale and customer base that makes their unique propositions competitive in a TV landscape that is getting more and more crowded and complex by the minute.

Mark Romano is vice president, Americas, at Insight TV, a 4K UHD channel featuring adventure, lifestyle and extreme sports original content.

The rise of over-the-top television services and a growing cord-cutting trend are applying pressure to cable’s pay TV business as never before.

As the quarterly impact of subscriber losses on legacy cable-TV operators is scrutinized, many investors’ deepest concern is an eventual tipping point at which new, internet-delivered “skinny” TV services will become the dominant viewing option and traditional bundled packages will fade.

While an in-footprint strategy focused on a next-generation video platform helped Comcast buck the trend and actually grow its video subscriber base, most other U.S. cable operators are still consistently losing customers.

Most incumbent MSOs don’t compete directly with other cable operators, a regulatory dynamic that, over many years, has resulted in a mélange of cross-industry policy, tech and marketing organizations such as NCTA–The Internet & Television Association, the Cable & Telecommunications Association for Marketing, the Society of Cable Telecommunications Engineers and CableLabs, as well as joint ventures like Canoe, the cable industry’s advanced-advertising consortium.

Because cable-TV operators are essentially awarded an exclusive franchise to serve an area, they’ve focused their video and broadband assaults on their own footprints and against rivals such as the telcos, satellite-TV providers and overbuilders.

As it becomes more challenging for operators to gain, yet alone retain, video subscribers in their own territories as they fend off old rivals and a fresh phalanx of virtual MVPDs, though, questions are swirling as to when, not if, MSOs will develop their own OTT services to launch beyond their traditional borders.

Such a brash move would create a cascade of consequences for programmers in particular, but it would certainly force other cable distributors to do the same, likely sparking an all-out video Armageddon.

OTT ON THE MARCH
AT&T and Dish Network have no such industry allegiances to worry about, and have already marched ahead with their own OTT TV services — DirecTV Now and Sling TV, respectively. Verizon Communications, meanwhile, has been rumored to be developing a virtual MVPD of its own that could be sold on a nationwide basis.

And though cable operators such as Comcast have stressed that the economics of an OTT TV service simply don’t add up, it’s clear that it and other cable operators are making the necessary preparations to build and deliver an out-of-market service — just in case.

The technology needed to pull this off is the easy part. The more difficult business-facing aspects of building an OTT service are also coming together.

Earlier this year, industry sources confirmed a Bloomberg report that Comcast has already locked in the rights to offer some channels over-the-top on a national basis. However, it was also stressed that a portion of those rights came by way of “most favored nation” clauses in carriage contracts with programmers that ensure that Comcast gets the same terms that are granted to other distributors, including virtual MVPDs. There’s also no clear indication yet that Comcast intends to act on those rights.

And Comcast hasn’t wavered from its position about OTT economics.

“We think we have a lot of opportunity just in our footprint,” Brian Roberts, Comcast’s chairman and CEO, said on the company’s first-quarter earnings call. “It’s a big upside. We continue to believe in what we’re doing. … The second thing, we just haven’t found the business model that works outside. We’ll keep evaluating, keep looking at it, but our success within our footprint is packaging, bundling. So we’ll continue to drive that internally within our footprint.”

But Comcast is a different animal even among its MSO peers, and has some advantages and initiatives underway that others do not.

X1 is a prime example. That multiscreen, cloud-based platform now serves as the core of Comcast’s next-generation video service. However, Comcast is also getting some out-of-footprint benefits, in terms of both economic scale and product influence, via X1 syndication deals it has forged with Cox Communications and two Canadian operators — Shaw Communications and Rogers Communications.

Comcast is also starting to underpin a new in-footprint skinny TV service with X1 technology. Sources confirmed that Comcast is eyeing a third-quarter commercial launch for Xfinity Instant TV, a managed IPTV service that will feature a range of packages, a cloud DVR service, and initially target broadband subscribers who don’t take a pay TV package from Comcast. Reuters said the app-based offering will be priced starting at about $15 per month and include packages that could sell for up to $40 per month, and allow for add-ons such as ESPN.

With the proper digital distribution rights, it would not seem a difficult thing for Comcast to pivot that handiwork into an OTT product.

But would it make any money? Without the benefits of service bundling, including the latching on of superhigh margin broadband services and newer products like Xfinity Home, a standalone OTT TV service would certainly be less profitable.

As another potential advantage that other MSOs don’t have, Comcast will also get a close-to-first-hand look at how profitable (or not) a virtual MVPD can be.

Hulu, which is partly owned by Comcast’s NBCUniversal, last week launched the beta version of a live TV service that starts at $39.99 per month for a lineup of 50-plus channels, including live locals of the Big Four broadcasters in some markets. The new service, which includes Hulu’s premium SVOD offering, also features some add-ons, including unlimited in-home streaming and enhanced cloud DVR service that allows users to fast-forward through ads in recorded shows, that, when bundled, push the price to almost $60 per month.

Hulu’s live service is just getting off the ground, but the company, which has revenues coming in the door from its millions of SVOD customers, is already costing Comcast big money. In a 10-Q report filed late last month, Comcast disclosed its share of losses at Hulu in the first quarter were $54 million due to higher programming and marketing costs.

Speaking on CNBC, Hulu CEO Mike Hopkins expressed confidence the new OTT service will turn a profit via its mix of live TV, SVOD and advanced ad capabilities.

Dan Rayburn, executive vice president of StreamingMedia.com and principal analyst at Frost & Sullivan, is on board with Comcast’s position about the economics of OTT.

“The economics don’t make sense; we really don’t have to debate that,” he said, pointing out that the content- licensing costs alone are a killer. “People say all you need is big scale. Netflix has 100 million subs … and they’re still not profitable.”

And the new class of virtual MVPDs face the challenge of marketing services that are designed to appeal to cost-conscious cord-cutters.

“With a live, linear service, you can never charge customers enough to make up your costs,” Rayburn said, pointing out that it’s this degree of sticker shock that caused Microsoft to throw in the towel years ago when it was mulling its own OTT TV service.

He also doesn’t believe the current pay TV environment and its battle against cord-cutting and luring in cord-nevers will force cable’s hand to go out-of-market.

He said services like Sling TV, PlayStation Vue and DirecTV Now have hardly put a dent in the market, and that there’s a good reason why they don’t (or rarely do) offer subscriber numbers — because they don’t want Wall Street to figure out the costs of running a service that sells for $20 to $40 per month.

But today’s troubling pay TV trend “certainly makes [cable operators] re-look at how things are packaged and offered,” Rayburn said. “But what’s the benefit to your overall business? I don’t see one.”

Telsey Advisory Group media analyst Tom Eagan also isn’t convinced operators are plotting to offer video service outside of their footprints anytime soon. In an interview, he said any attempts to secure out-of-market content rights are more than likely an effort to keep their options open.

“Who knows what will happen in five years?” Eagan said. “You always want to have as many levers as you can. I don’t expect anything in the next couple of years, but they want to have the optionality.”

So why, then, are all of these OTT TV services entering the fray if there’s no money to be made? Rayburn said the answer is simple — they all are owned by larger companies that can hide the bad economics, or take the hit without getting killed. DirecTV Now is owned by AT&T, YouTube TV by Google, Sling TV by Dish, PlayStation Vue by Sony and Hulu by a handful of major programmers. fuboTV, the sports-oriented vMVPD, is an exception.

TOO BIG NOT TO TRY
“No one is standalone” in that OTT TV grouping, he said. “None of these guys can survive or exist if it wasn’t a big conglomerate that was actually operating it or running it, because the economics don’t work as a standalone business.”

Colin Dixon, founder and chief analyst of nScreenMedia, agrees that rising content costs are making all pay TV services less profitable, but also believes that cable operators going OTT is an inevitability.

“I think they’re all going to end up having to do it — the environment is just ripe for it,” he said, adding that pay TV subs are seeking other video options in increasing numbers. “Even if it’s marginally profitable, it’s still incremental revenue that they get to add to the bottom line. I don’t see how they can resist doing it in the long run.”

Mike Farrell contributed to this story.


SIDEBAR: Cord-Cutting Draws More MSO Blood
If cord-cutting is among the key reasons prompting cable operators to look beyond their borders for video growth opportunities, then consider that box checked — in permanent ink.

It’s now undeniable that U.S. pay TV providers are contending with cord-cutting along with a large group of consumers who have never taken a traditional pay TV package.

Even before all public cable providers reported their first-quarter results, MoffettNathanson issued a report that said the U.S. pay TV industry lost about 762,000 video subscribers in the period, making it the worst-ever Q1 when viewed through the video lens.

“For the better part of 15 years, pundits have predicted that cord-cutting was the future. Well, the future has arrived,” MoffetNathanson principal and senior analyst Craig Moffett declared last week in his Q1 2017 Cord-Cutting Monitor, which found that multichannel video programming distributors were taking it on the chin despite positive new household formation.

