Remember way back in around 2017 or so, how skinny bundles were supposed to be the cure to a mildly concerning phenomenon called cord cutting? They were going to provide a cheaper, slimmer online version of the traditional cable bundle, and it seemed like a smart way to keep a relationship with increasingly disaffected customers, paying something for traditional “TV.”

Virtual MVPDs, as the industry awkwardly calls them, even held the promise of offering new kinds of TV programming bundles, better targeted to specific niches of viewers, like those who loved lifestyle and reality shows but didn’t care about sports. 

So how’s that going these days? The question arose again this past week, after T-Mobile summarily shuttered its five-month-old skinny bundles, collectively called T-Vision, and swapped in partnerships with two incumbents, Philo and YouTube TV.

One can’t help wondering what new CEO Mike Sievert’s brain trust was thinking as they prepared to launch T-Vision last year. Days after launch, media partners roasted the wireless carrier over which tier their networks got position, with conglomerates like Discovery unhappy with confined of their channels to the $10-a-month “Vice” tier. 

T-Mobile backed off quickly, but that unforced error called into question the venture’s economics, and whether T-Mobile even knew how to run a TV service. 

That was certainly a good question to ask regardless. It’s not like wireless carriers have had unbridled success running content services and aggregators. Just look at Verizon’s ill-fated forays with Go90, AOL, Yahoo, Huffington Post and Tumblr. 

Similarly, AT&T just unwound part of its ill-fated $49 billion acquisition of satellite service DirecTV, selling a minority stake to TPG at a  sharply discounted enterprise valuation of just $16 billion. Presiding over a two-thirds plunge in value in less than six years is some kind of achievement, but not one you’d think anyone wants to replicate. 

Of course, we’re still waiting to see how the $85 billion Time Warner deal works out for AT&T. HBO Max had a crummy launch last year, further complicated by the early days of the pandemic, but seems to be finding its feet. 

But it may take years before HBO Max makes money. In the meantime, AT&T must keep building out an extraordinarily expensive 5G wireless network while paying down $150 billion in debt. 

So, the best thing to say about TVision is that T-Mobile quickly killed off a bad idea, and signed deals to offer discounted services from two companies that actually know what they’re doing. 

The YouTube TV deal expands an existing relationship with Google, knitting T-Mobile further in with one of the world’s largest advertising and technology companies. 

The Philo deal is new, sending bargain-hunting customers to a small, smart and nimble indie that’s kept its main tier trim and affordable, just like what skinny bundles originally were supposed to be. 

But T-Mobile’s smart pivot still doesn’t paper over the bigger problems facing the skinny bundle business.

Cord cutting accelerated during the pandemic, plunging pay-TV household penetration rates to 1990s levels. And that plunge accelerated despite the addition of several million skinny bundle subscribers. Advertisers followed eyeballs, especially on in-app advertising on connected TVs, according to new figures from Google.

Those aren’t good trends for the future of traditional TV, even virtual versions of it. 

As analysts LightShed Partners pointed out in a January post, “Unless there is an ulterior motive to your vMVPD ambitions (such as YouTube TV’s goal of bringing more ad buyers into the YouTube ecosystem or Hulu Live’s goal of inflating ESPN’s subscriber base), it is increasingly clear that a standalone vMVPD is simply a bad business.”

To begin with, any chance of rebuilding the channel bundle from scratch—that long-ago dream—is now largely gone. Big media companies have used their leverage through broadcast retransmission agreements and the most sought-after cable networks to force vMVPDs to look more like MVPDs, with all the lesser channels most audiences don’t care about. 

Worse, prices are creeping up, undercutting skinny bundles’ other main attraction. Networks keep raising prices, and service providers can’t afford not to pass along the costs to consumers.

Prices for the leading services now sit around $65 a month, with largely similar collections of channels. Worse, for the services that feature some sports networks (none have all of them), prices are about to get a lot higher as new rights deals roll in. 

The lone exception is Philo. As LightShed suggested, the company “has stuck to its unique offering of general entertainment networks, without any expensive sports networks (no retrans, no national or regional sports networks) at a $20/month price point.”

But the discipline shown by Philo’s operators is uncommon. Most of Philo’s competitors have been force-fed a fattening, expensive diet of unnecessary channels, made worse by those sports programming costs. 

And all of this is happening amid the greatest threat to all MVPDs, traditional or virtual: the flight of the best content from networks on the traditional bundle to streaming apps owned by the same companies or their big tech competition. 

Netflix this week signed a whopping $450 million deal for two sequels to the hugely successful Knives Out film from last year. Apple paid a record amount for Sundance darling CODA two months ago. Amazon has been splashing large checks around too.

And as competition hits new levels, NBCUniversal may pull its licensed shows on Netflix and HBO Max early, to put them on Peacock, Bloomberg reported. 

That potential move suggests the urgency with which media companies are moving to get distinctive, differentiating shows onto their own streaming services, rather than just counting the easy money of licensing revenue. 

If companies are willing to do that to lucrative deals with outside partners, think how aggressively they’re likely to be harvesting the most attractive shows from within their own corporate families. 

And more generally, that’s the long-term challenge of the now-mesomorphic bundles amid a step change in the ways we watch television. The literal bottom line:  If big streamers are giving you more high-level shows, with more flexibility and roughly the same price or less, why would you bother with a skinny—or even a pudgy— bundle at all?

Charter Communications chairman and CEO Tom Rutledge said that the cable operator is doing better than expected. Wideo results in the first quarter were driven by a combination of sports-free offerings and the availability of its products via apps.

Charter lost about 70,000 video customers in Q1, less than half the 152,000 it lost in the same period last year and well below analysts’ consensus estimates for 170,000 losses. 

At the virtual MoffettNathanson Media & Communications conference Monday, Rutledge said a combination of broadband pull-through -- where new broadband customers, especially from satellite TV services, buy a video package as well as a high-speed data product -- and sports-free video packages, like ethnic offerings and Spectrum Essentials, helped drive results.

Rutledge told moderator Craig Moffett -- principal and senior analyst at MoffettNathanson -- that even those offerings are limited because of broader traditional video contracts that require Charter sell a minimum threshold of sports-driven programming before other tiers. But he added customers are finding ways to access the services they want. 

“We also have gone to an app-based distribution model,” Rutledge said. “We have 8 million customers now who are connected to us through apps as opposed to set-top boxes. What that does is it reduces our capital intensity, it reduces our revenue from equipment, but it also allows us to have a better user experience and it allows us to be on more devices, the consumer can save money. Our application is the No. 1 rated app in the country for its category.”

Although those factors gave Charter a slightly different trajectory than its industry peers in the quarter, it doesn’t negate the trend that traditional video’s decline is accelerating.

“We just have some tools that make it a little better for us,” Rutledge said. “Ultimately, being an app based provider will allow us to be, over the longer term, a better marketer of new video.”

As video’s importance in the overall cable bundle has diminished over the years -- every major publicly traded cable operator has significantly more broadband customers than video customers -- Rutledge said distributors’ leverage with non-sports programmers has changed.

Related: Rutledge: Sports Cost Relief is Up to Networks, Leagues 

“We have leverage in the sense that there’s not that much margin in the video business, so letting our customers have higher and higher rates is a problem, ” Rutledge said, adding that as sports costs rise, sports programming is becoming more of an elite product.

Related: Sinclair: Sports Rebates Could Come 

“[T]he sports package is still pretty much intact as a product and we haven’t chosen to try to destroy it, or do anything but continue to sell it,” Rutledge said. “But continuing to sell it means it’s continuously increasing in cost and therefore customers have higher and higher bundled cable bills. Some of the downside of selling that product is that people’s ire about their bill is projected onto us as opposed to the content companies. There’s some negativity associated with being a purveyor of high-cost content, but people still want to watch it in big numbers and it’s just becoming more of an exclusive product, slowly, because of its high cost.” 

Discovery Inc., CEO David Zaslav said that although consumers still demand so-called “skinny bundles” of programming, distributors are forced to pack channels like regional sports networks into offerings that consumers don’t want.

Speaking at the Goldman Sachs Communacopia conference in New York Tuesday, Zaslav said that the big issue around skinny bundles is that too much programming is being stuffed into what are supposed to be small, low-cost packages.

"There is no such thing as a skinny bundle with a regional sports network that costs $10,” Zaslav said, later adding that RSNs may need to be “puked out” of packages to make them more palatable to consumers.

"If that would happen, that would be a good thing for the ecosystem," he said.

While other channels are getting squeezed by RSNs -- and some distributors are fighting back on the high costs of the sports networks -- Zaslav said Discovery’s lineup of authenticated Go apps which allow customers to watch full episodes and live content on demand from its networks are making headway.

AT&T has been in a battle with Denver-based Altitude Sports and Entertainment for months over the high cost of the RSN. Altitude went dark to AT&T DirecTV, AT&T TV Now and U-verse customers on Aug . 31.  In July, 16 Fox RSNs went dark to Dish Network customers, largely over a price increase. 

Related: Ergen: Dish May Never Carry Fox RSNs 

Despite having smaller viewership than its linear channels, that smaller audience is in demand. According to Zaslav, they are made up mostly of “teenagers and 25 year-olds” who would never buy a $50 pay TV bundle but are attractive to advertisers,which allows the programmer to adequately monetize them.

Discovery has aggregated its Go apps and Zaslav said he believes “in the next two to three years our biggest cable network in the U.S. is going to be this Go platform." 

On the heels of closing its acquisition of Time Warner, AT&T has formally introduced WatchTV, a skinny bundle without sports or local broadcast networks that features a lineup of more than 30 live channels and a VOD library of about 15,000 TV shows and movies. 

AT&T said it will offer WatchTV (via the WatchTV mobile app, Web browsers and select streaming devices) at no added cost to mobile customers who sign up for two new unlimited wireless plans – AT&T Unlimited & More and AT&T Unlimited & More Premium – that are slated to launch next week.

AT&T said it also will “soon” offer WatchTV as a $15 per month standalone service.

Channels in the WatchTV lineup at launch include: A&E, AMC, Animal Planet, Audience (from AT&T), BBC World News, BBC America, Boomerang, CNN, Cartoon Network, Discovery, Food Network, fyi, Hallmark Channel, Hallmark Movies & Mysteries, HGTV, History, HLN, IFC, Investigation Discovery, Lifetime, Lifetime Movies, OWN, Sundance TV, TBS, Turner Classic Movies, TLC, TNT, truTV, Velocity, Viceland, and We TV.

Networks set to join the WatchTV lineup “soon after launch” include BET, Comedy Central, MTV2, Nicktoons, TeenNick, and VH1. 

More detail about WatchTV emerge about a month after AT&T chairman and CEO Randall Stephenson dropped hints about the coming service when he gave antitrust trial testimony during the then-pending AT&T-Time Warner merger.

RELATED: AT&T Eyes Launch of Sports-Free Skinny OTT TV Service

In addition to being used as a perk for AT&T’s new unlimited wireless plans, WatchTV also presents competition for Philo, the sports-free OTT TV service launched last November, and perhaps less so for AT&T’s own DirecTV Now service as well as OTT-delivered pay TV services such as Sling TV, Hulu Live, PlayStation Vue, and fuboTV, a sports-focused service. 

Here’s how AT&T’s new unlimited mobile plans stack up feature-wise:

AT&T Unlimited & More Premium

• Option to add WatchTV
• Option to add one of the following premiums: HBO, Cinemax, Showtime, Starz, Amazon Music Unlimited, Pandora Premium, or VRV, the Ellation-owned SVOD aggregation service
• $15 monthly credit toward DirecTV (the satellite TV service), DirecTV Now (OTT TV) or U-verse TV (AT&T’s managed IPTV service)
• 15 gigabytes of device tethering
• Streaming at high quality

AT&T Unlimited & More

• Option to add WatchTV
• $15 monthly credit toward DirecTV Now
• Up to 4G LTE unlimited data.

AT&T said more details about the new plans will be available here when they are launched next week. The current plans – AT&T Unlimited Plus Enhanced and Unlimited Choice Enhanced – sell for $48 per line (or $190 per month for four lines) and $40 per line (or $160 per month for four lines), respectively. 

Notably, AT&T said subs on the unlimited plans could see lower data speeds (and video could be limited to standard-definition) when the network is congested. 

AT&T is enhancing its new unlimited plans with video-focused features amid ongoing competition with rivals such as Verizon Wireless and T-Mobile, which is working on a national OTT TV service following its acquisition of Layer3 TV.

RELATED: Verizon CEO: Linear TV Model is Dead

Cable operators such as Comcast, Charter Communications and Altice have launched or are preparing to launch mobile services that lean on MVNO deals and their own WiFi networks.

RELATED: Charter Eyes June 30 Debut for Spectrum Mobile

AT&T is preparing to introduce a $15 per month, sports-free OTT TV service called AT&T Watch, in the coming weeks, according Twitter-based coverage of AT&T chairman and CEO Randall Stephenson’s antitrust trial testimony for the pending AT&T-Time Warner merger. 

Update: AT&T is also looking to make this package available for free to customers on its unlimited mobile service plans. 