First-quarter video losses were more than five times as large as last year’s loss of 141,000, and that the incremental number of cord-cutter and cord-never homes has grown to more than 6.5 million since 2013.
— Jeff Baumgartner

Despite improvements in the cable sector, overall pay television subscriptions declined by 2.05 million in 2016 – nearly double the 1.16 million losses in the previous year, while over-the-top access providers continued to thrive, according to Convergence Research Group’s The Battle for the American Couch Potato report.

Revenue for U.S. cable, satellite and telco TV access providers rose 3% in 2016 to $107.3 billion and should increase another 2.1% to $109.6 billion in 2017, according to the report. OTT revenue, based on estimates from 47 providers) rose 32% in 2016 to $8.3 billion and should rise 34.9% to $11.2 billion in 2017 and 31.3% to $14.7 billion in 2018, the report said.

Cable operators more than halved their subscriber losses between 2015 and 2016 compared to 2009-2014, a trend that the report said should continue.

According to Convergence, the pace of defections from traditional pay TV subscriptions should continue – it is forecasting the sector loses about 2.11 million customers in 2017 – while OTT gains steam. Convergence estimates that 27.2 million U.S. households (about 22.3% of total TV homes) did not have a traditional TV subscription in 2016, up from 24.2 million (20% of TV households) in 2015. That number will grow to 30.3 million households (24.6% of TV homes) without a pay TV subscription in 2017.

Cable continues to crush it in on the broadband front. Over the past five years cable companies have added nine times the residential broadband subscribers telcos have, according to the report. Convergence counts cannibalization of telco DSL customers, the ongoing residential wireline telephone losses and the gaps in higher-speed broadband coverage among the reasons for cable’s continued dominance.

Overall, Convergence estimated that U.S. residential broadband customers grew to 94.5 million in 2016 and should rise to 97.2 million in 2017. Broadband revenue grew about 9% to $51.3 billion in 2016 and should grow to $54.7 billion in 2017, according to the report. 

Telco residential wireline losses were about 8% in 2016 and Convergence anticipates the same for 2017. The researcher estimated that wireless substitution accounted for the bulk of the decline (87%) in 2016, with about 45% of households wireless-only. Convergence predicts 48% of households will be wireless-only by 2017, growing to 50% in 2018. Cable, the report said, represented 43% of U.S. residential wireline telephone subscribers in 2016, which should rise to 45% in 2017.

While cable gears up to enter the wireless business with Comcast’s Xfinity Mobile scheduled to expand beyond employee-only trials later this year and Charter eyeing a 2018 launch for its wireless product, the overall wireless business is in decline. Convergence said the four largest carriers added 17.7 million wireless customers in 2016, and should add about 15.5 million in 2017. Weighted U.S. wireless service ARPU dipped 7% and wireless service revenue fell 1% in 2016, according to Convergence, which estimates a 4% decline in weighted wireless service ARPU in 2017 and flat wireless service revenue in 2017.

Convergence has published The Battle for the American Couch Potato report for 11 years. Sources include Convergence analysis, company interviews, annual/quarterly reports and publications and U.S. Census data.

Over-the-top services helped drive television viewership up 1.2% in October, but those same consumers watched fewer commercials, according to a report by Pivotal Research Group senior analyst Brian Wieser.

In a report issued Tuesday, Wieser looked at the trends associated with television use and commercial share for national media owners in the U.S. for the calendar month of October (rather than the broadcast month, which ran from Sept. 26 to Oct. 30), using data from Nielsen that included time-shifted viewing and commercial impressions.

What Wieser found is that total TV usage was up by 1.2% on a total day basis for adults 18-49 during the month and rose 2% among all households. But commercial viewing by the same age group fell in the period by 1.4% on a total day basis and was down 2.4% in prime time.

Perhaps adding to the lower commercial views was that 65% more viewers watched via Internet-connected devices, accounting for 8.1% of total TV use among adults 18-49 on a total day basis.

Total programming hours were flat compared to last year during the month. And though total commercial impressions were up 2.6% (940 billion commercial impressions) among adults 18-49 included in C3 ratings (which excludes Internet-connected devices), it was driven mainly by higher commercial loads. National commercial loads across the industry rose to an average of 10.8 minutes per hour across all Nielsen-tracked programming in October, up from 10.5 minutes per hour in the prior year.

Also driving the viewership increases were an extra week of NFL Football in the month compared to last year and heavy viewing on news networks like CNN, Fox News and MSNBC due to the Presidential election.

Among networks, NBC Universal produced the largest share of C3 commercial impressions during the month, with 14.6% of adults 18-49 up from 14.5% in the prior year. Viacom fell from 14.3% to 13.8%, Time Warner was down from 11.8% to 11.2%, and Disney was down to 11.8% from 10.8% last year, according to Wieser. Fox was up from 9.3% to 11%, while CBS was down from 7.5% to 6.8%. Discovery was down from 6.0% to 5.8%. Scripps was up from 4.6% to 4.5%, and AMC was down from 3.9% to 3.3%.

With the launch of its DirecTV Now service just a week away, AT&T said it has reached a carriage agreement with Fox Networks Group for its DirecTV products, including the over-the-top service.

AT&T has announced a launch event for DirecTV Now on Nov. 28. The over-the-top service will offer more than 100 live streaming and on demand content for $35 per month.

According to a statement, Fox programming available to DirecTV Now customers will include: Fox News Channel, Fox Business Network, FX, FXX, FXM, FS 1, FS 2, Big Ten Network, 18 Fox regional sports networks, National Geographic and Nat Geo Wild. The parties have also agreed on a framework for Fox Broadcasting programming to be delivered to DirecTV Now customers nationwide.

“We’re delighted and gratified to team up with DirecTV to offer our brands as part of DirecTV Now,” Fox Networks Group President of Distribution Mike Biard said in a statement. “This agreement demonstrates our commitment to providing viewers with a seamless TV experience across the full range of our leading brands in news, sports and entertainment.”

AT&T DirecTV and U-Verse customers will continue to enjoy Fox broadcast stations, cable and regional sports networks live and on-demand through linear TV, online, and TV Everywhere apps.  DirecTV customers will also have access to 4K content from Fox's marquee sports properties including MLB regular season and playoff games, top college football and basketball games, NASCAR races and FIFA World Cup games.

“The expansion of our relationship with Fox enables AT&T to offer Fox content across our platforms and products,” said AT&T chief content officer Dan York in a statement. “And it’s a big win for our DirecTV Now customers, who will have easy and immediate access to a wide array of Fox programming, including popular national and sports content they can watch virtually anywhere, anytime.”

CBS ALL Access, the over-the-top service from broadcaster CBS, is working on a deal that would allow it to stream National Football League games.

CBS All Access, which now has more than 1 million subscribers, was launched in 2014 and offers live streaming of CBS stations in 150 markets and on-demand library content for $5.99 per month. While the service has evolved since its launch -- including offering exclusive original content like Star Trek: Discovery and The Good Wife spin-off The Good Fight next year – the lack of NFL games has been a sore point.

In a conference call with analysts to discuss third quarter results, CBS chairman and CEO Les Moonves said the broadcaster was working with the league to stream the games and could have a deal shortly.

“We’re in fairly active discussions about putting it on All Access,” Moonves said. “The product is doing better. The NFL is still extremely important to us. We’re hoping that we’re able to reach an agreement with them to link it even better.”

Moonves was more tight-lipped when it came to questions about the ongoing evaluation of a possible merger between CBS and former corporate sister Viacom. Viacom appointed a special committee of independent directors to look into the combination, hiring advisors last month . But Moonves said there is no time frame yet for a deal to be done or not.

“We’re not even in the second inning yet,” he said of the evaluation.  

Consumers may want their content when they want it and where they want it, but they don’t want it to cost much, according to a new survey by MoffettNathanson.

MoffettNathanson partnered with researcher Survata to find out what consumers would expect an OTT service to cost and found that less than a third believed a slimmed-down Internet-delivered content package should be priced at $40 per month or higher. The majority belived $30 per month or less was the better price tag.

The $40 price point is crucial because that is what Hulu is expected to charge for its slimmed-down OTT service scheduled to debut next year.

Survata interviewed 513 online respondents between July 15 and July 18, and included individuals that already had a subscription TV service as well as those that did not have pay TV.

In a note to clients, MoffettNathanson principal and senior analyst Craig Moffett wrote that using a survey to determine consumers’ willingness to pay for anything is “fraught with peril,” because respondents don’t always do what they say and isn’t usually enough to figure out what most would pay for a service.

But pricing is important because the dilemma facing OTT providers like Hulu and DirecTV (which plans to launch its OTT service DirecTV Now by the end of the year) is finding a point that will attract enough customers, but not erode their core subscription business while allowing them to make a profit.  

“Our survey confirms that a segment of the population is interested… but threading the needle at an economically workable price that appeals to enough consumers to be viable, and which will selectively target cord-cutters and cord-nevers rather than existing pay TV subscribers, will be very challenging indeed,” Moffett wrote.

One of the more surprising findings in the survey was the apparent loyalty many had to regional sports. Asked if they would subscribe to an Internet-driven live video service that included the four broadcast networks and some cable channels (like ESPN, TNT and FX), but no regional sports networks, two-thirds of respondents said no, even before hearing pricing information. The split was about even between people that did and didn’t already have a pay TV subscription, but younger non-payTV subscribers, aged 18-24, showed the biggest swings. About 50% of 18-24 year olds without pay TV said they would consider subscribing to the RSN-free OTT service, but just 19% of 18-24 year olds with pay TV would switch.