RELATED: AT&T’s Stephenson Says Need for Scale Led to Time Warner Buy

Brian Fung, a tech reporter for The Washington Post, was on the scene and tweeted that AT&T Watch would be an OTT TV service, like DirecTV Now is, but start at a less expensive price point and not include sports programming:

[embed]https://twitter.com/b_fung/status/987062529338826752[/embed]

AT&T has been asked for further details, but Fung noted later that the company confirmed some of the basic details mentioned by Stephenson:

[embed]https://twitter.com/b_fung/status/987080231235346433[/embed]

AT&T hasn’t detailed pricing and packaging for this new OTT TV offering, but it would appear to be most akin to an entertainment-focused national offering from Philo that launched last November and starts at $16 per month, and on the complete opposite end of the spectrum of fuboTV, the sports-oriented virtual MVPD.

Update:Per CNN, AT&T Watch will be available for sale to all, but will be offered for free to consumers who take AT&T’s unlimited wireless service.

CNN added that AT&T alluded to this offering in a pretrial brief, holding that a combination with Time Warner would enable AT&T to bring those content assets to its wireless platform to “develop new and more valuable services especially for mobile video devices.”

Among examples, AT&T noted that it would “launch a new service with Turner and a small number of popular cable networks, which would be made available for free to AT&T's wireless customers on unlimited plans and for a nominal price to anyone else."

RELATED: Philo Unleashes Entertainment-Focused OTT TV Service

Philo hasn’t announced subscriber figures or ramped up a bunch of marketing for its new service, so it’s difficult to determine how its sports-free offering is resonating in the market. As for AT&T, a skinny bundle without sports would address a part of the market not covered as directly by DirecTV Now, which ended 2017 with 1.15 million subscribers.

Whenever I hear talk that Viacom and CBS are mulling yet again whether to recombine the company they tore asunder more than a decade ago, I inevitably think back to that 1980 movie The Blues Brothers, where, on a mission from God, John Belushi and Dan Aykroyd as Jake and Elwood Blues tried to put their R&B band back together one last time. And then I think of Blues Brothers 2000.

Sometimes, things are better left as they are.

The Blues Brothers – regardless of your personal taste in film – was a trendsetter, a showcase for massively under-appreciated musical geniuses (it encouraged at least one 17-year-old high schooler to seek out the collected works of Cab Calloway, John Lee Hooker, Ray Charles and anything touched by Steve Cropper), perhaps the most expensive amalgamation of car chase scenes in movie history and the sole reason that 50-year-old men today still consider Ray-Ban sunglasses cool. (No offense, Tom Cruise)

Blues Brothers 2000 was simply a terrible, terrible mistake, an abhorrent attempt to cash in and recapture lightning in a bottle that fell disastrously short.

If Viacom and CBS are seriously thinking about rekindling merger talks, they have to decide which Blues Brothers they want to be -- an imperfect but original take on an old standard, exposing a new audience to a classic entertainment genre; or a slapdash attempt by some out-of-touch old guys for a big payday? You do the math.

Viacom stock has been on a roller coaster ride over the past several weeks as reports battered back and forth that a deal was on and off. The latest – the boards of both companies said they have appointed independent directors to evaluate a merger – probably means that minus a massive change of heart, a deal is on.

Viacom and CBS’ largest shareholders – Sumner Redstone and his daughter Shari’s -- desire to put the two companies together is no secret. Shari tried to do the same about a year ago while in the midst of an increasingly nasty power struggle with Viacom’s then-CEO Philippe Dauman (she won). She changed her mind after naming Bob Bakish, a long-time Viacom executive, as permanent CEO of the company, impressed she said at the time with a resurgence in energy at the company and a desire to see the new CEO’s plan to revitalize the once dominating brands play out. 

Now the urge to merge has returned, spurred not unsurprisingly by a trio of big media deals in the past 18 months – AT&T’s $108.7 billion pending purchase of Time Warner, Discovery Communications’ $14.6 billion soon to close buy of Scripps Networks and Disney’s $66.1 billion agreement to purchase of certain assets of 21st Century Fox.

The other catalyst for a deal is that the reason for splitting them up in the first place in 2005 – unlocking value, a term that was massively overused in the early part of the century – never turned out the way they thought it would.

Back in 2005, Viacom was supposed to be the big beneficiary of the split – it would no longer be shackled to a low-growth broadcaster (CBS) and could finally take advantage of its youthful demographic and cutting edge content, watching its stock price soar as the ad dollars rolled in alongside ever fattening affiliate fees. CBS would be the utility stock, good for retirees who were more interested in steady, but lower, returns.

More than a decade later, the opposite happened. In a brilliant move, CBS chief Les Moonves embarked on a years-long push to extract cash for retransmission consent. Today, CBS is on track to tally $2.5 billion in retrans revenue by 2020.

Viacom, on the other hand, faltered as SVOD and online video eroded its subscriber base and decimated ad sales. In the meantime, other youth-oriented channels sprang up, increasing competition and a misplaced focus on stock buybacks and financial returns cut into programming budgets, creating a lack of new shows to attract new audiences.

Under Dauman, Viacom stumbled as it chased short-term dollars through SVOD deals for the best programming on its networks – and inadvertently trained younger viewers to not watch commercials and to prefer on-demand to linear. At the same time, CBS grew into the top-rated broadcaster and began to assert its clout. CBS showed just how much power it had when it went dark to about 3 million Time Warner Cable subscribers for the month of August 2014, resulting in the single largest quarterly subscriber defection (306,000 customers) in that cable operator’s history. Later, CBS addressed the growing trend in cord cutting by offering its own OTT service – CBS All Access in 2015– while Viacom continued to stumble.

CBS stock also soared – even in the recent market volatility it still trades well above Viacom’s price, and the logic behind putting the two back together mostly centers on how pairing CBS with Viacom’s channels would give the pay TV programmer a more compelling package in carriage renewals with distributors. In short, there has never been any question about the value CBS would bring to Viacom in a recombination (see above). The sticking point has always been what would it do for CBS?

While that was a harder question to answer a couple of years ago, some believe that now, given the shift toward direct-to-consumer offerings and skinny bundles, adding the Viacom channels would make CBS All Access more compelling. But I’m not so sure.

Just putting them together doesn’t make either company better. Forcing pay TV distributors to carry unchanged or unimproved Viacom channels only diminishes the value of the broadcast network. No offense to Viacom, but if you nail a dead rat to the Mona Lisa, it becomes the Mona Lisa with a dead rat nailed to it, not The Last Supper.


And I know what you're thinking -- Viacom could extract higher affiliate fees if it was paired with must-have CBS, which could be used to develop better programming and benefit both content providers. But pay TV distributors are already madder than the owner of Bob's Country Bunker, and forcing them to pay higher prices for programming they hope will get better isn't going to make them any happier. 

Bakish, who became CEO about 14 months ago after Dauman was fired, has done an admirable job so far, but there is still much to be done. Ratings are on the upswing and there are some new programs in the pipeline, but they are still far behind their peers. In a conference call with analysts to discuss fiscal Q1 results Feb. 8, he said 2017 was a stabilizing year. Now that the company has more solid footing, he sees growth opportunities mostly by executing on the existing plan.

“We're overwhelmingly focused on organic execution and we see a lot of potential ahead,” Bakish said.

So that brings us back to the real reason behind putting the companies back together – because everybody else is doing a deal. Like nature, the media business abhors a vacuum, so why not?

But even that logic doesn’t require a Viacom-CBS re-pairing.

Rosenblatt Securities analyst Alan Gould suggested that a better deal may be CBS and Verizon – it would give the telco a leg up on programming its planned OTT service while giving CBS access to piles of cash. Viacom, he said, would be a better target of Discovery or Sony Entertainment. 

Barclays media analyst Kannan Venkateshwar also liked the Discovery angle, adding in a note to clients that while a deal will not solve Viacom’s deeper problems – subscriber erosion, a declining ad market – it could buy the company some more time to execute its goals.

The analyst wrote that in a Discovery deal, Viacom would bring some added international strength – it has assets like Channel 5 and Telefe in Europe and assets in Latin America and India that would fit well with Discovery. On the studio side, Viacom’s Paramount Pictures could fit well with Discovery shareholder John Malone’s Lionsgate. And CBS’s Showtime premium channel could mesh with another Malone asset – Starz.

Venkateshwar noted that Viacom just began the turnaround process last February, and while CBS won’t cure all it’s ills – he pointed to continued downward trends in fiscal Q1 – it may give the company some legroom as it looks for a more permanent solution.

“Overall, the quarter likely underlines the need for the company to seek an inorganic path out of its problems,” Venkateshwar wrote. “The announced potential combination with CBS is unlikely to solve any of the core performance issues at Viacom but would likely buy the company some time, especially in dealing with distribution challenges. Longer term, however, we believe a combined CBS and Viacom would need to look at further partnerships to gain scale large enough to provide any meaningful clout to survive in the current media ecosystem.” 

The media landscape saw steady change in 2017. High Dynamic Range (HDR) moved to the forefront and consumers took advantage of even more skinny bundle offerings as they continue to look for ways to cut or shave the cord. Artificial intelligence became more accessible and had a big impact on consumer interaction.

The question is, how will the tides turn in the next 365 days? Here are my predictions for 2018:

High Dynamic Range (HDR) Becomes Ubiquitous

The rollout of HDR-capable devices and content will proceed much as the 4K rollout happened, which is to say smoothly and quickly. Stores are brimming with 4K display options this holiday season, many of which include HDR options across a good selection of reasonably priced models. By this time next year most new TVs will likely be HDR-capable with many more options available in the mid- and low-price range.

As with the 4K rollout, there is a chicken and egg problem of having a capable device along with the availability of content to playback that utilizes the new display capabilities. With 4K it was easier since existing cable, satellite and broadcast services were able to upgrade and provide 4K content and channels.  

With HDR it’s a bit different. Since HDR is not backward-compatible with Standard Dynamic Range TVs and most traditional broadcast infrastructure is not compatible with HDR signals, most of the HDR content will be coming from online video services such as Netflix and Amazon.  There are broadcasters out there experimenting with HDR for sure, but the time horizon for having a wide selection of HDR television and sports events available through standard TV services is still a ways out. Meanwhile, subscribers to Amazon Prime Video or Netflix can enjoy a reasonable selection of HDR titles today, and most new titles from these two services are coming in HDR.

While there is still an issue of the competing Dolby Vision vs. HDR10 vs. HLG HDR formats, this won’t really matter for the average consumer. The fight is mainly between Dolby Vision and HDR10. And, with the exception of Samsung, most TV makers are beginning to support both formats and most content creators already support both. So, while Dolby and HDR10 duke it out in the format wars, most consumers will be able to continue viewing content regardless of their video service.

Skinny Bundles Abound

2018 will be the year of the skinny bundle. There are many options now available from different providers such as SlingTV, DirecTV Now, Spectrum TV Stream, YouTube TV and Hulu Live. There will be lots of hype and significant growth due to the fact that there are few skinny bundle subscribers today and it will be a compelling offer for many. For others, subscriptions even come free with mobile phone services.

What remains to be worked out is why the skinny bundle is better. At the moment, it remains simply a port of the traditional TV experience to the internet.

There is nothing significantly better than traditional TV services, except for price. Price is an important factor for sure, but price alone will not significantly disrupt the traditional TV market, especially not with the limited number of channels and on-demand assets that the skinny bundles have today.

The key thing to watch for in 2018 with regard to skinny bundles is for those companies experimenting with new and unique user experiences that take advantage of the fact that they are being offered over the internet. Some of these experiments will work, some will not; but ultimately the widespread adoption and success of the online TV offering and its ability to disrupt traditional TV is going to be based on some innovation in user experience versus simply having a cheaper option to the same experience online.

Artificial Intelligence (AI) will enable better content experiences

In the last few years, but especially in 2017, artificial intelligence has advanced significantly. There are now tools available from providers such as Google, Microsoft and Amazon Web Services that no longer require an expert in artificial intelligence to set up for use. Furthermore, these providers are offering pre-built networks to process media files such as pictures and videos.

As an example, most major online photo storage and sharing services are using artificial intelligence to perform facial recognition in order to allow users to navigate photo collections by people versus simply by date. Many of today's online video services rely on metadata in order to categorize, recommend and search the content catalog. However, the sources and depth of this metadata is rather thin, being constrained to a few items such as title, director, genre, actor etc. Even that is only for the relatively small set of content that is professionally produced in comparison to the vast volumes of user-generated and semi-professional content being created in the world. The kind and amount of metadata available for that content varies widely and often doesn't exist.

Artificial intelligence can quickly and easily process vast volumes of data that not even an army of humans could manage in a reasonable timeframe, providing the kind of metadata required for categorization, recommendation and search. This information could also be used to help further target advertising beyond simple demographics and allow for advertisers to include information about the video into which the advertisement will be placed to drive selection. Knowing what kind of content the user is watching could be as valuable as knowing the gender and age of the person watching.

The consumer-facing impact of artificial intelligence on media will be in the form of new and better user experiences around search and discovery of content, better recommendations and more relevant advertising. Knowing that this improvement was driven by artificial intelligence is something that may or may not be known depending on whether the provider reveals the implementation behind their experience.

--Bill Wishon is senior architect, media office of the CTO, at Akamai

 [Image source: Wikimedia Commons]

Altice USA stock was hammered Friday morning, down more than 15% in early trading, after its parent company, European telecom company Altice N.V., said full-year cash flow growth at its international telecom operations would come in at the lower end of previous guidance.

Altice USA shares were down more than 15% in early trading to $20.66 each ($3.84 each). The stock finished the day down 7.8% ($1.91 each), closing at $22.59 per share.

The fall-off in the U.S. operation appears to be strictly guilt by association as the decline closely followed those of its parent company stock, traded on Amsterdam’s Euronext Exchange. Altice N.V. shares were down in the double digits most of the day, closing Nov. 3 at 12.51 euros, down 22.6% or 3.65 euros each.

Altice USA released its Q3 results Thursday afternoon and, despite headwinds in the cable business overall as cord-cutting and skinny bundles continue to erode video subscribers, results were generally better than expected.

But at the international operations, Altice N.V. said cash flow guidance would be at the “low end” of the high-single digit percentage range. It previously had expected growth to be in high-single digit percentages. Revenue at the international operations was down 1.8% in Q3, with cash flow up 1.8%.

Revenue at the U.S. business grew 3.2%, and cash flow was up a healthy 18.9%, fueled mainly by the company's aggressive cost-cutting methods.  

“From a fundamental perspective the [U.S.] stock should be up on these results vs. the current 15% decline,” said Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak. But he added that the combination of the guidance adjustment by the parent and the overall negative sentiment from investors in the U.S. cable business over cord-cutting and competition was a big factor in driving down the share price.

“The irony is that prior to 3Q Altice NV and Altice USA have been trading off due to concerns around the U.S. outlook,” Wlodarczak said. “They beat in the U.S., and the stock dumps anyways.”

Altice USA went public in June at about $30 per share and enjoyed early gains as speculation about possible consolidation moves goosed the stock. But as those deals haven’t materialized, the stock has declined. Altice USA’s stock price was down by about 28.6% between June 23 – it’s high point – and Nov. 2. With the stock’s decline Friday, shares have plunged nearly 40%.

In a research note Thursday, MoffettNathanson principal and senior analyst Craig Moffett said that although Altice USA lost subscribers in Q3, it has managed to squeeze substantial margin growth from its operations. Margins, at about 44.1%, are near what the company promised when it first purchased Cablevision Systems in June 2016, and are easily outpacing industry averages.  

In a note to clients Thursday, Moffett wrote that so far Altice USA’s growth hasn’t suffered, adding that the Q3 results make “clear that the cost-cutting story remains on track,” adding that although its growth rates aren’t at the same level as larger peers like Comcast and Charter, they aren’t behind by much.

“With stable unit metrics, rising prices, and falling costs, near-term numbers look very good,” Moffett wrote. “Perhaps that will be enough to convince investors to set aside their terminal growth rate anxieties.”

In an effort to help tier 2/3 cable operators create and deliver their own skinny TV bundles to OTT-powered TV-connected and mobile devices, Evolution Digital has launched eVUE-NOW!, a new, app-based platform that supports live TV feeds along with network DVR capabilities.

Colorado-based Evolution Digital said the app for eVUE-NOW!, to be branded by its MSO partners, will support iOS and Android mobile devices, as well as a variety of TV-connected retail platforms, including Roku players, Apple TV boxes and Android TV devices.

Evolution, said company president and CTO Brent Smith said, is also developing an Android TV-powered box that will carry the MSO’s brand, be leased by the operator, and auto-connect/default to the operator’s app when the device is turned on.

While cable operator partners are eager to support retail streaming platforms, some also want a leasable option that gives them more control of the device and the user experience, Smith said, adding that Evolution Digital’s Android TV box should be available by early 2018, if not sooner.

Smith said eVUE-NOW!, an offering that complements an IP-VOD service from Evolution Digital that’s being deployed by almost two dozen operators, enters play as operators ask for a way to more easily stand-up IP-delivered, multiscreen, slimmed down packages that can counter cord-cutting and compete with a growing mix of virtual MVPDs.

“Independent operators now have a way to more rapidly access and enter into the IP video marketplace,” Smith said. “This is our way to help the market find a solution and quickly defend themselves against the virtual MVPD providers.”

Being able to offer skinny TV packages tailored for broadband-first customers is becoming a priority for operators big and small. Of recent note, Comcast last week introduced a beta version of Xfinity Instant TV, a managed IPTV service, and the National Cable Television Cooperative has inked distribution deals with two vMVPDs – PlayStation Vue and fuboTV.

RELATED: Comcast Rolls Out ‘Xfinity Instant TV’ Beta

Smith said packages created with eVUE-NOW! will lean on the operator’s distribution rights with programmers.

The video recording component of eVUE-NOW! will initially offer an option for subscriber to store up to 20 programs per week. After a week, the system auto-replaces stored programs with the next available episode of a series or event, the company said.

Smith said Evolution’s storage platform uses a private copy model that is similar in many ways to the one pioneered by Cablevision Systems’ (now Altice USA’s) remote-storage DVR.

Under the initial model, the eVUE-NOW! platform, including components like encoding, transcoding, streaming and storage, will operate on the cable operator’s premises Smith said it could also be configured to run as a hosted solution that could be attractive to the smallest of the small cable operators, because they would not have to incur the on-premises costs.

Partners, he said, can integrate their own billing systems or use Evolution’s backoffice to tie in outside billing systems, including those that allow subscribers to pay and sign up with a credit card.

Smith said there’s some early stage testing underway with operators that can’t yet be named.

Several cable operators, including GCI, TDS Telecom, and WideOpenWest, are already working with Evolution to deliver IP VOD services.

RELATED: Evolution Digital Expands Customer Roster for ‘eVUE-TV’

Charter Communications is taking aim at TV cord-cutters and broadband-only customers via a trial of a slimmed-down, no-contract streaming video package that starts at $19.95 per month.

The in-home IPTV offering, called Spectrum TV Stream, offers more than 25 channels, including the four major local TV broadcast feeds, plus PBS, CNN, Bravo, A&E, Discovery Network, FX, and AMC, History, and E!, among others, according to this promotional flyer about the service posted on Reddit.

Per the promo, that baseline offering also offers access to a library of nearly 5,000 free VOD titles and does authorize a subset of its live TV channels (those with TV Everywhere rights) to be viewed when the customer is out of home.

A premium version of the package, which costs $15 more per month (a price that is good for three years, according to the flyer), subs can get a VOD library with more than 10,000 titles and more than 35 premium channels from HBO, Showtime, The Movie Channel, Starz and Starz Encore. Subs can also subscribe to individual premium channels for $7.50 per month.

The flyer also shows a live sports and news package for an additional $12 per month that includes ESPN, NBC Sports, ESPN2, Bloomberg Television, and HLN, plus others.

Out of the chute, Spectrum TV Stream, which doesn’t use traditional set-top boxes, is supported on iOS, Android and Amazon mobile devices, Roku players, the Xbox One and Samsung smart TVs.

Confirming a report by Fast Company, Charter issued this statement:

“We are testing Spectrum Stream, an IP delivered in-home Cable TV product with traditional TV everywhere out-of-home streaming, to a group of prequalified and current Spectrum Internet customers to see if this smaller package resonates with a certain segment of non-video customers. It includes local broadcast channels, 25 popular cable networks and access to thousands of On Demand choices — along with options for additional news, sports and premium channels — delivered to connected and mobile devices, without requiring a set-top box.”

Charter tested a different iteration of Spectrum TV Stream in the fall of 2015 that started at $12.99 per month, bundled in a Roku 3 streaming player, and offered an add-on package with channels such as A&E, ESPN, Food Network, TBS and TLC for an additional $7 per month.

RELATED: Charter Targets Cord-Cutters With ‘Spectrum TV Stream’

Other pay TV operators are testing or rolling out slimmer bundles, including some without sports programming, as they try to stay on top of a small but growing cord-cutting trend.

Comcast, for example, has been eyeing a Q3 launch of Xfinity Instant TV, an in-footprint, managed IPTV service that will feature a variety of packages, access to a cloud DVR, and initially target broadband subscribers who don’t take a pay TV package from the MSO. Reuters reported that the app-based Xfinity Instant TV 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.

RELATED: Comcast Prepping Q3 Launch of ‘Xfinity Instant TV’

CenturyLink is taking a somewhat different approach with CenturyLink Stream, a nationally-available OTT offering that features a baseline $45 per month package that includes ESPN and a cloud DVR, and a handful of add-on programming packages.

CenturyLink Bows Beta of OTT TV Service

More than 3.1 million homes had over-the-top skinny bundles as of April, according to new data from comScore.

At that point, Hulu’s live service and YouTube TV had not yet launched. Sling TV, the first skinny bundle to launch, was the biggest with more than 2 million subscribers, comScore said, followed by Sony’s Playstation Vue and DirecTV Now, which became available at the end of 2016.

comScore fond that skinny bundle customers were highly engaged with the services, watching for 5.3 hours on the average viewing day.

In those households, the programming available via the skinny bundle accounted for more than half of the OTT viewing time.

Go to broadcastingcable.com for the full story.

Apologies to Newton Minow, but TV isn’t a vast wasteland — it’s a jungle. And the jungle just got a lot meaner.

In just the past two years, cable networks, which had grown fat and happy feasting on double-digit affiliate-fee increases and strong advertising growth over the past several decades, have seen the core of their business begin to crumble before their eyes.

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Ad-revenue growth, once a given in the TV business, started to soften about five years ago for the major network groups, as younger viewers took to their laptops, tablets and smartphones to consume content.

After years of reliable double-digit growth, cable network ad revenue fell into negative territory in the first quarter, according to MoffettNathanson media analyst Michael Nathanson.

Skinny bundles and competition from over-the-top services like Netflix, Sling TV and DirecTV have eroded the linear-TV customer base as even once-invincible networks like ESPN have watched their customer shrink. ESPN has lost an eye-popping 12 million subscribers since its peak in 2011, according to Nielsen.

And subscription video-on-demand pioneer Netflix, which expects to spend about $6 billion on original content this year — second only to ESPN — now accounts for 30% of all home entertainment revenue, according to Internet guru and Kleiner Perkins Caufield & Byers partner Mary Meeker.

All of this has exacted a heavy toll on the cable programmers. Since August 2015 — when most cable-network stocks got hammered after it was revealed that Disney lost about 3 million ESPN subscribers in the prior 12 months — the stocks are still down by double-digits. When the dust settled in the summer of 2015, the media sector had lost a combined $60 billion in market capitalization during the period.

Content Stocks Languish
While those notoriously news-driven stocks have had some good days — on Nov. 20, 2015, Disney stock reached $120.07 per share after some investors saw opportunity in the downturn, the closest it has come to its Aug. 4 closing price of $121.69 each — only three of the top 10 network groups have been able to recover from the bloodbath of 2015.

The three that did, CBS, Scripps Networks and Time Warner Inc., have grown for reasons other than strong ratings and ad sales. Time Warner had the largest growth — 25% — mainly because in October, it agreed to be purchased by AT&T for $108.7 billion. CBS has risen on strong retransmission-consent fees, expected to top $2.5 billion by 2020, and the promise of its over-the-top services, CBS All Access and Showtime. Scripps Networks, which grew its ad revenue by 5% in the first quarter, has grown on its low cost of programming and its availability in several skinny bundles.

Collectively, the stocks of the top 10 publicly traded cable networks fell nearly 10% between April 26 and May 31, building on a decline that has been weighing on the industry for the past several months. The stocks have been on a steady decline since February, when the sector was down a collective 7.3%.

The most recent declines are just as troubling in light of other factors, said Telsey Advisory Group media analyst Tom Eagan.

The average price-to-earnings ratio for entertainment stocks was 15.6 times in July 2015, Egan said, just prior to the big sell-off that year. In August 2015, it fell to 12.8 times. Today, it’s 12.3 times.

The delta is even starker when compared to the Standard & Poor’s 500 Index. According to Eagan, the P/E ratio for the S&P 500 was 16.6 times in July 2015, meaning that the average entertainment stock was priced at a 6% discount to the average S&P 500 stock. Today, the S&P 500 is around 17.7 times, meaning the entertainment discount has risen from 6% to 30% in less than two years.

“The most interesting thing is not just the discount, but that the discount to S&P has widened so materially,” Eagan said.

Media stocks have always been event-driven, and cable-network stocks are no different. Eagan pointed to the P/E multiple for the entertainment sector in September 2016, which was about 11.9 times. One month later, after AT&T made its bid for Time Warner, that multiple rose to 13.1 times.

“AT&T making the bid lifted the whole average more than one point,” Eagan said. “But it was short-term nominal inflation. Despite that, they’re still down.”

Deals Won’t Stop the Bleeding
Eagan doesn’t believe that another big deal would erase the deficit. The problems in the sector are much deeper, he said.