Customers who had pay TV also were more apt to place a higher cost on an OTT service that included live sports. About 19% of people with pay TV said an OTT minus the RSNs should be cheap – under $10 per month – with 23% saying it should cost $10-$19 per month. But adding the RSNs to the mix for this group swung the pendulum dramatically – about 33% of those with pay TV service said the RSN-laden OTT service should cost $50 per month or more.     

Cord cutters and cord-nevers, those that have either severed their pay TV relationship or never had one in the first place, were considerably more price sensitive, according to MoffettNathanson. The largest number of that group believed the non-RSN OTT service should cost between $5 and $9 per month (31%) or $10-$19 per month (28%). Including the RSNs raised pricing expectations considerably, with 28% picking $50 per month or more, and 21% picking between $10 and $19 per month.

While Moffett wrote that cord-cutters’ and cord-nevers’ reluctance to pay is understandable – they have higher price-sensitivity by nature – it could pose problems.

“All else being equal, it suggests that the cannibalization problem could be difficult to manage, and/or that it will be difficult to attract cord cutters and cord nevers at a reasonable price,” Moffett wrote.

CBS made good on its promise to offer customers a commercial-free option for its over-the-top service CBS All-Access, rolling out the offering for $9.99 per month on Wednesday.

CBS joins Hulu, which launched its commercial-free option last September and makes good on a promise chairman and CEO Les Moonves made earlier this year to offer an ad-free version of All Access. At $9.99 per month the CBS offering is lower priced than Hulu's $11.99 monthly fee for its ad-free version. The basic CBS All Access service, replete with commercials, still costs $5.99 per month.

“The foundation of CBS All Access is not only about giving CBS fans access to more of the content they want, but also giving them more choice in how they watch their favorite CBS programming,” said CBS Interactive president and chief operating officer Marc DeBevoise in a statement. “The addition of a commercial-free plan gives our subscribers even more ways to customize their CBS viewing experience – from which devices to whether they watch in or out of the home, and now with commercials or without.” 

With the commercial-free plan, subscribers will be able to watch CBS All Access’s on-demand library of more than 7,500 episodes, including full current seasons of primetime hits like Big Brother, Blue Bloods, Madam Secretary and The Odd Couple among many others, as well as late night, daytime and news programming, all without commercials. CBS All Access’s upcoming original series, including the next chapter of the legendary Star Trek TV franchise, Star Trek: Discovery, a spinoff of The Good Wife and a new digital edition of Big Brother will also be available commercial-free under the $9.99/month plan. 

Subscribers to the $5.99/month plan will continue to experience reduced commercials when watching on-demand content and be able to watch CBS Classics without commercials. Current subscribers will have the option to move to the commercial-free plan by logging on to their account through CBS.com. 

But commercial-free doesnb’t necessarily mean ad-free for all content. CBS said subscribers to the $9.99 plan will still have to watch commercials in live streaming content nof local CBS TV stations and select on-deman shows will still include promotional interruptions.

CBS All Access is available online at CBS.com, on mobile devices and tablets via the CBS App for iOS, Android and Windows 10, and on Roku Players, Apple TV, Xbox One, Xbox 360, Chromecast, Android TV, Amazon Fire TV and Fire TV Stick, with more connected device platforms coming soon. 

WASHINGTON — Companies such as Apple and Amazon should expect their cloud-based video distribution systems to be regulated in the same manner that traditional video networks are now, Columbia University Institute for Tele-Information director Eli M. Noam suggested.

His comments came in the first of two Federal Communications Commission workshops on access to video distribution platforms held Monday (March 21).

Noam, a professor of finance and economics at Columbia Business School, said that for the purposes of market power, the power of the cloud, interoperability and interconnection will be serious issues.

Regulation will not likely be on the content or application level, but instead at the structural and network level, he said.

Telecom regulation won’t shrink or wither away as media moves to the Internet, Noam said. Rather, “it’s actually going to be more important because so many things will be moving over the Internet and the Internet, in turn, will be governed by some of those traditional regulatory principles” that now govern regulation of traditional broadband networks, Noam said.

Companies like Apple and Amazon will be the new dominant players in video, and that it will be a concentrated market, Noam said. People who think OTT will be a space where everbody can play “will be sorely disappointed,” he added.

Time Warner Inc.’s Home Box Office unit, less than a year after launching its over-the-top HBO Now service in the United States, is expanding its OTT reach to Brazil and Argentina later this year.

HBO chairman and CEO Richard Plepler made the announcement at the Morgan Stanley Technology, Media & Telecom conference in San Francisco Wednesday.

“We’re going to go OTT in Brazil and we’re going to go OTT in Argentina as well this year, which is just a further expansion of our international growth,” Plepler said.

Plepler said Brazil is probably HBO’s biggest market in Latin America with about 30 million broadband homes and 70 million TV homes. Although HBO has about 30% penetration in Brazil, Plepler said the addition of the OTT offering will bring a “new dimension,” to the business.

“I think you are going to see more of that going forward,” Plepler said, adding that the Brazil and Argentina launches are being done with partners but declined to name them.

HBO Now launched in the U.S. in April and has since accumulated about 800,000 subscribers. It previously announced plans to launch the product in Spain and currently operates standalone streaming services in 9 countries – the U.S., Denmark, Sweden, Norway, Finland, Colombia, Mexico, Hong Kong, Singapore.

Domestically, Plepler said HBO Now is working on becoming available on more platforms, and will gain carriage on Sony PlayStations later this year.

Time Warner Cable chairman and CEO Rob Marcus told analysts Thursday that its testing of an IP-based video product in New York utilizing Roku boxes  is a lot of things, but one thing it isn’t is an attempt to go over-the-top.

Time Warner Cable began testing the service earlier this week, offering the full suite of its video offerings through a Roku box. Some reports said that TWC was planning to test a $10 monthly service with about 20 channels and a full-blown offering for about $50 per month.  

On a conference call with analysts to discuss its third quarter results, Marcus said the trial is a natural extension of its TWC TV app, available on IoS and Android smartphones and other devices.

“The way I would characterize the New York City trial is really the next step in the evolution of TWC TV," Marcus said. "When we launched the TWC TV app the goal was to create an offering that was complementary to our traditional video product. As we move forward and what we’re trialing with this beta [test] in New York is we're going to move that TWC TV capability toward a full video offering that could be substitutional for the traditional set-top box-based video product. Where we're headed is the ability of customers to access the complete video product without having to rent a set-top box from us, whether they use a Roku or ultimately another IP-enabled device. But what we need to accomplish that is first we need to ensure that the video product complies with Title VI of the [1996] Telecom Act in the same way our traditional service does.”

That means making sure the product includes Emergency Alert service; has the complete TWC channel lineup, including PEG channels, and improving the video picture resolution from standard definition to high definition.

Marcus said that further enhancements could be made to the product down the road, but stressed that the product is not an attempt by Time Warner Cable to offer an over-the-top product.

“Our IP video offering is not over-the-top,” Marcus said. “This is a video service that we are delivering over our facilities, not anybody else’s. Over time there might be a TV Everywhere component to this just like there is one to our traditional video offering. But what we’re talking about here is a managed video service over our network.”

He added that while the tests involve the full Time Warner Cable video offering, it doesn’t mean that later iterations wouldn’t include smaller packages.    

“We’re fans of choice,” Marcus said.

He said TWC will continue to promote smaller packages like its basic cable offering plus a premium channel or its low-cost TV Essentials package aimed at cost-conscious consumers. He noted, though, that in the quarter, about 82% of new customers opted for the full video package.

The pomp and pageantry for the latest round of Apple’s inventions drew hordes of smartphone and tablet fans, but most eyes were watching for the technology giant’s latest gambit into the TV business.

Without a hint of hyperbole, Apple said the latest iteration of Apple TV — its new, shiny TV-connected device — represents “the future of television.”

While a bona fide over-the-top pay TV service from Apple remains a no-show (there’s still not a lot of “TV” in Apple TV), the CE giant believes its latest, greatest box is poised to transform the television business in ways less obvious, but more meaningful.

The late Apple chairman and CEO Steve Jobs famously called Apple TV a “hobby” back in 2007, when the first-generation product was launched, but comments from his successor, Tim Cook, indicate that the company is ready to take its video game to the next level and create some competitive headaches for traditional pay TV players.

“It really is the golden age of television,” Cook proclaimed at the media event in San Francisco. “As important as TV is, the TV experience itself hasn’t changed that much in decades … Today we’re going to do something about that.”

While analysts and industry watchers didn’t see the new Apple TV as something particularly earth-shattering, the platform does represent a quantum leap when compared with Apple TV’s previous generation.

A major difference is Apple’s decision to open up its ecosystem for apps that can run on the new Apple TV, which will use a new operating system, tvOS, that is based on iOS but optimized for the big screen. That should open up the floodgates for apps, creating a conduit for more over-the-top video, games and other services.

Apple has more than 11 million developers. “We can’t wait to see what apps they bring to the big screen,” Eddy Cue, Apple’s senior vice president of Internet software and services, said.

“Our TV vision is simple and provocative,” Cook said. “We believe the future of television is apps.”

That future also involves Siri, the voice-recognition technology that has been integrated into the new Apple TV, and a more-capable remote that also features a touch-based navigation interface that will let users swipe at will. Early on, Apple TV search will sift across the libraries of iTunes, Netflix, Showtime, HBO and Hulu, with more to be added later.

But what the new Apple TV has also contrasts with what it still lacks — no support for 4K, and nothing in the way of an Apple-delivered pay TV service.

Apple is reportedly developing an OTT “skinny bundle” TV service that will focus on broadcast-TV channels, but the company has been bogged down with negotiating rights to offer a service that can be offered nationally. Delayed, that offering is not expected to see the light of day until sometime next year.

By comparison, Sony PlayStat ion Vue’s multichannel-TV service currently lacks national distribution (it’s currently available in seven markets) and still doesn’t carry ABC. Sling TV, Dish Network’s OTT TV service for cord-cutters, has yet to add any broadcast-TV channels to its lineup.

ALSO MISSING: THE ‘WOW’ FACTOR

Some analysts were not blown away by Apple’s new entrant, holding that it needed a “wow” factor that can help it stand out from the pack.

“It was exactly as we expected,” Colin Dixon, founder and chief analyst at nScreenMedia, said. “This was, in my mind, a me-too upgrade. This is Apple catching up with the competition. It gets them back to parity to everybody else in the market … If I’m Roku, I’m probably taking a deep sigh of relief.”

Granted, some of the luster was off the new Apple TV before its debut, as many (accurate) details about it leaked in the weeks leading to the event.

“First and foremost, every product was foreshadowed in the press,” music-industry analyst and critic Bob Lefsetz noted in a newsletter entry about Apple’s event, which also saw the intro of the iPad Pro (and a stylus called Apple Pencil), new Apple Watch gadgetry and two new smartphones — the iPhone 6s and iPhone 6s Plus.

“If Jobs were still running the company tyrannically, heads would have rolled,” Lefsetz said. “Where was the element of surprise?”

Dixon found the fusion of Siri and the Apple TV interesting, but said other OTT platforms have already taken the concept further. By way of example, Roku’s crossplatform search spans at least 17 video sources, including Amazon Instant Video, Hulu, HBO Go, Time Warner Cable’s TWC TV app, Netflix and Vudu.

Apple TV’s jump onto the gaming bandwagon, a move that represents a possible threat to console makers, also mimics what’s being offered via the Amazon Fire TV and (to a lesser degree) on Roku players. Games are also expected to play a key role on a new family of devices powered by Android TV. But adding a Wii-like gyroscope to the remote could help Apple “offer some pretty powerful games with this platform,” Dixon said.

Bringing an actual TV service to the Apple TV and tightening that experience “could make it much more interesting than it is today,” though, Dixon added.

PLAYING CATCH-UP

While it’s debatable as to whether the Apple TV had fallen behind from a capability standpoint, it’s clear that it has lost ground to the competition. While Apple has shipped more than 25 million Apple TV units so far, Roku held 34% of the streaming device market at the end of 2014, giving it the lead on Google Chromecast (17 million units shipped at last count) and Amazon Fire TV, with Apple TV bringing up the rear, according to Parks Associates.

“Given the pricing, Apple is targeting a premium market, rather than market share, so we would not expect to see significant lifts in overall share of sales but would expect to see a strong showing among a premium market segment,” Barbara Kraus, director of research at Parks Associates, said.

She believes, however, that the new Apple TV could steal some gaming share from platforms such as Xbox and PlayStation if it can carve out a niche between the core and casual gaming markets.

Still, the Apple TV’s open app approach could put pressure on Roku, Microsoft, and even pay TV operators to do the same.

PRESSURE TO OPEN UP

Apple’s decision to go with an open ecosystem for the new Apple TV “is a bold statement,” Jason Flick, the CEO of You.i TV, a maker of a crossplatform user interface platform that counts Sony Crackle and Corus Entertainment among its clients, said. “It’s a blow for others that are using a closed, more template-based approach. People will need to open up. It will raise the bar quickly for TV apps.”

That could create concern for multichannel video programming distributors (MVPDs) pushing forward with IP-based platforms and technologies such as the Reference Design Kit, which are designed to foster innovation and help operators create systems that support their own apps as well as those from third parties.

But so far, MVPD app lineups are relatively small. For example, Comcast’s X1 platform, which uses the RDK, supports a few apps from outside developers, including Facebook, Flickr, Pandora and a new set-top gaming service offered in partnership with EA.

BTIG analyst Rich Greenfield said he believes Comcast has something to worry about, particularly when it comes to Apple TV’s revamped interface. The new Apple TV UI and remote, he tweeted, “make Comcast’s X1 look ancient.” Ouch.

CABLE CONCERNS

But if cable operators are harboring fears about Apple’s new platform and the potential OTT TV competition it represents, they are showing it in a measured way.

“Apple is another competitor for us, a serious competitor for us,” Cox Communications president Patrick Esser said soon after the debut of the new Apple TV during an interview on Fox Business Network’s Closing Bell With Liz Claman. Traditional pay TV providers and their packages still provide more bang for the buck than what consumers can create on their own using OTT options, Esser said.

“I think our product is the best value on the market, and often customers go out, and by the time they buy a number of over-the-top services, they find out that [with] our multichannel video product they actually get more for the money they pay than they do if they go and try to pull it off of the Internet,” he said.

But is Esser “dreading” the adoption of Apple TV?

“No, I’m not,” he said, though he acknowledged that the video market is more fragmented than it has ever been. He said, Cox, like Apple, has opportunities to innovate over broadband. Cox has already created over-the-top offerings delivered outside its cable footprint, including flarePlay, a subscription gaming service, and a recently released free, video streaming aggregation app for youngsters called flareKids.

But the new Apple TV could open up more doors for programmers, a group that is increasingly going over-the-top and direct to consumers, though some are still trying to make heads and tails of it.

The new Apple TV is “more exciting than terrifying … It’s a little of both,” AMC Networks CEO Josh Sapan said last week at an event in San Francisco hosted by technology website Re/code. “All of this technology means you can choose more and be dictated less by a bunch of people who work in television programming.”

Tale of The Tape: The New Apple TV

Price: $149 for a 32-GB model; $199 for a 64-GB model. Apple is still selling the older Apple TV model for $69, making it the low-end entry-level model of the lot

Availability: End of October

Size: 3.9 inches by 3.9 inches by 1.3 inches

Weight: 15 ounces

Ports and interfaces: HDMI 1.4, 802.11ac WiFi with MIMO, 10/100Base-T Ethernet, Bluetooth 4.0, IR receiver, USB-C (for service and support)

Processor: A8 chip with 64-bit architecture

Video formats: H.264 (up to 1080p and 60 frames per second)

Remote: Bluetooth 4.0 wireless (for non line-of-sight), IR transmitter, researchable battery (three months on a single charge), Siri integration, built-in accelerometer and gyroscope

Content: OTT offerings on board with the new Apple TV in the early going will include MLB.tv, HBO Now, Showtime, Netflix, Hulu, Watch ABC, YouTube, CNNGo, NBC Sports Live Extra, Fox Now, PBS Kids, PBS, USA Now, WatchESPN, Watch Disney, and NHL GameCenter

— Jeff Baumgartner

In the latest turn in the seemingly endless Apple OTT-TV saga, the CE giant is delaying the debut of its planned live TV service to sometime in 2016 amid more snags in its negotiations with programmers, Bloomberg reported Thursday, citing unnamed people familiar with the situation.

Sources told Bloomberg that licensing talks with programmers such as CBS and 21st Century Fox are “progressing slowly,” and that it’s having trouble getting the kind of pricing it would need to offer a bundle of channels for about $40 per month. The report said Apple also doesn’t think it has the capacity yet to deliver the kind of quality over-the-top service it envisions.

Bloomberg’s report is comes more than two months after Re/code said similarly that Apple was eager to launch a TV service this fall but was bogged down in negotiations that could delay the service until later in 2015 or sometime next year. At the time, an industry source said the service Apple has in mind would feature national reach of live TV broadcast channels, versus being limited to select markets, and said Apple would be “hard-pressed” to launch a meaningful pay TV service by this fall because of the aforementioned lack of distribution deals with some major programmers.

Talks are going so slowly, Bloomberg said, that Apple won’t announce details about the service at its September 9 event in San Francisco, meaning the service will miss a chance to debut during the fall TV season. However, Apple does plan to use the event to intro a new Apple TV device, Bloomberg said.

Apple's been asked to comment on the report. 

The current Apple TV already supports several authenticated TV apps, which require pay TV subscriptions, as well Showtime’s recently launched standalone OTT service and  HBO Now.

If and when Apple does launch an OTT-TV service, it will have some company, as the market has already seen the debut of Sling TV, Dish’s OTT service for cord-cutters that starts at $20 per month, and Sony PlayStation Vue, which now offers multichannel packages in seven markets, and is working on a new set of a la carte TV offerings. But it would also be showing its face as the traditional pay TV industry gets gashed by an accelerating cord-cutting trend.