Analysts have warned of the bifurcation of the TV market for years, and in the past several months, evidence of it is mounting. In the first quarter, pay TV subscribers declined by 762,000, the largest first-quarter decline ever and more than five times the 141,000 customers lost in the prior year.

The size of the decline, coupled with the fact that the losses weren’t offset by virtual MVPD gains, sends a troubling signal in that it “punishes those networks and companies that are not being carried by vMVPDs and strikes at the heart of a more bullish ‘cord-cutting will stabilize media’ thesis,” Nathanson wrote in a research note, adding that he doesn’t expect any relief in the seasonally weak second quarter.

Networks haven’t been sitting on their hands during this transition.

In February Viacom, which has had its own troubles with falling ratings and disappearing viewership, said it would focus on six core brands — Nickelodeon, Nick Jr., BET, MTV, Comedy Central and Paramount (Spike TV is to be rebranded as Paramount Network) — while placing less emphasis on its 19 other channels. While some have seen the Viacom move as a way of phasing out its less-watched networks, which Viacom denies, it is indicative of a growing trend in the programming business: Less is indeed becoming more.

Within the last year, NBCUniversal CEO Steve Burke has said publicly that the programmer probably would be better off with five or six core channels (it currently has 13 networks), and at Time Warner’s Turner, chairman and CEO John Martin has said all 10 of its networks probably won’t make it to virtual MVPD lineups, but if half do, the programmer will be able to manage just fine. About 90% of Turner’s total affiliate-fee revenue is generated by five networks.

“If we can get four or five, we’re in good shape,” Martin said at the MoffettNathanson Media & Communications conference in May. “If that means you could grow the overall pool of subscribers — because aggregate bundles of networks are being bundled in a way that subscribers like better, so there will be more subscribers — we’ll be fine.”

So far, some have already begun the process of weeding out less watched channels. In February, NBCU shuttered its crime-oriented Cloo network, a month after it had said it would shut down the linear version of Esquire Network, its joint venture with Hearst. Esquire is now available as a digital-only network.

Rise of the ‘Loser Bundle’
It looks as if the “loser bundle” — a term for a package of channels minus the broadcast networks and sports, first coined by BTIG media analyst Rich Greenfield in 2016 — is coming closer to reality.

Networks are also changing the way they look at their audiences. At the same conference, Martin said Turner wants “fans, not viewers,” seeking deeper engagement with, perhaps, a smaller audience.

That mantra is being sung by programming chiefs from Disney — ESPN is launching a direct-to-consumer offering later this year, and will revamp its flagship SportsCenter programming in August to include more updates and exclusive digital content — to Viacom and the Discovery Channel. Viacom CEO Bob Bakish said the programmer was in “very advanced discussions” to be part of a sports-free streaming entertainment package that would retail for between $10 and $20 per month.

At the Sanford Bernstein Strategic Decisions conference in New York last week, Discovery Communications CEO David Zaslav again called for the need for an $8 to $10 monthly video package, without sports channels, similar to what is offered in Europe.

“The rest of the world is a full bundle, a sports bundle, sometimes sports intertwined with a full bundle, and then a skinny bundle,” Zaslav said at the conference. “I believe we will ultimately get there.”

That is a big change from just seven years ago, when programming executives were scoffing at SVOD and OTT upstarts for chasing “digital dimes.” Now, a programming executive without a clear, coherent on-demand and over-the-top strategy is risking a loss of potentially big revenue.

Affiliate fees and retransmission consent are under pressure because of consolidation. And advertising — the other source of network revenue – is under siege as ratings continue to decline.

That could change next year for two reasons: the proliferation of better audience measurement across devices and the carriage renewal cycle. With another year under its belt, the measurement industry may get a better handle on tracking those elusive millennials as they surf between traditional TV, tablets, phones and online viewing. And more importantly, some bigger carriage renewals will come due in 2018 as well.

Eagan noted that AT&T purchased DirecTV in 2015, which could mean that some three-year carriage deals for the largest multichannel video-programming distributor in the country will be negotiated.

“As we get into 2018, a lot of these negatives will start to soften,” Eagan said.

It is a brave new world for television. As more consumers embrace cord-cutting, cord-shaving and skinny bundles, multichannel video programming distributors have started to gain the upper hand in negotiations with the big cable networks. It’s time for those cable channels that have been riding on the coattails of their big-brand parent companies to face the music.

Distributors are no longer being forced to take on smaller, low-rated channels to appease the Viacoms or Disneys of the world. They are no longer interested in having six MTV channels when all they want is the original-flavor MTV. They can pass on having eight Nickelodeon channels when the original Nickelodeon will do. One thing that’s been said – and bears repeating – is that distributors are looking for something non-duplicative. Having 16 music channels is clearly overkill. And being forced to take MTV Tres in order to get MTV is tantamount to being held at gunpoint.

Related: Viacom’s Bakish Touts Skinny Bundles

Earlier this year, we saw reports that Viacom is planning to narrow its focus to six key channel brands – Nickelodeon, Nick Jr., MTV, Comedy Central, BET and Spike – while shifting away from smaller brands like CMT and TV Land. What message does that send to MVPDs? Are Viacom’s other brands still viable?

We’re at a day of reckoning for the large media conglomerates who have relied on the successes of their popular networks to protect their smaller, less appealing networks. They no longer have the leverage needed to force distributors to buy their large bundles of networks. For the first time, these smaller networks must stand on their own and step out from under their parent company’s protective wings.

Before, a distributor trying to get subscribers couldn’t afford not to have the key brands like MTV, CNN, Nickelodeon, etc., so they bit the bullet and loaded up on their other channels too. That’s no longer the case. With so many other choices for entertainment, the power balance has shifted, and the MVPDs now have the upper hand. In the age of the skinny bundle, distributors are free to ignore the privileged, spoiled kids and focus on the scrappy, punk upstarts that offer the kind of content their subscribers are interested in.

The current opinion is that independent channels are in danger, that they will get lost in favor of skinny bundles. This is not necessarily true. As skinny bundles are introduced, the smaller networks that had previously secured carriage via larger network leverage will no longer have the luxury of being safe within a larger network group. Instead, the playing field has been leveled for all smaller nets – the independents and those under a larger corporate umbrella.

MVPDs should not be pressured into buying smaller nets if they want the larger nets under that same umbrella. All networks should – and soon will – prove the value of what they represent as a network. Unraveling these large network bundles into smaller, skinnier bundles will allow the independent cable network a chance to shine. In this new, free market, the indie doesn’t have to worry about competing against the smaller net that relies on its parent company. The indie can stand up against that smaller net on its own and, if the indie’s product is appealing, the indie will survive.

This unbundling is causing the smaller nets that previously had the support of their parent companies to step up their game. If they were only surviving because of their parents, they might not be long for this world. Meanwhile, the independent cable networks have been on their own and made it work. They’re at an advantage. Before, independent networks had been unable to secure as much distribution as possible simply because many of these smaller channels were taking up space. If these smaller channels go away, wouldn’t there be more opportunity for independent networks to begin to gain distribution? The demise of the smaller networks within the conglomerate portfolio could be more beneficial for independent nets.

In the past year, we’ve seen ABC Family and VH1 Classic become Freeform and MTV Classic, respectively, and go down in viewer ratings. This February, NBCUniversal announced that it would be reformatting Oxygen network with true-crime programming geared toward women. After getting dropped by AT&T’s DirecTV and U-Verse, NBCUniversal announced that it will shutter Esquire Network and relaunch it as a digital-only platform. We’ve seen ESPN2’s 19% ratings dip for parent company Disney. Syfy is down 30% for parent company NBCUniversal. USA (NBCUniversal), TNT (Turner), Discovery (Discovery Communications), History (A&E Networks), AMC (AMC Networks) and FX (Fox Entertainment Group) were all down year-to-year in viewers as well.

There are some smaller networks that have been able to grow their ratings under their parent companies: SundanceTV (AMC Networks), Logo (Viacom), Bravo (NBCUniversal), OWN (Discovery) and El Rey (Univision); but overall, ratings have been in decline. It’s a tough market.

The smaller, independent networks that never had the support of a larger parent company are already used to fighting tooth and nail to support and promote their content. They’ve always had to prove themselves. That is why you see ratings growth for indie networks like Hallmark Channel, DIY, Ovation and WGN America. If you have a product worth watching, people will show up.

Not every independent network has been so lucky. We saw what happened to Participant Media’s Pivot TV last year. While some said that Pivot was the first casualty of skinny bundling, others say that it was too niche to survive, bundling or not. If your content is not in demand, should you survive? If you don’t have a big parent company, probably not. Now, in the age of cord-cutting and cord-shaving, if you do have a big parent company, you might not either.

Liz Janneman is executive vice president, network strategy, at Ovation TV. Image by Gearstd, iStock/Getty Images.

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

Viacom has seemingly taken the first meaningful move to break up its huge programming bundle, an action pay TV providers have been dreaming of for decades.

But while a newfound focus on six core brands might eventually unshackle distributors from being forced to pay for channels their customers don’t watch, Viacom must navigate a fine line between legacy pay TV providers and emerging virtual multichannel video programming distributors (vMVPDs) for the transition to be a success.

CEO Bob Bakish said Viacom will focus on a so-called “Flagship Six” of BET, Comedy Central, MTV, Nickelodeon, Nick Jr. and Paramount. Spike TV will be rebranded as The Paramount Network in 2018. Four other brands — VH1, CMT, Logo and TV Land — have been designated as “reinforcing” networks, flanking the core six.

Viacom’s remaining 15 networks, including the likes of MTV Classic, Nicktoons and Centric, will receive less emphasis.

Bakish has stressed that the channels will not disappear. But they won’t receive the same resources as the core six.

Most analysts believe the non-core channels will eventually go away.

Programmers like Viacom and NBCUniversal — which recently shuttered its Cloo and Esquire networks — are coming to the realization that the days of reaping additional affiliate fees and ad revenue with marginal channels of essentially repurposed content are over. In the current skinny-bundle universe, less is indeed more.

Emerging virtual MVPDs, actively targeting Viacom’s core millennial audience, will play a role in the changes. Bakish said a key part of his five-point turnaround plan for Viacom will be better managing those relationships, limiting deals with over-the-top providers to its library content while supporting vMVPDs like Sling TV and DirecTV Now by embracing “their roles as catalysts of innovation.”

But Bakish also expressed a desire to deepen relationships with existing MVPDs, a move MoffettNathanson senior research analyst Michael Nathanson saw as perhaps a path to more sensible negotiations in the future. “Maybe we will also see an end to the jamming of commercial loads and SVOD deals simply to make quarterly numbers,” Nathanson wrote.

Viacom will have to carefully waIk the line between legacy MVPDs and emerging virtual MVPDs, according to one analyst.

“By creating effectively a two-tier system for its networks and potentially allowing for a smaller set to be carried on vMVPDs like Hulu puts legacy distributors at an effective disadvantage,” Barclays media analyst Kannan Venkateshwar wrote in a client note.

But the impact may be lessened, depending on how the programmer handles its “reinforcing” networks.

Credit Suisse media analyst Omar Sheikh estimated that the four reinforcing networks contribute about 15% of total revenue and cash flow, meaning that absent the other channels, Viacom would only have to grow its top 10 networks by 3.5% annually to deliver the same profit.

Viacom has some time to pull it off. The company doesn’t have any big affiliate fee renewals until fiscal year 2018, which could give it nine more months to work out the kinks, noted Telsey Advisory Group media analyst Tom Eagan.

“The question is whether Viacom can enhance the value of its brands (in ratings and engagement) before the next round of renewals,” Eagan said in a research note.

Small operators seeking insight and information on competition, continued industry consolidation and the power of Internet-protocol video can seek it this month at the National Cable Television Cooperative’s Winter Education Conference. If for no other reason, it’s in New Orleans.

The NCTC said more than 270 members have already signed up for the Feb. 20-21 gathering (more than the number that attended last year’s meeting in Phoenix). More than 200 exhibitor representatives have signed on for about 80 booths and tables.

Advanced video platforms will be the focus of this year’s meeting, a topic on the minds of every small cable operator looking for a competitive advantage.

“The focus will be emphasizing how to compete in the new video world. There are several components to it, a blend of technology, marketing and market research,” NCTC CEO Rich Fickle told The Wire, adding the co-op is in the middle of finalizing an RFP with 16 different companies for IP and advanced video technologies.

Click through to the WEC agenda.

SITTING ON AN ANDROID

“We’re looking at systems that can be used without set-top boxes and, in some cases, they can sit on top of an Android TV set-top,” Fickle said. “The choices for how cable operators serve their customers have opened up quite a bit.”

The event will also feature industry experts from Leichtman Research, CableLabs and Parks Associates, among others, addressing topics including the evolution of the U.S. video market, leveraging IP video and the connected home. The conference also offers multiple networking opportunities and a Solutions Showcase exhibit hall featuring the latest suppliers and innovators, as well as product forum presentations.

Fickle pointed to the proliferation of digital MVPDs like Sling TV, DirecTV Now, Sony PlayStation Vue and YouTube Unplugged, adding that the NCTC will unveil some market research at the WEC that will offer more insight into how consumers look at apps and the services delivered through them.