As for the purported capacity issue, industry sources have confirmed earlier reports that Apple and Comcast had been talking for years about a deal that would enable an Apple-powered device to offer a mix of live TV and other subscription video services in partnership with the MSO over managed IP connections that did not intermingle with capacity set aside for high-speed broadband service. But those talks never got very far, and Comcast has instead pushed forward with X1. 

Pay TV service providers lost 566,000 subscribers in the second quarter, a 76% increase from the 321,000 shed in the same period last year, driven by sharp declines in satellite and telco TV customers.

The losses come on the heels of a sharp drop in cable stocks over the past few days, driven by fears of increased cord-cutting and the threat of over-the-top video services. Cable stocks, mainly programmers, lost about $60 billion in market value between Aug. 5 and Aug. 6,. While those declines started to level off Aug. 7,  after satellite giant DirecTV quietly released its second quarter results Friday night, those fears apparently were warranted.

“Cord cutting did indeed accelerate markedly in the second quarter, just as we were afraid it would,” MoffettNathanson principal and senior analyst Craig Moffett wrote in a note to clients, adding that the declines cannot be written off to mere seasonality. While pay TV almost always loses customers in the second quarter as subscribers leave school or move to summer residences, the overall loss rate is accelerating rapidly. According to Moffett, in 2014, the pay TV sector was shrinking at a rate of about 0.1% -- today, it is declining at a rate of about 0.7%.

“That may not seem like a mass exodus, but it is a big change in a short period of time,” Moffett wrote. “And the rate of decline is still accelerating.” 

Net subscriber losses were up sharply at DirecTV – which completed its $48.5 billion merger with AT&T on July 24 – to 133,000 in the period, more than double analysts’ estimates and nearly four times the 34,000 loss in the same period of 2014. Coupled with Dish Network’s loss of 81,000 net subscribers in the period – and adding an estimated 70,000 additional subscribers attributed to Sling TV -- and total satellite TV subscriber declines in the period were 284,000, nearly four times the 78,000 lost in the second quarter of 2014.

Telco TV companies like Verizon and AT&T lost a collective 2,000 subscribers in the period, compared to a gain of 29,000 customers a year ago.

Cable companies actually fared better – the sector lost about 280,000 customers in the period, almost half the 534,000 shed a year ago. At about 1.9%, the rate of decline for the cable sector dipped below 2% for the first time in seven years, according to Moffett.

In his note, Moffett said the declines also come during a period of housing growth.  According to U.S. Census data, 1.6 million new homes were formed on an annualized basis in 2015, more than twice the 696,000 formed in the proior year.

“Those new households are nowhere to be found in the Pay TV data,” Moffett wrote, which is understandable because those homes are being formed by millennials who are more likely to cut the cord or never have it in the first place. As a result, Moffett estimated that cord-cutters rose to 1.9 million in the second quarter (2.3 million on an annualized basis) from 611,000 in the same period last year.

Walt Disney Co. chief Bob Iger took a chunk of time at the media giant’s earnings call Tuesday to address reports that have claimed its ESPN sports network has been struggling under the weight of heavy subscriber losses, adding that the network is performing well.

Iger came out swinging in defense of ESPN, adding that Disney is confident in its performance and that while it has had some subscriber losses, 80% of them are due to an overall decline in the number of multichannel households across the country. He added that actual subscriber losses were lower than what has been released in some reports.

Last month, the Wall Street Journal reported that ESPN was undergoing some serious belt-tightening in order to reduce costs brought on by a sharp decline in subscribers. According to the Journal, ratings measurement giant Nielsen has estimated that ESPN has lost about 3.2 milion subscibers in little more than one year.

Iger admitted that ESPN uses Nielsen subscriber numbers but “they don't necessarily track the number of subs that we get paid on.”

“The numbers that have recently been in the press which are Nielsen numbers were higher in terms of sub losses than those that we are seeing,” Iger continued. “But we're not at this point ready to give specifics in terms of what those numbers are.”

Iger also tried to calm any fears that the Worldwide Sports Leader would go direct to consumer anytime soon. Late last month Iger told CNBC that going direct-to-consumer was “inevitable” for ESPN, but not for at least five years.

Iger stressed that the multichannel video model is still the best way to deliver programming, adding that 83% of multichannel video subscribers watched ESPN in the first quarter.

“When we look at the universe we don't really see dramatic declines over the next five years or so and therefore we are not taking what I would call radical steps to move our products into over-the-top businesses,” Iger said. “We don’t think right now that is necessarily the greatest opportunity. We just don’t think it's necessary.”

But Iger acknowledged that there is value in being on new emerging platforms.

“They want ABC, they want Disney Channel, they want ESPN,” Iger said of those new platforms. “There isn't one that has talked about launching without coming to us, suggesting a desire to have us. We are going to take advantage of those opportunities and at the right price under the right circumstances, license our linear channels to those platforms.”

NEW YORK — Can video-on-demand score with consumers while keeping pace with the momentum generated by streaming rivals Netflix, Hulu and other over-the-top services?

Recent announcements — including Showtime’s summer launch of an OTT subscription service — reflect the shift in consumer viewing of quality TV content to the Web in general and mobile devices in particular.

As a result, TV everywhere, video-on-demand, digital ad insertion, electronic sell-through and over-the-top streaming are now mission-critical goals for distributors. Meanwhile, advertisers are experimenting with new platforms that are easier for consumers to access — and more difficult for distributors and advertisers to measure and monetize.

Some of the television industry’s brightest leaders deconstructed the VOD business at the OnDemand Summit, staged here last week by Multichannel News and Broadcasting & Cable. The conversation revealed major trends in the VOD portion of the TV ecosystem.

TVE: PROGRESSING, BUT CHALLENGED

The cable industry’s TV everywhere effort — granting pay TV customers online access to cable fare once their payment status has been verified — continues to bulk up on programming even as competing OTT services continue to establish a bigger footprint in U.S. homes.

Nearly 10% of U.S. homes subscribe to broadband and an over-the-top video service, but don’t subscribe to a traditional cable bundle, per a recent Parks Associates study, TV Everywhere and the New World of OTT.

The firm also forecasted that OTT video-service subscription revenue will climb from nearly $9 billion in 2014 to more than $19 billion in 2019. “While operator attempts at TV everywhere have made little impact, OTT video services are experiencing a boom,” Brett Sappington, director of research at Parks Associates, said.

While some industry observers may argue about the significance of the inroads that TV everywhere has made over the past year — the Cable & Telecommunications Association for Marketing reports that more than 55% of consumers recognize and use TVE services from cable networks — it is clear that the category still has an uphill climb to slow down or stop the momentum garnered by the likes of Netflix, Hulu and Amazon.

More than 90 networks are offering TV everywhere services on a subscriber-authenticated basis — with MLB Network last week becoming the first sports league-owned network to offer a TVE extension — but CTAM CEO John Lansing said creating a cohesive, TV everywhere message remains a challenge. A simpler subscriber-authentication process is also a factor that has hampered TVE’s development.

“The biggest limitation is that TV everywhere is not a consumer-facing brand,” Lansing said. “To communicate the value of the product without a single handle to the consumer is the biggest challenge.”

Developing a strong marketing message that spells out to consumers the virtues of TV everywhere offerings will also go a long way toward establishing a richer, deeper relationship with viewers.

Sean Riley, president and founder of Sean Riley Consulting, said the industry should use its promotional time to market the various TV Everywhere offerings that exist online and through other platforms.

“Once you hook your fans on your great content via digital platforms and VOD, you’ll deepen the relationship with those viewers, and they will come back to your linear channel on Thursday night to watch that big series premiere,” he said.

One of the advantages that MVPDs have over OTT services is the ability to offer recent episodes of cable network series almost immediately after they’ve aired on the linear channel, and distributors are beginning to exploit that advantage.

‘STACKING UP’ VOD USAGE

VOD is allowing viewers who normally wouldn’t have watched a particular show to “catch up” with it — especially if a program has generated buzz on social media or elsewhere — weeks after it premieres.

“This is how VOD is changing the economics,” Rentrak vice chairman and CEO Bill Livek Livek said. “After the third day, the majority of viewership is happening; in primetime, content with the Big Five [broadcast networks], in five or seven days, almost half of viewership is cumed up.”

The amount of programming available on VOD has helped drive its popularity, especially as full current seasons become more available. Called stacking, the practice of letting current-season eposides pile up so viewers can catch up has been a major initiative for Comcast, which has more than 550 series stacked on its VOD platform.

Stacking is particularly effective with serial dramas, where missing one week can discourage a viewer from going back to a linear program.

Comcast vice president of video strategy and analysis Steve Meyer added that stacking can make a big difference for some shows. On average, he said, if a distributor has four episodes of a primetime series on VOD, that leads to a 20% lift in the ratings. When that same program is stacked, ratings rise about 40%.

Turner Content Distribution executive vice president of brand distribution Jennifer Mirgorod is a strong believer in stacking: Turner this month agreed to stack 15 series from TNT and TBS — basically its entire summer primetime original drama lineup — on Comcast systems.

Turner began stacking last year, with shows such as The Last Ship, Murder in the First and Falling Skies, and saw a sharp spike in ratings. Stacked episodes of The Last Ship attracted 30% higher ratings in the 18-49 live-plus-three-day demo on average in Comcast households. For Murder in the First, 18-49 L3 ratings averaged 40% higher through the season in Comcast households.

Other networks are also joining the fold. Meyer said that FX has stacked almost its entire lineup with Comcast, and the Fox broadcast network has stacked a double- digit number of shows, as have NBC, CBS and ABC. On cable, AMC has had success stacking shows such as Halt & Catch Fire. Of the top 50 shows on TV, Meyer estimates that 30% are stacked on Comcast systems.

“And you’re going to see more,” Meyer said.

Mirgorod said that despite earlier concerns, full-season VOD stacking helps drive viewers to the linear show after they’ve caught up. But once they have, they don’t abandon VOD all together; many hop back and forth between real-time showings and on-demand episodes throughout the season.

“It’s better to start promoting after a couple of weeks,” Mirgorod said. “It’s that Netflix behavior — people expect a lot of shows to be available at one time.”

SUCCESS THROUGH MEASUREMENT

New developments in measurement have also boosted the stature of VOD. Rentrak’s Livek said recently that VOD is taking the place of the digital video recorder, which — with the hectic lifestyles of today’s consumers — is even becoming too burdensome to program specific shows. With VOD, customers must merely click a button to watch their favorite shows when and where they want to.

And in what should be good news for advertisers and programmers alike, consumers are willing to make a tradeoff , watching advertising embedded in VOD shows (and with fast-forwarding disabled) in exchange for convenience.

In Demand CEO Bob Benya, in an interview related to the cable operator-owned content distributor’s 30th anniversary, noted free VOD offerings are growing because of better audience measurement efforts from Nielsen, which is now measuring content with C3 (live programming, plus total DVR playback three days after airing) and C7 ad loads.

“Cable operators and others have disabled fast-forwarding, benefitting advertisers,” Benya said. “The networks are getting [monetization] credit for it, and that’s unlocked the rights. Now, you’re seeing a massive catalog available to viewers. The good news is that VOD keeps growing like crazy in terms of users as well as hours of usage.”

Along with inroads in advertising and measurement, electronic sell-through of content is a product industry executives are hoping will boost the usage and revenue for the category.

While EST, which is the digital sale of movies and TV shows, is still in its infancy, revenue from fi lm and TV titles is expected to reach $2 billion this year, up nearly 30% from 2014, Warner Bros. president of worldwide home entertainment Ron Sanders said at an On- Demand Summit panel session.

“It’s a way to keep your consumers inside the cable infrastructure, instead of letting them stream a movie on Netflix or order a movie on iTunes,” Sanders said.

Comcast, which launched its EST service in 2013, said the category generated $100 million in revenue during its first year, with 99% of those transactions coming via the remote control, according to Comcast Cable executive vice president and general manager of video services Matt Strauss.

One of the things that could entice operators to consider offering EST to its consumers is the continued shrinking of the window between theatrical and EST availability, which is currently around 90 days — well before OTT services such as Netflix and Hulu gain access to films, according to Sanders.

WASHINGTON — The Senate Permanent Subcommittee on Investigations is sending subpoenas to cable operators and other multichannel video programming distributors (MVPDs) seeking information, including program contract information, related to over-the-top video service, according to multiple sources.

The Senate panel is the subcommittee with sweeping jurisdiction; its past investigations have included everything from trying to weed out Communists under chairman Joe McCarthy in the 1950s to rooting out the cause of Enron’s financial collapse in the early 2000s.

The information sought this time includes data on video pricing, one industry source said. That would make sense, given the presence of a pair of longtime cable price critics on the panel: Sen. John McCain (R-Ariz.), a member of the majority, and ranking member Sen. Claire McCaskill (D-Mo). McCaskill has criticized cable operators in the past over a variety of issues, and has asked for anecdotal evidence from constituents and others about their cable complaints.

Subpoenas for documents and records can be issued by any member of the subcommittee, so long as the request is authorized by the chairman and notice is provided to the ranking member — and in this case, that would be McCaskill.

Multiple sources said they understood McCaskill was a driving force behind the subpoenas. A McCaskill spokesperson declined comment, as did Matt Owen, chief counsel for the subcommittee.

LETTERS IN THE MAIL

An industry source who said the letters had gone to cable operators did not know whether they went to telco or satellite video operators as well. Another source said some cable operators and at least one satellite operator had received notices. All the major players were expected to receive them, that source said.

A spokesperson for Comcast, the largest U.S. cable operator, had no comment. The National Cable & Telecommunications Association and American Cable Association, the cable industry’s two main trade groups, declined comment as well.

The Senate is widely expected to take the lead on video issues in Congress’s planned bicameral review of communications laws, and over-the-top video is expected to figure prominently in that review. The government is puzzling over how it should treat over-the-top video providers and how Internet-service providers — many of whom are also cable operators with traditional video offerings and their own OTT products — should treat them.

The Federal Communications Commission has made it clear that affording broadband access to competing over-the-top video providers will be a key factor in its reviews of proposed mergers among and between telco and cable ISPs, as well as with program distributors.

Programmers are coming off a federal court victory in which the U.S. Court of Appeals for the D.C. Circuit held that the FCC could not avail third parties to massive amounts of sensitive contract data in the Comcast- Time Warner Cable merger-review process. (That merger has since been scuttled.)

They now face the potential that such documents could be put in the hands of a committee that has had a history of strategic leaks, or that could produce those documents in the context of a hearing.

The investigation could take months as the targets of the subpoenas first try to figure out exactly what the subcommittee needs, in the interest of refining what they must provide. Senate staffers must then vet the information.

It is unclear how that information might be used — say, in upcoming hearings — or how the subcommittee will ensure that sensitive information is not shared (or hacked).

‘RATHER AGGRESSIVE’

One Washington, D.C.-based cable executive speaking not for attribution said the document requests could take a long time. And coming from the Investigations subcommittee, the source added, the move appeared more hostile than a matter of simple fact-finding for a planned Communications Act rewrite.

The source called the subpoenas a “rather aggressive” move.

The process, the source explained, is basically that the subpoenas are issued, then the targets — in this case, the MVPDs — start negotiating over which documents the subcommittee specifically needs, to try to understand what lawmakers really want and avoid over-delivering boxes of sensitive information. Then the Senate staff will have to absorb it.

Given what was understood to be the broad scope of the request, the source said, the subpoenas appear to be a lot of fishing for information — and what becomes of the info will depend on what the panel finds.

It was unclear what role the programmer side of those contracts would have in the process.

One unintended consequence of the request is that it could make industry players less amenable to frank discussions in planned Communications Act rewrite hearings in other committees, such as the Senate Commerce Committee, the cable executive said. It could also turn cable executives from friendly witnesses into ones in litigation mode, since they would no longer just be called to testify but would have to do so knowing members of Congress have highly confidential documents. He said it could make those executives less forthcoming, given they would have to calculate what they are saying in the context of what Congress already knows.

CBS All Access, CBS’s new subscription-based OTT service, has become available on the Roku platform, marking its first hook-up with a TV-connected device.

On Roku, the CBS All Access Channel will replace the current CBS Channel, which offers clips. Existing users will automatically be upgraded to the new channel today (April 7), but will still have the ability to watch clips without being an All Access subscriber, CBS said.

CBS All Access, launched last fall for $5.99 per month, also supports iOS and Android mobile devices and Web browsers at CBS.com. The service features a video-on-demand library and a Nielsen-measured live TV stream in 14 U.S. markets, including New York, Los Angeles, Chicago and Philadelphia, with more markets slated to be added. On the VOD side, CBS All Access features full current seasons of 16 primetime CBS shows, including Scorpion and Madam Secretary, with new episodes becoming available the day after they air on CBS. It also offers full past seasons of shows such as The Good Wife and Survivor,

“The launch of CBS All Access’s Channel marks the first of many connected device platforms we’ll be bringing CBS All Access to in the coming months,” Marc DeBevoise, EVP and GM, entertainment, sports and news, for CBS Interactive, said in a statement. “This launch brings us even closer to delivering on our promise to give our viewers access to more of CBS’s world-class programming on whichever platform they choose.”

CBS has not said how many people have signed up for CBS All Access, but company CEO Les Moonves told investors in March that the figure had eclipsed the reported 100,000 or so that had registered for Sling TV, Dish Network's new OTT pay-TV service, which currently doesn’t offer CBS.

Discovery Communications CEO David Zaslav threw down the TV Everywhere gauntlet Thursday, telling operators that if they don’t step up their efforts to broaden the release of the authenticated service, all programmers will be forced to go direct to consumers on their own.

“If TV Everywhere doesn’t develop as it should,” Zaslav said, “it will require all of us to go direct to consumer because the cable guys just aren’t getting it done.”