Attendees can also gauge the regulatory climate in Washington, D.C., with a Monday, Feb. 20, discussion headed by America Cable Association CEO Matt Polka. Leichtman Research president and principal analyst Bruce Leichtman will offer a look at the state of the video and broadband industries, and panel discussions from top executives at Eagle Broadband, RCN, CenturyLink, CableLabs, Cable One, Parks Associates and Buckeye Broadband will provide insight into competitive and technology issues.

Pricing and packaging of services will also be discussed, especially as skinny bundles proliferate throughout the pay TV universe.

“We have several members who have been doing different flavors of that,” Fickle said, adding that there will be panels and research released at the conference around those strategies. “It’s all about how to compete and how to drive costs down but improve the customer experience. A lot of it is done through IP, which is a different approach than we have done in the past.”

TAKING IT EASIER

Fickle added that programming contracts, which had constrained smaller operators from offering skinnier bundles, are easing up.

“The deals we’ve done over the last few years with the programmers have changed the restrictions,” Fickle said. “It’s not what everybody wants, which is, you can package anything you want, but it’s pretty comparable to what the larger MVPDs can do.”

Consolidation, a big topic when Charter Communications was pursuing Time Warner Cable — it closed the deal in May — isn’t as high on the priority list for small operators today. While there are likely some deals left to be done, Fickle said the emphasis is on cooperation.

“There are efforts underway to find ways for smaller operators to either partner up with some of the larger companies or band together even tighter to replicate some of the same capabilities, working together as a cooperative group of entities,” Fickle said. “Some of that needs to happen. I don’t think it’s something to panic about. Probably in the next five years it needs to be pursued in earnest.”

Elsewhere...

Mr. Wheeler’s Tweets Offer Pointed Words

Former Federal Communications Commission chairman Tom Wheeler didn’t take long to signal he would be a vocal critic of the new Trump administration, both at the White House and at the agency.

After tweeting “Congratulations Chairman Pai” on Jan. 20 — when Wheeler exited the FCC — by Feb. 1 he was taking aim at Pai’s decision to take the set-top box rule out of circulation. Wheeler had kept it in front of the commissioners for a possible vote, though that was highly unlikely to come from either Pai or his fellow Republican, Michael O’Rielly, who both opposed the revamp.

Wheeler and Pai had what often appeared to be a rocky relationship, exhibiting at times a strained courtesy at meetings, sparring in Hill hearings, and clearly at loggerheads over key policy and process issues.

On Jan. 31, after Pai pulled the set-top revamp item (a Wheeler centerpiece), and the day Pai presided over his first public meeting, Wheeler’s tone shifted as he took aim at both Pai and the cable industry — the latter a familiar target.

“Removing set-top box rule victory for Cable-wood over consumers,” Wheeler tweeted (Hollywood studios joined ISPs in pushing back on the set-top item), adding: “$200 million Pai Tax on helpless cable subs. Trump helping little guy??”

The chairman’s office had no comment. The Wire’s comment: Ouch!

— John Eggerton

Related >Making the Right Moves: Distributors Strategize in a New Era of Programming

You could say Verizon Fios started the hubbub around skinny bundles with its April 2015 launch of Custom TV, the first slimmed-down video package offered by a major multichannel video programming distributor.

But Verizon executive director of content strategy and acquisition Ben Grad, who was in on Custom TV from the beginning, would wonder what all the excitement was about. To him, coming up with what has triggered a flurry of skinny bundle packages from other distributors was just a simple case of giving the people what they want.

“We were listening to our consumers and what we believed our customers were interested in,” Grad said. “We built Custom TV to match their interest and needs.”

While some programmers took exception — ESPN sued Verizon, saying the package, which allowed customers to buy the network as part of a separate sports tier that included Fox Sports for $10 per month — they calmed down later after their networks were included in one of the two new Custom TV plans. Verizon said that after that modification, take rates for the package soared.

Related >Mediacom's Italia Commisso Weinand: Tough but Fair

While Custom TV may not be as skinny as it once was, Verizon has other innovations up its sleeve. Last year it launched go90, a free short-form video service, and CEO Lowell McAdam has said that “mobility” is the future for the video business. None of that seems to phase Grad, who along with the rest of the Verizon programming team will continue to hammer out deals.

That could mean content agreements for other parts of the company — Verizon purchased AOL in 2015 for $4 billion ,and is in the process of completing a $4 billion buy of Internet search engine Yahoo!.

“The biggest priority for us is leveraging our content relationships to offer growth across the company, not just the 5 million Fios customers or the 102 million Verizon wireless customers,” Grad said.

Grad and the rest of the team will have to do that without one of the best minds in programming, former vice president of content strategy and acquisition Terry Denson, who left Verizon in June. Denson, a former cable executive with Insight Communications, had joined Verizon in 2004 and wasn’t afraid to rattle some cages. Custom TV was developed on his watch; he was one of the first programming executives to say carriage deals should be tied to ratings; and he implemented one of the industry’s first regional sports network surcharges.

Related >Cox's Andrew Albert: Engineers on Board

No replacement has been named for Denson, and Grad said he and the Verizon programming team are continuing as they always had. The innovation pipeline is still humming with the customer in mind, he added.

“Ultimately I don’t know if there is a one-size-fits-all approach for consumers,” Grad said. “Some consumers are happy with the traditional bundle and some consumers are looking for something more like what we have with Custom TV. I think some consumers are looking at the proliferation of direct-to-consumer offerings, and they’re building their own bundle but going with traditional broadband. [And] we see things like 5G on the horizon; that opens up some additional options for consumers.”

CenturyLink shed more light on its over-the-top video plans, noting Wednesday on its Q2 call that those coming products will feature “skinny” bundles that include the local broadcast TV networks.

CenturyLink has been conducting a small OTT pilot under the Prism Stream brand, but plans to move ahead soon on “more robust trial,” Glen Post, president and CEO of CenturyLink, said on the earnings call.

Post said those skinny bundles, delivered to connected devices via an app, will include the broadcast networks, “which is a little different from a lot of…the offers that are out there today. We think that will be a differentiator as we bring those local channels with the over-the-top cable channels.”

That bigger pilot, slated for launch toward the end of 2016, aims to “really test the market in terms of pricing” and to penetrate areas that complement CenturyLink’s more traditional Prism TV offering, added Dean Douglas, the company’s president of sales and marketing.

CenturyLink is cutting separate distribution deals for the OTT product. Programming deals for CenturyLink’s Prism TV service are purchased through the telco’s partnership with the National Cable Television Cooperative (NCTC), a group that cuts programming and technology deals for an array of largely independent MVPDs.

“They key for getting the skinny bundles to work is having the right level of programming agreements in place,” Aamir Hussain, CenturyLink EVP and CTO, explained. “When we launch our TV over-the-top offering, that offering [is based on] new agreements with the broadcasters. And those agreements are not bound by any caps or by franchise agreements. So these are non-franchise-type agreements. They allow us to pretty much have a nationwide reach.”

Hussain also stressed that CenturyLink’s core skinny packages will be complemented with access to multiple genre-based packages. “That will have a very, very positive impact on our ARPU at a cost point, which makes sense for the consumer,” he said.

CenturyLink is just one of several service providers that plans to launch or has launched OTT services. Dish Network has Sling TV, and today announced new skinny-focused options under the “Flex Pack” brand for its satellite TV platform. AT&T, meanwhile, is preparing to launch a set of DirecTV-branded OTT services in the fourth quarter. Comcast has argued that the economics of an OTT service don’t add up. But the MSO will have an indirect line into the OTT arena as Hulu, which is partly owned by Comcast, prepares to launch a live streaming TV service early next year.

CenturyLink will use OTT to deliver video services outside its traditional footprint. Today, CenturyLink is bundling DirecTV where it does not offer Prism TV.

CenturyLink ended Q2 with 311,000 Prism TV subs, up from 258,000 in the year-ago quarter. It has launched Prism TV in markets such as Minneapolis/St. Paul; Seattle; La Crosse and Platteville, Wis.; Columbia and Jefferson City, Mo.; Tallahassee and central and  southwest Florida;  Las Vegas; central N.C.; Phoenix; Omaha, Neb.; Denver and Colorado Springs, Colo.; Portland;  and Salt Lake City.

CenturyLink dropped 65,000 broadband subs in Q2, ending the period with 5.99 million.

Post said broadband numbers dropped in part to a focus on acquiring “higher-value bundled customers and less emphasis on standalone broadband customers.”  

He said a “significant percentage of the churn” came from standalone broadband customers that are “less loyal than our traditional bundled customers.”

On the financial end, CenturyLink posted revenues of $4.4 billion, down from $4.42 billion in the year-ago quarter, alongside net income of $196 million (36 cents per share), up from $143 million/26 cents.

The company expects Q3 revenues of $4.35 billion to $4.4 billion, and earnings of 52 cents to 57 cents per share. 

Bucking a trend amplified by a small but growing cord-cutting trend and the popularity of over-the-top video options, Comcast just came off a first quarter in which the MSO added 53,000 subscribers, its best first-quarter video result in nine years.

While a portion of the credit goes to X1, Comcast’s Internet protocol-capable next-generation video offering, those results are due to a confluence of efforts and initiatives that span not just the core product but also areas such as improved customer care, according to Matt Strauss, Comcast Cable’s executive vice president and general manager, video services.

Multichannel News technology editor and Next TV editor Jeff Baumgartner recently caught up with Strauss to discuss Comcast’s new video products and strategies involving X1, TV Everywhere, its new IP-delivered “Stream” product, and future 4K plans.

Editor's Note: An expanded version of this interview will appear in Multichannel News’s show dailies at this week’s INTX show in Boston.

MCN:As you look at the second half of the year, what are your top priorities?

Matt Strauss: We’re really focused first and foremost on continuing to execute against the deployment of X1. We’re seeing a lot of very positive benefits from X1, both on the churn and on the increased consumption side. We’re now at about 35% penetrated, and it’s even higher if you just look at triple-play subs — about 50% of our triple-play subscribers now have X1.

What goes hand in hand with that is that we also want to finish out the deployment of our cloud infrastructure. We’ve been deploying cloud across our footprint — both cloud streaming and cloud DVR — and we are very close to getting 100% deployment. We want to finish that up by the middle to end of this year.

Finally, we want to continue the penetration and usage of our products and services. We’ve got a very ambitious deployment for our new consolidated Xfinity app. With the upcoming Olympics [in Rio] we want to use that as an opportunity to shine a light on this new application, which we think is a tremendous value to our customers.

Related:INTX 2016: Comcast's Roberts Says No Plans to Take Pay TV Over-the-Top

MCN:With respect to the pay TV momentum, how much credit does X1 get, even as you continue to improve other areas like customer care and customer experience?

MS: It certainly is contributing. When you look at X1, we’re seeing improvements in churn. X1 customers are also consuming more video. They also have a higher attachment rate to DVRs and typically they take additional outlets in their home. There’s no doubt that X1 is contributing, but I don’t know if there’s any one silver bullet.

When it comes to growing the video business, it’s really a combination of several factors and investments that we’ve been making over the past few years, in how we’ve been improving our infrastructure, moving more to IP.

MCN:What kind of usage patterns are you seeing with the Xfinity TV app? Is the big challenge getting the message out to customers so they understand the app’s full capability?

MS: I’d almost characterize it as we’re in a moment in time because we have the Xfinity TV in-home app and we have our Xfinity TV Go app. We are in the process of consolidating those into just one app, which will be the Xfinity TV app. This unification … will provide this unprecedented access to content both in the home and out of the home. And I think those lines are going to continue to get more and more blurred.

When you look at the usage of our app in general, we have about 42% penetration of our mobile app among our double-play customers on a monthly basis. On a quarterly basis, it’s almost 60% who are using one of our apps, and that’s up about 16% year-over-year.

Related:CEO Roberts: Comcast, X1 Ready for Olympics

MCN:What’s next for Comcast with respect to 4K? You’ve got the app for Samsung TVs but we’ve seen some recent reports that you’ll really be focusing more on a strategy that puts an emphasis on High Dynamic Range (HDR)?

MS: While there’s hyper-attention on 4K, when we look at the total video experience, we think 4K is part of the offering. But HDR, which is not necessarily getting the same amount of attention, is in many ways more immersive and, we think, impactful.

Instead of deploying maybe a half-baked solution, which we’re starting to see a little bit of in the market, we thought it was more prudent to deliver the complete experience … and that’s what’s being developed with our Xi6 box, which we’ll be testing this year, but it’s going to really be deployed next year.

MCN:The video market continues to be abuzz about skinny TV bundles. Comcast has been going after that segment with the Stream TV product in some select markets. What have you learned so far, and what’s next on the rollout plan?

MS: In many ways X1, we think, is satisfying the demand for how many of us watch television. The average person watches about 130 hours of video every month.

But there are changes in how other segments are consuming video. When we look at skinny bundles, we believe that they are in some ways a manifestation of the economy as anything else. It’s rare that you hear someone say that they want fewer choices. What’s more likely is that you might hear someone say they want to pay less.

We have been experimenting with skinny bundles and experimenting with ensuring we’re getting the right product to the right customer at the right time in their life, whether that’s Internet Plus or the Xfinity On Campus product, or Stream.

While Stream is, at the moment, comprised of a skinny bundle, the strategies behind Stream are much more around how we’re going to transform the overall end-to-end customer experience, and Stream is just one example of how we are expanding into that terrain.

NEW YORK — Hulu is the latest media company to reveal plans to offer a “skinny bundle” of live cable and broadcast network feeds to stream over the Internet. Hulu CEO Mike Hopkins announced the proposed streaming service last week by emphasizing that subscribers to the package will be able to enjoy “live sports, news and events in real time without a traditional cable or satellite subscription.”

Hopkins’s emphasis on live event programming is important. While offering a slimmed down package of entertainment-themed programming will have its appeal for young millennials and cord-cutters who want to slice their cable bill, Hulu seems to believe that in order to gain broad appeal these bundles must offer a good helping of live sports and news content — arguably the last vestige of must-see TV for today’s binge-watching, delayed-viewing consumers.

A quick look at recent ratings trends shows how appealing and valuable live event programming is. During the first quarter, sports and news programming comprised nine of the top 15 most watched shows during the period. (AMC’s The Walking Dead held the remaining spots.)

Also fans are streaming more live events — sports content in particular — via the Web, as such events become more available. CBS Sports’ live stream of Super Bowl 50 consumed more than 402 million total minutes on mobile devices on Feb. 7. The National Basketball Association’s NBA League Pass out-of-market offering scored a record 27 million video views and 1.2 billion total minutes of viewing during the 2015-16 regular season — including, for the first time, single-game sales.

On the live news side, Fox News Channel, CNN and MSNBC have benefited greatly from the contentious and unprecedented presidential campaign. Fox News was the most watched network on cable in primetime during the first quarter of 2016, posting a 37% increase over the same period a year ago, followed closely by ESPN. CNN posted a whopping 162% primetime increase to finish among the top 10 most watched networks, while MSNBC was up 65% year to year, according to Nielsen.

Not all distributors are convinced that live sports and news programming is vital to a basic skinny bundle package, particularly given the high price of sports networks. Verizon recently released its monthly $55 Custom TV package featuring 45 entertainment channels, but not ESPN, FS1, Fox News Channel or MSNBC. Verizon Custom TV subscribers would need to add a “sports channel” package and a “news and info” package to get those networks.

As more distributors explore skinnybundle offerings — and as more cable and broadcast networks wrestle with the idea of a “less is more” bundled world — a workable structure that benefits all parties will eventually emerge. If it looks anything like what Hulu is proposing, it will hit the field running with live sports and news programming.

CBS chief operating officer Joseph Ianniello said the broadcaster expects $2.5 billion in retransmission consent and reverse compensation revenue by 2020, a $500 million increase from its previous forecasts.

Ianniello, speaking at CBS’ Investor Day in New York, added that the broadcaster believes it can generate $800 million in additional revenue over the next five years from its Showtime OTT and CBS All Access over the top services.

Ianniello said the retrans increase is a direct result of CBS’ ability to receive fair compensation for its broadcast content and for out of home rights. He added that the figure includes less than $3 per month per subscriber in retrans revenue, less than $2 per month per subscriber from reverse compensation from affiliates.

Ianniello added that the $800 million in expected OTT revenue will be split evenly between its Showtime OTT service and CBS All Access. For Showtime to achieve $400 million in revenue, it would need to add about 4 million incremental subscribers over the five-year period, which he said is achievable, given the 90 million U.S. homes that don’t subscribe to the premium channel. Reaching that revenue level would require the channel capture about 5% of that universe. He added that Showtime’s linear service already has about 20% penetration.

For CBS All Access, Ianniello said the network receives about $5 per month in revenue per subscriber from the monthly fee for the service and another $3.50 per month per subscriber in advertising revenue. Reaching the $400 million revenue goal would mean attracting another 4 million customers, which Ianniello again said was easily achievable.

The two revenue sources are part of CBS’ Four Pillars of Growth for the next five years – the other two are international syndication and revenue from skinny bundle providers. Ianniello said the network could attract $800 million from international in the period and another $450 million from skinny bundle providers.

In a question and answer session with analysts after the presentations, CBS CEO Les Moonves addressed speculation that the broadcaster was interested in buying rival premium network Starz by saying that he looks at every deal.

“I think the answer is we look at everything,” Moonves said. “Every name of every company that is for sale, we’ve looked at it.  But there is nothing we are going to do that won’t make total sense for us. Joe [Ianniello] and his team are looking at every deal that comes down the pike, but we haven’t done anything in a long time.”

CBS CEO Les Moonves said the broadcast network is “essential” to any programming package – full, skinny or otherwise – adding that the company is also catering to viewers that want smaller video packages, offering pair of online services that are geared toward younger audiences.

At its Investor Day in New York, Moonves said that CBS offers the best of all worlds – its leadership among broadcasters (he said the broadcast network will win this season, making it the 13th time in 14 years it has been the top ranked network – and its CBS All Access and Showtime OTT offerings provide a lower-cost alternative to more expensive programming offerings.

“CBS is essential to any skinny bundle,” Moonves said, adding that the network gets higher fees when it is included in smaller packages like CBS All Access, for which it charges $5.99 per month. “Any way you want CBS – large bundle, small bundle, OTT – CBS is there.”  

To keep the CBS All Access package increasingly relevant, Moonves said the service will offer its first original show in January, a reboot of the Star Trek series. The goal, he said, is to offer three to four new original shows each year on the All Access platform.

Moonves announced earlier that CBS is exploring strategic alternatives for its CBS Radio Group to unlock the value of the assets, which could mean either a sale or a spinoff. The company spun-off its outdoor advertising business in 2014. He offered little detail on the company’s plans, only that whatever it decides to do will be right for shareholders and the business.   

At Showtime OTT, Showtime CEO David Nevins said the service is more popular than the company ever imagined, although he did not offer any subscriber figures. But he did say that Showtime OTT has a huge potential audience in the 13 million broadband-only and 75 million pay TV homes across the country that don’t subscribe to Showtime.

CBS chairman and CEO Les Moonves said the broadcaster is considering a lower-priced package of its CBS All Access online service and its standalone Showtime offering for consumers, adding that while so-called skinny bundles haven’t quite caught on with consumers, they are “inevitable.”

Moonves, speaking at the Deutsche Bank Technology, Media & Telecom conference in Palm Beach, Fla., said the company was mulling an offering that would offer both services at a discount to their current pricing. He gave no further details.

 CBS launched All-Access in October 2014, with shows from its content library as well as live network programming in cities where it owns and operates TV stations, for about $5.99 per month. The service has since expanded its live capabilities to include several network affiliates across the country. Moonves said that the network is negotiating with the National Football League to allow NFL games on the service in the future. The networks also is considering an ad-free version of the service – for an additional $4 per month and has been developing original programming for the service, including a new version of Star Trek scheduled for a January 2017 debut. 

Showtime launched its standalone online service in July for $10.99 per month. 

Moonves said while CBS All Access has been successful, “we haven’t pulled out all of the stops.”

“Next year it’s going to add substantially to our bottom line,” he added, especially in 2017 when it launches the Star Trek series, which he said is expected to be an “extraordinary success.”

Moonves didn’t say when the All-Access/Showtime combo would be available. But he did say that consumers are demanding more flexibility in programming packaging and eventually a provider will touch on the right combination of shows and pricing.

“Someone’s going to figure out how to do this and how to give people what they want to watch and it’s not for $100 a month, it will be for $35 or $39 dollars a month where you’ll really get the 12 to 15 or 18 channels that you care about. And not get the karate channel for 25 cents a month,” Moonves said. “That doesn’t make sense anymore.”  

Moonves also said that the consolidation wave among distributors won’t have any impact on CBS’ ability to extract retransmission consent fees. He added that while some disputes get a lot of attention, the vast majority of deals are done quietly.  

“What we have is something they [distributors] need,” Moonves said. “Our content makes them money, they make us money. They pay a fair price for our product. I think the system works really, really well.”

Washington -- “Everyone seems hell-bent on making sure the bundle persists, [but] we cannot continue to raise prices. That is what will eventually break the bundle,” said Michael Morrison, director of Fioptics Service at Cincinnati Bell, which will launch its “Fioptics MyTV” skinny bundles of video service on Monday, March 7.

“We would rather go to broadband, a much higher-margin product,” he added. “We want to offer those choices.”

Speaking on a panel about “The New Age of Video Consumption” during the American Cable Association Summit in Washington, Morrison explained that the company’s biggest challenge was determining channels that viewers want to see, even if they are not the most popular channels nationwide. 

RELATED STORY: "Cincinnati Bell Rings Up Slimmed-Down TV Packages"

“Being able to let a customer slim down their entertainment options is very important. This is something they want. We’re taking our first step,” Morrison said.

MyTV will supplement Cincinnati Bell’s current video service, which serves 115,000 customers, overbuilding the Time Warner Cable system in the market. When queried by Multichannel News, Morrison declined to predict the take-up of the new service.

MyTV will offer viewer-selected tiers will start with a $35.99 per month Starter Package ($29.99 for the foundation subscription plus $6 for one genre bundle), which will include about 100 channels. This core package includes local channels, as well as cable channels including AMC, Discovery Channel and HGTV.

Morrison said that during consumer testing, 80% of potential subscribers liked the skinny bundle options and pricing, compared to about 25% who like current pricing and structural formats. “We have good options versus Time Warner,” Morrison said, noting that MyTV is carried on the 1 Gbps network that Cincinnati Bell has built during the past eight years. 

“We hope that with the MyTV launch, it will make the entertainment more valuable,” he added. “If you look at what we’re doing, we know that we’re paying more for the packages [than bigger MSOs]. It forces us to be more creative to find new ways to package [channels].”

Morrison’s enthusiastic outlook about MyTV and skinny bundles was part of ACA’s dialogue about the migration of cable operations away from traditional video delivery.

Gene Kimmelman, CEO of Public Knowledge, on the same panel, focused on the ability of new technologies to delivery new services.

“The danger is that the traditional players are continuing to duke it out under old rules and [hence] may be left behind,” he said.

Sandy Brown, CEO of ONE World Sports Network, predicted, “As we look at where this will head, there will always be a place for the bundle.” But he acknowledged that “the OTT market is not as it will be in a year or two.” 

Asked about the role of Comcast’s X1 platform and other access concepts, Morrison said that he expects future licensing deals will generate new kinds of program options.

“Whether it’s provided by X1, TiVo or the Roku box, if a customer has one platform, that’s the best experience for the customer.” He said that he expects “three to five years from now, most of our experiences will be through an app.”

And he emphasized that, “High quality content will continue, whether it’s over the top or [via] a traditional bundle.”

FiOS TV, which shook up the pay TV universe last year with the introduction of Custom TV, a skinny bundle without sports juggernaut ESPN, has revamped that offering, introducing a new Custom TV package – Sports & More – that includes the Worldwide Sports Leader for the same price.

Custom TV subscribers still have the option of selecting a sports-free package -- which FiOS is calling Custom TV Essentials. The difference is now they also have the choice of  selecting an option that includes sports channels -- Custom TV Sports & More -- for the same monthly price. 

ESPN had chafed at being left out of the original Custom TV package, and even went as far as suing Verizon over breach of contract, but that suit never seemed to move forward.

But dropping ESPN from Custom TV seemed to fuel speculation that the once must-have cable network was losing steam, which was exacerbated by Nielsen data that showed the channel had lost about 3 million subscribers in 2015.

Disney chairman and CEO Bob Iger hinted that ESPN had worked out a deal with Verizon on the media giant’s fiscal first quarter conference call, adding that the sports channel was in talks with several skinny bundle and OTT service providers. While Iger and other content and distribution CEOs have pointed out that fatter bundles still appear to be the most popular with viewers, ESPN seemed pleased with its addition to the Custom TV tier.

“We are encouraged by the changes that Verizon has made to Custom TV," ESPN said in a statement. "We expect the vast majority of Verizon subscribers to continue to get ESPN as part of their Extreme HD or Preferred HD package and we welcome the opportunity for additional subscribers to enjoy ESPN and ESPN2 as part of the new entry-level Custom TV offering."

After all the hype, Verizon said it will introduce new Custom TV bundles this Sunday (Feb. 21) aimed at appealing to a broader range of customers, adding that the new packages are designed with the same goal as the original: “to give customers the flexibility and choice to only pay for the types of channels they want and not the ones they don’t.”

The new plans are:

Custom TV – Essentials: Including about 75 channels such as Discovery Channel, Lifetime, History, Bravo, Fox News, Nickelodeon, MSNBC, CNN, Hallmark Channel, FX, Food Network, Disney Channel, MTV, Spike, USA and Turner Classic Movies.

Custom TV – Sports & More: All the regional sports channels in the customer’s service area, as well as about 55 channels such as ESPN, ESPN2, ESPNU, Fox Sports 1, NBC Sports Network, the NFL Network, and non-sports channels including Cartoon Network, CNBC, Syfy and TNT.