If it went through on its threat, Discovery wouldn't be the first programmer to test the OTT waters. Home Box Office is expected to launch a standalone OTT service later this year as is its premium network rival Showtime. Already CBS has launched its CBS All-Access OTT offering, which allows customers to access certain broadcast and library contet for $5.99 per month. Earlier this month Dish Network launched its SlingTV OTT product,  with similar offerings from Sony (PlayStation Vue) and Verizon expected later in the year.

Discovery’s OTT ambitions have been played outside of the U.S., with its Dplay app in Norway that aggregates channels and sells them to consumers without the need for a pay TV subscription.

Zaslav said about 250,000 customers in Europe are paying $8 per month for the OTT service, but that it is mostly driven mostly by sports. For example, he added that Discovery has seen spikes in demand for its app around big events like the Australian Open, where Discovery’s Eurosport networks offer preliminary matches. That “Superfan” demand could also translate into the kids’ market in Latin America.

Zaslav said he expects the market in the U.S. to be stable, adding that the programmers has secured significant increases in affiliate fees in recent carriage negotiations and TV Everywhere could help drive further monetization of its content.

“The best way to do that would be broad deployment of TV Everywhere in the U.S., taking the Superfan groups and going after them,” Zaslav said. “I think the ecosystem in the U.S. stays as is for the next three years. The question is, what happens four, five or six years from now? Will there be a peel off of the direct to consumer business?”

Operators have been criticized soundly over the years about the sluggish rollout of TV Everywhere, which allows pay TV customers to watch select programming anywhere at any time on any device. But the rollout of the service has been slow as operators have complained that securing rights from programmers has been increasingly difficult.

Recently, the Cable Telecommunications Association for Marketing (CTAM) has stepped up its initiative to get the word out on TV Everywhere.

While programmers and operators alike have blamed each other for TV Everywhere’s missed opportunites, Zaslav seems to be the first major programmer to appear to pull out the OTT card if it can’t reach TV Everywhere deals.

Discovery was one of the last cable programmers to embrace online video – while others were placing full episodes of their shows online for free, Discovery believed free short-form clips on the Internet that drove viewers to the linear channels was more appropriate.

WASHINGTON — The Federal Communications Commission will give the industry and public a little more time to comment on the proposal to classify linear over-the-top video providers as multichannel video programming distributors (MVPDs), at least for the purposes of nondiscriminatory access to programming — just not as much of it as they had requested.

Several parties, including the National Association of Broadcasters and Telecommunications for the Deaf and Hard of Hearing (with the support of the American Cable Association), had pointed to the complexity of the issues involved and asked for an extra 30 days to comment.

"The commission’s general policy is not to grant extensions of time routinely," Media Bureau chief Bill Lake said in granting an extension, "but we find that given the complex issues involved here, the public interest warrants an extension of the comment and reply comment deadlines. Although the parties seek a 30-day extension, we believe that a two-week extension will give the public enough time to respond to the NPRM."

Comments are now due by March 3; reply comments must be filed by March 18. (The NAB and the other parties had sought deadlines of March 19 and April 3).

The FCC voted last December to propose giving linear OVDs nondiscriminatory access to cable-affiliated programming and local-TV station broadcasts, regardless of whether or not the distribution is facilities-based. That decision raises lots of questions about how to apply that definition and the ramifications of doing so.

The idea is to help promote online video as a competitor to traditional cable and satellite providers. The FCC has said that a technology-neutral definition of MVPD should yield more programming choices.

"Video is no longer tied to a certain transmission technology, so our interpretation of MVPD should not be tied to transmission facilities," FCC chairman Tom Wheeler said when the item was up for a vote.

In the past, the FCC has tentatively concluded that an MVPD must have a distribution facility to meet that classification.

Netflix has launched its over-the-top video service in Cuba.

Starting today (Feb. 9), people in Cuba who have Internet connections and access to international payment methods will be able to subscribe to Netflix and instantly watch a curated selection of films, TV shows and original Netflix content, the company said. Subscriptions start at $7.99.

Netflix's Golden Globe and Emmy Award-winning series House of Cards and Orange Is the New Black are among the company's original series to be available to viewers in Cuba, alongside kids shows such as DreamWorks Animation's All Hail King Julien and The Adventures of Puss in Boots, and Academy Award-nominated original documentaries such as Virunga and The Square.

Netflix first offered service in Latin Amrica in 2011 and has about 5 million subscribers across the region.

"We are delighted to finally be able to offer Netflix to the people of Cuba, connecting them with stories they will love from all over the world," said Netflix co-founder and CEO Reed Hastings. "Cuba has great filmmakers and a robust arts culture, and one day we hope to be able to bring their work to our global audience."

WASHINGTON — Cable operators will be busy over the next few months at the Federal Communications Commission, principally pushing back on Title II reclassification of Internet access, weighing in on the definition of over-the-top video providers, helping come up with new set-top standards and, in the case of the largest players, trying to push some major mergers over the goal line.

Telecom Act Reform: On Capitol Hill, House Republican leaders are promising to wade into a rewrite of telecom laws and to level the regulatory silos that they, and others, have suggested are so last-century.

That effort began in the House this year with a series of white papers. Washington observers predict Congress will start getting down to the details. Given that a comprehensive effort will likely take years, the Republican- controlled Congress may want to start off with a standalone FCC-reform bill.

Instead of trying for the “home run,” one cable lobbyist said, the GOP might want to take on a single component that has been hanging out there and may be doable, such as process reform.

That is, unless the Republicans try to overreach — say, by trying to limit FCC merger conditions, as they did in a previous attempt at reform. “Nobody is going to throw themselves on the track for FCC process reform,” the lobbyist added.

Former Republican FCC commissioner Robert McDowell (now a partner at law firm Wiley Rein) said it is easier to “tear down some silos in pieces rather than all at once.” Nonetheless, he said he thinks a comprehensive bill will eventually be hammered out.

“It remains to be seen exactly how the stars align, but I haven’t seen this level of seriousness to get something done in a long time,” McDowell said.

With Republicans taking over Senate committee and subcommittee chairmanships, most expect increased FCC oversight, including more hearings and perhaps Government Accountability Office reports on relevant issues.

Net Neutrality Hangs Fire: The FCC’s new Internet- neutrality rules — either based in Section 706 authority, Title II or some combination — will likely not surface until at least February, but activists will continue to hammer the agency on the issue.

The agency won’t put out some of the recent hybrid proposals for additional public comment, attempting to avoid any further delay in deciding on new rules.

Merger Action: One net-neutrality safety valve for the FCC is the proposed merger of No. 1 cable operator Comcast with No. 2 Time Warner Cable. If the FCC allows the deal, the chairman could make adherence to the new rules a condition — as then-FCC chairman Julius Genachowski did in Comcast’s 2011 merger with NBCUniversal — whether or not they are thrown out in court.

A Comcast spokesperson declined to comment on whether or not a condition involving Title II would put the kibosh on the deal.

That merger, and telco AT&T’s acquisition of satellite-TV provider DirecTV, have already wound up in federal court. Programmers obtained a stay of the FCC’s decision to make copies of program contracts and their work product available to hundreds of third parties. The underlying suit against the decision could delay the completion of both mergers, particularly given that oral argument isn’t set until February.

Spectrum for Sale: Net neutrality is the poster issue for the FCC, but the agency will also be plenty busy tying up loose ends on its most-productive-ever spectrum auction: AWS-3, which generated over $41 billion.

There’s also the upcoming broadcast incentive auction, which affects cable operators to the extent that the FCC opens up more unlicensed spectrum for WiFi, as well as the headend retuning that will be required with the station repack. Cable operators will be compensated out of the auction proceeds.

Also on the FCC docket is the classification of linear over-the-top providers as multichannel video programming distributors for regulatory purposes. That could be a game-changer for video competition, but the FCC’s proposal is filled with more questions than answers and is more the beginning of process. So don’t look for a vote on a final order on the rulemaking proposal anytime soon. But there will likely be plenty of debate and comment at the FCC.

Set-Top Regulations: Now that the STELAR Act compulsory-license renewal legislation is law, the FCC plans to start working on a successor regime for software-based set-top box security and surfing, as well as a congressionally mandated review of what constitutes good-faith negotiations between programmers and distributors.

The FCC will need to create a set-top working group where issues will include two-way compatibility, competitive access, licensing terms, security, privacy and data collection — or tracking what people are watching.

Comcast stock rose more than 3% in early trading Thursday after the cable operator posted improved subscriber metrics in the third quarter and dampened any speculation that over-the-top offerings would affect its overall business.

Comcast stock was up as much as 3.2% ($1.64 per share) to $53.13 each. The stock settled down later in the day to $52.94 each, up 2.7%.

The nation’s largest cable operator seemed to lift investor spirits with improved video customer metrics – it lost 81,000 basic video subscribers in the period, its best Q3 showing in seven years – and assurances that recent over-the-top offerings from Home Box Office and CBS won’t cut into its business.

HBO announced plans to make its premium channel available online without a pay TV subscription on Oct. 15. HBO chairman and CEO Richard Plepler has said the service, which will be available sometime next year, will initially target broadband-only customers and that the premium service will partner with pay TV distributors. The next day, CBS announced a $5.99 per month over-the-top service that will include live local programming from CBS owned and operated stations in 14 markets as well as on demand episodes of  network shows like The Good Wife, Survivor and Blue Bloods.