After choosing their plan, customers can enhance their channel lineup by selecting up to three additional, genre-based add-on packs for only $6 each – Movie Lovers Pack, Kids Teens & Family Pack, and the Global Sports Pack.

Custom TV customers will also receive the Fios TV Local package, which includes the customer’s local broadcast channels and other local programming.

“For many customers, less is more – they would rather pay less and get more of the content they are actually interested in,” said Verizon Consumer and Mass Business Group president Tami Erwin in a statement. “The original Custom TV has proven very popular since we launched it last year, and we’ve incorporated our customers’ feedback to make the next generation of Custom TV even better with a simpler choice and a much wider variety of channels available.”

Custom TV triple plays with Fios Digital Voice and Fios Internet with symmetrical upload and download speeds of 100 megabits per second, start at $69.99 per month online. Standalone versions of both packages are prices at about $54.99 per month each.

Customers that want the most content can also still purchase Verizon’s more traditional Fios TV plans such as Preferred HD, Extreme HD or Ultimate HD.

ESPN is in talks with Dish Network and other distributors about joining slimmed-down pay TV bundles, including some that are delivered over-the-top, ESPN president John Skipper said Wednesday at Re/code’s annual Code/Mediaconference in Dana Point, Calif.

ESPN is already being distributed by Sling TV, Dish Network’s OTT-TV service for cord-cutters, and is apparently looking to broaden its opportunities as it seeks new ways to be part of slimmed-down programming packages. Those discussions could lead to more digital distribution opportunities for ESPN. .

“A number of people have expressed interest and we’re in discussions with a large number of people,” Skipper said. “I think other people will enter into some markets with lighter packages in this calendar year,” he added, but didn’t elaborate on who those new, potential partners are.

Among the possibilities, Apple’s been pursuing deals for a national OTT TV service focused on skinny packages that include the major broadcast TV networks but that service has reportedly been bogged down in carriage talks.  Amazon, meanwhile, has shown interest in becoming a virtual MVPD, and now sells standalone access to Showtime and Starz and other services to Prime members via its new Streaming Partners Program.

As for Sling TV, that service “has brought in new people to the pay TV universe…and ESPN is a driver of that package,” Skipper said.  “We plan to discuss bringing in new packages with other providers.”

Skipper also reiterated that ESPN still has no interest in being sold on a standalone basis – something that HBO and Showtime are now doing on the premium end of the pay TV market – but would rather continue to be included in bundles that include other Disney-owned channels.

“We can sell ESPN as a standalone product, but we do not believe it right now to be good business," Skipper said. “There are lots of people who want ESPN, and it’s our task to figure out how to get packages to ESPN that work for them.”

With the Super Bowl 50 faceoff between the Denver Broncos and the Carolina Panthers just days away, football fans are gearing up for the big game. The most ardent ones will dole out thousands of dollars for a coveted seat at Levi’s Stadium. Most viewers, though, will tune in from their living rooms.

In today’s evolved content-consumption world, sports are one of the last vestiges of live content viewing. Apart from sporting events and the occasional awards show, today’s consumers dictate both consumption time and method. Whether recording programming on a cable box, watching on-demand or turning to a streaming service like Netflix or Hulu, appointment viewing programs are a relic of a bygone era. Sports, and by extension sports viewing, is unique, as it inspires a sense of community and cameraderie — whether in-person or via social media — and the conduit for this shared experience is watching in real-time, usually through traditional TV networks. However, as the ways viewers consume content continue to evolve, Super Bowl 60 in 2026 could see viewers tuning in in a variety of new ways.

The popularity of streaming services has ushered in the era of “cord cutters,” or viewers who don’t subscribe to a traditional cable package. While cord-cutting can be an enticing solution for many, especially millennials, sports content is often an element that keeps viewers tied to a cable subscription, as most streaming services don’t offer many options for sports content viewing. However, more and more consumers are demanding choices when it comes to sports viewing on the go.

To meet ever changing consumer demand, both traditional TV-networks and OTT providers have an opportunity to create or further their market dominance by innovating when it comes to personalized options and channel dissemination.

Introduce the skinny bundle: Today’s consumers not only want a personalized content-consumption experience, they’ve come to expect it. Skinny bundles offer more customized content packages that match viewing preferences. They aff ord cable operators the steady revenue and consumer relationship of a modern subscription, but packaged in a way that’s more attractive to consumers. Individual networks and streaming services have already begun to explore potential customizable bundles. For example, Sling TV has an entire sports tier that allows fans to follow their favorite teams for a fraction of the cost of a traditional cable package.

Enable cross-channel viewing: While many sports fans still want the big-screen HDTV experience in their living room, fans increasingly seek out methods to watch games on the go. Cable operators have an opportunity to weave multichannel viewing into traditional cable packages — for example, making tablet and mobile streaming standard as part of a consumer’s subscription offerings.

When it comes to the future of sports viewing, TV networks have the upper hand. They are the only ones, at least right now, willing and able to commit to multibillion-dollar TV contracts with sports leagues.

To avoid a fumble in fending off the threat from streaming and keep tomorrow’s sports fans engaged, cable operators must innovate with personalized offerings and multichannel viewing.

Brice Clinton is senior sales engineer at CSG International in Englewood, Colo.

After a year dominated by news of a rise in pay TV subscriber losses, the emergence of “skinny bundles,” falling ratings for programmers and the continued consolidation of cable distribution, several top analysts said they believe 2016 will be a year when the media business begins to sort out its top priorities.

Telsey Advisory Group media analyst Tom Eagan believes ratings measurement — especially Nielsen’s release of its Total Audience Measurement product — could be a game-changer by offering accurate viewer data across content platforms. Falling ratings have hammered networks across the board as younger viewers move to mobile devices to watch content. With the ability to track those viewers, Total Audience Measurement could change that.

“Maybe we’ll see ratings be flat to up in 2016,” Eagan said. “We’ll know some of that when they roll this [Total Audience Measurement] out and when we see negotiations start in earnest for the upfronts in April. We may actually see a slowing down of the ratings declines, which have been occurring for the past three or four years.”

Being able to accurately measure viewing across all platforms and devices will be the final nail in the coffin for the old media business model, Eagan added.

“The old media model on the content side, which was roll out as many cable networks as you can because you’re going to get affiliate fees, is no longer the model,” he said. “You don’t want to have any weak links in your media stable.”

THE DISTRIBUTION DEALS

Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said obtaining regulatory approval for the biggest merger deals of the year — Charter- Time Warner Cable and Altice’s purchases of Cablevision Systems and Suddenlink Communications — will be the top stories of 2016, but for a different reason than most suspect.

Wlodarczak said the industry will watch the Altice deals closely on the cost synergy fronts. Altice has said it believes it can squeeze $900 million in costs from Cablevision and another $215 million from Suddenlink, figures some analysts have said are too high. (The Federal Communications Commission gave the nod to Altice’s Suddenlink acquisition on Dec. 18.)

“If they do have the magic cost-cutting bullet, then others in the industry can implement the same strategies to boost EBITDA [earnings before interest, taxes, depreciation and amortization] margins,” Wlodarczak said.

As far as Charter, Wlodarczak said cable operators will be watching closely to see if bringing CEO Tom Rutledge’s business strategies to the combined entity will eventually drive low double-digit cash flow growth in 2017 and beyond.

The emergence of skinny bundles — smaller programming packages for cheaper prices — also made a big splash this year, with Verizon Communications’s FiOS TV Custom TV package, and are expected to continue to be news in 2016. FiOS Custom TV includes 45 channels — minus ESPN — for $54.95 per month initially, stepping up to $84.95 per month after a year. Subscribers also can choose from other programming packages, grouped by genres like Lifestyle, Entertainment, News & Info, Pop Culture, Kids and Sports, for an additional $10 per month.

Skinny bundles caused a bit of a stir at first — ESPN sued Verizon over dropping it from the Custom TV lineup — but haven’t really taken hold yet, mainly because existing programming contracts make it hard for distributors to break up the existing “fat” bundle. And several cable CEOs have said customers may come in inquiring about skinny packages, but the vast majority end up taking the full product suite.

Still, some over-the-top services like Dish Network’s Sling TV, which offers about 23 networks (including ESPN) for $20 per month in a single stream, have claimed success. Others, like Verizon’s go90 mobile-only service and Sony’s PlayStation Vue, are still searching for a market.

Eagan said skinny bundles could end up diluting demand for OTT.

CORD-CUTTING, SHAVING

Subscribing to skinny bundles “is the same as cord-shaving, but it’s voluntary cord-shaving,” Eagan said. “I think it will help offset the popularity of some of the OTT bundles.”

The emergence of more OTT players coincided with an acceleration in cord-cutting in Q2 and Q3, but cable operators were largely spared, due mainly to cable’s dominance in the broadband arena.

The rollout of DOCSIS 3.1, expected in the second half of the year and offering cable customers 1 Gigabit-per-second to 10-Gbps speeds, should help solidify that dominance, Wlodarczak added.

With cord-cutting not as big a concern for cable operators, MoffettNathanson principal and senior media analyst Craig Moffett said he believes the biggest overhang on the stocks will be the fear that Comcast or other operators will participate in the upcoming federal spectrum auctions as buyers.

“In the past, dalliances with wireless have been a significant negative for the stock, and we suspect some of the recent weakness in the shares owes to fears of reckless spending on either spectrum itself or on a network thereafter,” Moffett wrote, adding that it “is honestly not something we worry too much about.”

Apple believes the future of TV is apps, but it’s increasingly apparent that it will be awhile before a pay TV app from Apple becomes a significant part of that future.

Apple’s plan to create a slimmed-down pay TV package with nation-wide access has been rumored to be delayed time and time again, but a Bloomberg report splashes a new coat of paint on those strained efforts with word that Apple has put the plan on the backburner again because of continued difficulties coming to terms with programmers, which want more than what Apple’s currently willing to pay.

Apple, which is said to want to offer a small package of channels for $30 to $40 per month, “is instead focusing on being a platform for media companies to sell directly to customers through its App Store,” Bloomberg said, citing an unnamed person with knowledge of the situation.

That strategy would seemingly come into play on the heels of the new Apple TV, a streaming device outfitted with a new operating system that will enable the platform to support multitudes of apps, including those from TV programmers and TV distributors. Apple will need to develop this plan amid heated competition from Roku, which has had some success building partnerships with MVPDs, and Amazon, which has begun to bundle subscription video services with Prime, a move that makes the online retailer start to take on MVPD-like attributes.

While Apple’s over-the-top pay TV plan has long been the subject of rumors, CBS CEO Les Moonves added some significant weight to what the CE giant had in mind on Tuesday when he made comments at a Business Insider Ignition conference in New York that the initiative is in a holding pattern.

“They’ve had conversations on it and I think they pressed the hold button,” Moonves said, according to Bloomberg. “They were looking for a service.”

Moonves, though, was upbeat about the prospects of skinny bundles and offered some thoughts on what Apple wants to accomplish. “This will happen,” the CBS exec said. “It has four major networks and 10 cable networks, let’s say, and the price point will be in the $30s, $30 to $35, $40 maybe. People will not be spending money on channels they don’t want to watch."

Bloomberg’s report is just another chapter in Apple’s long-stalled pay TV efforts. Reports surfaced earlier that Apple pushed any launch plans to sometime in 2016 due to ongoing snags in its talks with programmers. 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 its own next-gen platform, X1.

Stream TV, Comcast’s mobile-first IPTV service for cord-cutters, launched Thursday in Chicago, a move that follows the service’s debut earlier this month in the Greater Boston region, which includes eastern Massachusetts, New Hampshire and Maine.

The no-contract, $15 per month service, targeted to broadband-only customers, features the major broadcast networks, HBO, access to “thousands” of VOD titles and the MSO’s Cloud DVR service. Comcast has plans to make Stream TV available across its footprint by early next year. The service FAQ notes that the new service is also available in select areas of Indiana and Michigan. Comcast has previously identified Seattle among cities that will get Stream TV in the early phases of the rollout.

The Cloud DVR component of Stream TV lets subs record up to two shows at once and holds 100 GB of storage (about enough for 20 hours of HD programming). Stream TV subs can watch on up to two devices at the same time.

Stream TV, delivered to the home on Comcast managed IP network, supports Web browsers, smartphones and tablets via the Xfinity TV app. Using their credentials, Stream TV subs can view some programming from ABC, Fox and HBO (via their respective apps) on connected TV devices such as Roku players, Apple TV boxes, the Amazon Fire TV, gaming consoles and via the Chromecast streaming adapter.

Update: Comcast's FAQ also reiterates that the in-home Stream TV service is exempt from the MSO's monthly Internet data usage allowance policies, which have recently been expanded to several markets, though not yet in Chicago or Boston. "Stream TV is a cable streaming service delivered over Comcast's cable system, not over the Internet. Therefore, Stream TV data usage will not be counted towards your XFINITY Internet monthly data usage," the MSO notes.

This approach came up with Comcast's original Xfinity TV app for the Xbox 360 (Comcast recently discontinued that app), which was also delivered over separately managed IP capacity, and not "over-the-top," meaning that the traffic did not co-mingle with spectrum and capacity set aside for the MSO's high-speed Internet service. Comcast has also been careful not to label Stream TV as an OTT service. However, the same can't be said for TV Everywhere apps that Stream TV subs can access in or out of the home.  