NBC Universal CEO Steve Burke  said he was surprised by the OTT announcements.

“I was surprised by both of them for different reasons,” Burke said on a conference call with analysts. “CBS I was surprised because they have been such a defender of retransmission consent and the traditional ecosystem and have been so successful in the broadcast business. And HBO because I think it’s going to be such a challenge for them to not cannibalize what is already a really, really good business for them. That having being said, we’re so early on in the transition to more Internet television that I think we are going to see a lot of surprising things.”

But Burke also called for perspective

“I don’t think distributing directly to consumers via the Internet is an easy thing to do,” Burke said.

On the programming side, Burke said that NBU will invest more in original programming on its USA Network – he didn’t say how much – adding that the programmer had been known for “blue-sky procedurals” and could see more “edgier” shows, as well as sports programming from other NBCU channels.

Comcast Cable CEO Neil Smit also chimed in when asked if HBO’s OTT offering would cut into the core business. He noted that Comcast was the first cable operator to introduce Internet Plus, a package of high-speed data service and HBO to consumers, a relationship he expects to continue. And he added that the operator’s X1 platform has been a strong retention tool for customers and is driving more linear TV viewing even among younger consumers.

Cash flow growth is expected to decelerate to between 2% and 3% for cable operators in 2015, down slightly from the 4% rise expected this year. But a continued focus on higher margin broadband and commercial services should keep profit margins fairly steady for the foreseeable future, according to credit ratings agency Moody’s Investor’s Service.

In its report, Broadband is the Game, Cable is Poised to Win, Moody ‘s estimates that cash flow margins will decline mainly because of the maturing video business. Video customer losses and higher content costs should continue to impact that segment of the business going forward. And though the broadband business has also shown some signs of maturation as subscriber growth has slowed down, Moody’s believes cable operators will see profits rise as customers upgrade their service to higher speed and higher costs tiers. Earlier this year, the broadband subscribers surpassed cable video customers for the first time.

“It’s the broadband business now, and speed upgrades make it cable’s game to win,” the Moody’s report said

Proposed over-the-top offerings from Sony, Verizon, Dish Network and DirecTV are expected to have some downward effect on pay TV subscribership, but Moody’s believes it will be minimal.

Moody’s doesn’t believe that content providers are going to want to rock the boat of affiliate fees and ad revenue from cable that hard, adding that it expects content providers to make content available to a degree and at a price that targets people outside that audience.”

While widespread adoption of odver-the-top services could throw a wrench in that strategy, Moody’s believes “programmers will tread lightly, limiting pressure over at least the next year or so.”

On the commercial services side, Moody’s expects cable to continue to gain market share – it pointed to the pending Comcast-Time Warner Cable merger, which would allow the combined entity to serve larger customers in major cities like Los Angeles  New York City and helping to build on the more than 20% annual revenue in that segment for both companies. Providing cellular backhaul services – essentially using their network to transmit information between cell towers, also is expected to be a healthy business – Moody’s projects 7% to 10% annual revenue and cash flow growth for that segment alone over the next three-to-four years.

“What’s good for the cell towers is good for the cable operators serving them,” Moody’s said.

WiFi could also prove to be a cash generator for cable operators in the future, Moody’s said. Currently used primarily as a retention tool – operators offer it as a free add-on to broadband service – WiFi is becoming increasingly important and could withstand a small monthly surcharge without a resultant subscriber loss, Moody said. The credit rating agency estimated that at Cablevision – which was a pioneer in offering WiFi service – could lose as much as 5% of its customer base before an additional $2 monthly charge would be uneconomical. A $3 monthly charge pushes that acceptable subscriber loss to 7%, according to Moody’s.

A week after Sony made a splash by signing up Viacom’s 22 networks to its planned over-the-top video offering, Dish Network announced that Scripps Interactive Networks has signed a comprehensive deal to offer its suite of channels including Food Network, HGTV and Great American Country to its own service targeted at Millennials.

Dish has said that it plans to launch the service – which some believe could be  named “nuTV” – early next year.

The Scripps agreement includes over-the-top (OTT) multi-stream rights for live and Video-on-Demand content. The agreement also expands Dish’s distribution of authenticated live and Video-on-Demand Scripps Networks programming on Internet-connected devices.

Moreover, the agreement widens exposure of Scripps Networks programming to a larger swath of DISH’s traditional viewer base by opening DIY Network and Cooking Channel to the popular “America’s Top 200” programming package.

The renewal agreement applies to the entire suite of Scripps Networks channels, including: HGTV, DIY Network, Food Network, Cooking Channel, Travel Channel and Great American Country.

“DISH is delighted to add Scripps Networks’ award-winning lifestyle content to our growing library of sports, family, educational and entertainment options that will create a redefined video experience for a new type of consumer,” said Dish CEO Joseph Clayton in a statement. “This wide-ranging agreement gives DISH customers dynamic access to Scripps Networks programming today and tomorrow.”

The OTT rights allow access to Scripps Networks content through a future multi-stream subscription service of linear and Video-on-Demand content. With this capability, the content will be available to an untapped segment of customers that is seeking a flexible, content-driven, Internet-accessible service.

“This agreement demonstrates the consistent strength and popularity of our portfolio of brands, and enables even more people to enjoy DIY Network and Cooking Channel in addition to our existing offering on Dish,” said Scripps Interactive chairman and CEO Kenneth Lowe in a statement. “We are committed to making our lifestyle content available to consumers wherever and whenever they want it. This first-of-its-kind OTT deal for Scripps Networks Interactive enables us to reach even more people through Dish’s innovative services.”

The renewal also expands the authenticated Scripps Networks programming available to DISH customers at home or on-the-go via Internet-connected devices – televisions, computers, smartphones, tablets, gaming consoles and other devices. Dish customers will be able to use the DISH Anywhere™ app, dishanywhere.com and Scripps Networks’ web properties and apps to view live, Video-on-Demand and full-season content.

The updated agreement follows news of Dish’s groundbreaking agreements with The Walt Disney Company, announced in March, and with A+E Networks, announced in August.

Over-the-top video services will be available in 706.5 million TV homes worldwide by 2020, nearly double the 374.4 million homes expected in 2014, according to a report by Digital TV Research.

Asia will see the most growth – its report Global Online TV & Video Household Forecasts predicts that Asia Pacific will gain 233 million OTT homes between 2013 and 2020, about 61% of the global additions during the same period. The report stated that China alone will add 140 million OTT homes by 2020, taking its total to 206 million homes – more than all of Europe – and will overtake the U.S. in 2014.

By 2020, 47.6% of the world’s TV households will view online television and video, up from 15.4% in 2010, according to Digital TV Research. South Korea (79.8%) will have the highest proportion by country by 2020, with India (21.9%) at the other end of the scale.

Subscription video on demand subscribers should rise to 199 million by 2020, according to the report, more than double the 83 million expected by the end of 2014. North America’s share of the total will fall from 57% in 2014 to 34% in 2020. While that shows that most of the growth in OTT services will happen outside the U.S., America will still contribute 62 million homes to the 2020 total, with Japan in second place with 20 million homes.

Digital Research estimates that by 2020, 13.4% of the world’s TV households will subscribe to an SVOD package like Netflix or Amazon Prime, up from only 1.6% in 2010 and an expected 6.1% by year-end 2014. The proportion in 2020 will vary from 49.6% in the US and 48.5% in Sweden to 2% in India and Vietnam. Ten countries will have SVOD penetration in excess of one-third of TV households by 2020.

Time Warner chairman and CEO Jeff Bewkes told analysts Wednesday that his company is open to over-the-top video service providers, but stressed that any deal would have to be “additive” rather than “subtractive” to its current distribution relationships.

Bewkes declined to speak directly about 21st Century Fox’s decision to halt its pursuit of the company, but on a conference call to discuss second quarter results, the Time Warner chief was more than open about the company’s strategy going forward and its potential growth prospects.

Bewkes said that he was “interested” in Dish Network’s plan for a streaming service that would be targeted at young millennials, and he added that while he was not opposed to OTT in general, any deal would have to be positive for Time Warner.

“We’re certainly open to opportunities to grow our business,” Bewkes said. “We’re not philosophically opposed to an over the top virtual MVPD model, we just have to believe it will be additive to the whole situation rather than subtractive.”

Later, Bewkes said that while there are some questions around some over the top services, Time Warner is looking closely at the model.

“Take the Dish streaming service, it’s a concept we’re interested in, because of the way it’s designed very much targets incremental subscribers at a price point that would be attractive to younger people particularly. A similar one would be Comcast selling HBO in a lightweight TV package that allows you to target consumers that otherwise would not subscribe to the multichannel TV package. That could be a great entree into the ecosystem for younger viewers who may trade up over time.”

And even HBO Go, the online video offering that some analysts have speculated Fox intended to beef up with content from its other networks, could be expanded in the future.

“What we’re doing is trying to be best in class, to have a platform that could deliver the Turner networks and frankly other networks – they don’t have to be ones that we own,” Bewkes said.