Comcast introduced Stream TV in July, and is launching it as it continues to improve its video sub losses. It shed 48,000 video subs, nearly half the 81,000 it lost in the prior year period and marking its best Q3 in nine years.

While Stream TV allows Comcast to target a different set of consumers, the MSO’s primary video focus is on X1, it next-gen video offering. “X1 has been transformative for us,”  Matt Strauss, Comcast Cable’s EVP and GM of video services said last week at the Wells Fargo Tech, Media & Telecom conference in New York. He said  VOD usage on X1 is 45% higher than on Comcast’s legacy video platform. About 25% of Comcast’s video sub base is now on X1.

Strauss acknowledged that Comcast must be careful not to cannibalize its base video offerings with slimmed –down offerings like Stream TV and Internet Plus.

“You have to monitor that very, very closely,” he said. “This isn’t about putting things in the market to get consumers to downgrade.”

Dish Network (via Sling TV, Time Warner Cable, Charter Communications and Cablevision Systems are among other MVPDs that have launched or are testing streaming products geared for the cord-cutting crowd and consumers who have never taken a traditional pay TV service.

Time Warner Cable has pushed ahead with a IPTV trial in New York City, Mt. Vernon and New Jersey that offers three different video service tiers to customers who take the MSO’s residential broadband service (its “Extreme” tier or higher).

The trial, seemingly targeted to cord-cutters and video customers who are looking to avoid set-top box fees, centers on the MSO’s TWC TV app for the Roku platform, which provides access to more than 300 live TV channels, plus about 20,000 free and subscription VOD choices from the operator’s on-demand vault. Like Time Warner Cable’s regular TWC TV app for Roku, the version featured in the NYC trial does not support transactional VOD or a DVR features. But Roku does provide those TWC customers access to a platform that supports a massive number of OTT "channels," including Hulu, Crackle, Netflix, and Amazon Video. 

Details of the trial began to emerge late last month. On Monday, TWC announced that it’s offering three different tiers on the Roku platform via TWC’s managed IP network (and not “over-the-top” ):

-Starter TV: $9.99 per month for 12 months, a free Roku 3, and access to 20-plus channels in the MSO’s Starter TV plan, including ABC, CBS, C-SPAN, CW, Fox, HSN, NBC, TBS, TWC News and Univision. A DOCSIS 3.0 modem with Extreme Internet service (50 Mbps down in NYC, where the operator has completed “TWC Maxx” upgrades ) or above and in-home WiFi is required.

-Starter TV with Showtime and Starz: $19.99/month for 12 months for $19.99/month, a free  Roku 3, the operator’s Starter TV plan, and access to the Showtime  Anytime and Starz Play TV Everywhere apps.

-Standard TV with Showtime and Starz: $49.99 per month for 12 months, a free Roku 3 player, access to a lineup of 70-plus linear channels (including AMC, CNN, Comedy Central, Discovery, Disney, ESPN, Fox News Channel, FX, MTV, TBS, TNT, TWC News and USA), and credentials for the Showtime Anytime and Starz Play apps.

Per the fine print, TWC’s Roku-powered option in NYC expires on June 18, 2016, and is not available to bulk residential customers.  TWC has not announced the monthly rate for the offering following the trial period. TWC is in the process of being acquired by Charter Communications, which recently launched a streaming TV app for the Roku platform.

“The TWC TV Roku Trial represents an important step in our evolution, giving customers more ways to view the content they love in ways that work for them,” Peter Stern, TWC’s EVP and chief product, people and strategy officer, said in a  statement.  “This trial will help us build a better experience for our customers, while making cable television programming even more affordable, accessible and relevant to a new generation of consumers.”

Other MSOs have launched or are trialing new slimmed down TV offerings. Charter is  testing a service called Spectrum TV Streamthat starts at $12.99 per month;Comcast is nearing the wide launch of “Stream,”a $15 per month no-contract IP video offering; and Cablevision Systems has launched a batch of packages tailored for cord-cutters.  Dish Network is targeting cord-cutters and cord-nevers with Sling TV, an OTT-TV service that launched nationally in February and starts at $20 per month.

Time Warner Cable is about to kick off a beta trial of an IP-based TV offering for broadband-only subs in New York City, Engadget reported Friday  (October 23).

TWC isn’t commenting on the report, but Engadget said the offering, which would eschew traditional cable set-top boxes, will support a variety of streaming video platforms, though the “focus” will be on the Roku platform, and that the MSO will provide participants with a free  Roku 3.

Per Engadget, TWC’s offering, seemingly for cord-cutters and cord-nevers, would feature a “Starter” TV package for an extra $10 per month, an option that would bundle in Showtime and Starz for $20 per month, and a fuller-freight “Standard” tier with that would cost $50 per month and include Showtime and Starz.

Time Warner Cable has already developed authenticated TWC TV apps (for subs on its regular pay TV service) that run on the Xbox One and Xbox 360, iOS and Android mobile devices, Roku, the Kindle Fire HD & HDX, Web browsers, and the Fan TV box (now part of Rovi) and certain Samsung smart TVs.

The report said customers on TWC’s new video offering for broadband-only subs will let customers stream on up to four devices.

After absorbing heavy video losses in recent years, TWC has seen those number improve in 2015, adding 30,000 in Q2 and shedding 45,000 in Q2. Speaking at an investor conference last month, TWC chairman and CEO Rob Marcus said the MSO has a shot to end 2015 in the black with respect to video subs, but noted that the MSO is "not seeing this mass migration to skinny bundles." TWC is scheduled to report Q3 2015 results on Thursday, Oct. 29.

Pursuing broadband-only subs with slimmed-down video bundles has become a trend among traditional MVPDs. Among examples, Charter Communications, which is trying to acquire TWC, has been testing a service called Spectrum TV Stream that starts at $12.99 per month; Comcast is nearing the wide launch of “Stream,”a $15 per month no-contract IP video offering; and Cablevision Systems has launched a batch of packages tailored for cord-cutters.  Dish Network is going after cord-cutters and cord-nevers with Sling TV, an OTT-TV service that launched nationally in February and starts at $20 per month.

Offering a deeper look into the increasingly volatile world of pay TV, a new survey from Digitalsmiths found that 46.6% of respondents are at risk of cutting the cord or leaving their current pay TV provider for another. 

Digitalsmiths, the video search and discovery firm acquired last year by TiVo, revealed those findings in its Q2 2015 Video Trends Report, based on a survey of 3,210 adults in the U.S. and Canada.

The survey found that 7.7% of respondents switched pay TV providers in the last three months, a 1.7% year-over-year increase. Over the next six months, 14.9% are at risk to cut service (4.5%), change providers (8.1%), or switch to an online app or rental service (2.3%).

While the cost of service factors into this trend (61.6% said they pay more than $100 month to their provider), the group that is “unsatisfied” with their service rose to 6.1% in the Q2 survey, while 76.6% claimed to be “very satisfied” or “satisfied.”  Those in the unsatisfied camp cited reasons such as increased fees and poor customer service.

A La Carte and OTT

Digitalsmiths also shed some light on the demand for a la carte, skinny bundles and the rising popularity of OTT services.

On the OTT front, the surveyed group was most familiar with Hulu (44.7%), compared to HBO Now (31.2%); Showtime’s new standalone OTT offering (17.1%); CBS All Access (10.8%); Sling TV (9.7%); and PlayStation Vue  (9%). Consumer awareness for that full group rose 1.8% in Q2 versus Q1 2015. About 42.5% were not familiar with those offerings.

Digitalsmiths also found that 79.2% said they would like to pick only the channels they watch (down 2.2% in Q2 versus Q1 2015), and see a selection of 17 to 18 channels as the ideal lineup.

The average price they’d pay for that channel mix was $39.50 per month. Almost 20% said they’d be willing to pay $10 to $20 per month, 17.3% said they’d pay $21 to $30 per  month, and only 3.1% said they’d pay $81 or more per month.

“These numbers illustrate clear demand by respondents for the à la carte Pay-TV model,” Digitalsmiths noted in the study, which also found that 35.1% were overwhelmed by the number of channels available to them. “While the cost of programming continues to increase, consumers could become less tolerant of paying for unvalued programming.”

For those who want a la carte, ABC was the top channel selected, followed by Discovery Channel, NBC, History, CBS, A&E, Nat Geo Channel, Fox, HBO, PBS, Comedy Central, The Weather Channel, AMC, Food Network, Animal Planet, TLC, TBS, TNT, CNN and HGTV. The bottom five of the group were Velocity, Telemundo, Univision, Fusion and Ovation TV.

‘Cord-Cheating’ and OTA

The study took a fresh look at “cord-cheating,” where subs seek VOD fare and linear TV from parties other than their pay TV provider. In Q2, 57.7% subscribed to a service such as Netflix,Hulu, Amazon, Sling TV, and HBO Now, a figure that grew 7% year-over-year, and 22.8% over a two-year span.

Of the 15.7% surveyed who do not take a traditional pay TV service, 33.3% use an antenna to get basic TV channels.

TV Everywhere

A positive trend for pay TV is increased awareness of authenticated TV Everywhere services. In the Q2 survey, 43.3% said they were aware that their pay TV provider offered TVE, up 4.8% year-on-year, and up 11.2% over two years.

Almost one-fourth of respondents said they have their provider’s TVE app, up 2.3% year-on-year.

Of those who do tap into TVE, 45.4% use it on a weekly basis, up 3% year over year. However, 54.6% said they access those TVE offerings “rarely” or “never.”

The study also highlighted the popularity of apps from programmers and broadcasters. In Q2, 27.8% said they have installed one on their tablet and/or smartphone.

In terms of installations, the top apps in this category were: HBO Go (5.9%), Hulu (5.7%); ABC  (5.2%); WatchESPN (4.9%); A&E (4.5%); CBS (4.4%); and NBC (3.2%).

Digitalsmiths’ study also centered some results on the vendor’s bread and butter – search and discovery. About 22.2% said that their provider makes TV and movie recommendations to them, up 6% over two years, and 92.5% felt that the recommendations made were “always” or “sometimes” accurate, up 2.4% versus Q1 2015.

Digitalsmiths clients include AT&T/DirecTV, Bright House Networks, Charter Communications, Dish Network, Foxtel, FOX Sports, Sharp Electronics, Time Warner Cable and Verizon, among others. 

Winds of change continued to blow through the TV business in the second quarter, with live TV viewing dropping as the number of homes with broadband only and those with streaming video subscriptions rose.

According to Nielsen’s second-quarter Total Audience report, the number of homes with pay-TV subscriptions—a crucial number for the industry—is down 1.2% to 100.4 million from 101.6 million a year ago. The number of broadband only homes rose 52% to 3.3 million from 2.2 million.

Media company stocks have been diving because investors are concerned that subscription revenues are threatened by cord cutters and skinny bundles. Top executives from media companies, including Philippe Dauman of Viacom, have mostly been downplaying the threat the decline poses.

Meanwhile, the share of homes with subscription video on demand rose 18% to 45% in the second quarter of 2015 from 38% in the second quarter a year ago. The number of homes with enabled smart TVs rose to 18% from 11%.

Read more at B&C.

Time Warner Cable chairman and CEO Rob Marcus said the cable giant could end the year in the black regarding basic video subscribers, a major turnaround from the heavy losses of just a few years ago.

Marcus, speaking at the Bank of America Merrill Lynch Media, Communications & Entertainment conference in Beverly Hills, Calif., said given the momentum of the past two quarters, a positive basic video showing is not out of the question.

TWC added about 30,000 basic video customers in the first quarter and lost 45,000 in the second quarter. Marcus said that momentum is strong in the third quarter, although he couldn’t predict whether the company would report gains or not. The fourth quarter, which is typically stronger, could be the difference, adding that the company has a “good shot” at posting at least a slight gain.

That would be a big turnaround from just two years ago, when Time Warner Cable lost a staggering 833,000 basic video subscribers in 2013. Those losses improved to 408,000 in 2014, as the company began implementing its TWC Maxx initiative, began converting markets to all-digital and substantially improved customer service.

Basic video gains would be a nice parting gift for Marcus and TWC, which agreed to be purchased by Charter Communications in a deal valued at $78.7 billion. That deal is expected to close by the end of this year or early next year.

Marcus also downplayed the need for so-called skinny bundles, adding that while thinner programming packages may look appealing, most customers end up buying the thicker offerings because they have more value. He said that in the second quarter, 82% of new TWC customers opted for the “fattest of the fat” bundle.

"The headlines over the last several months have been way ahead of the facts," Marcus said. "We're not seeing this mass migration to skinny bundles.” 

Dish Network has not revealed sub numbers for its new OTT service, Sling TV, but a report from Re/code claims that they're now in the neighborhood of 250,000.

That’s paying subs – not just people who signed up for Sling TV’s seven-day free ride. Based on Sling TV’s core service, at $20 per month, that means the service is bringing in at least $5 million per month, and does not account for Sling TV’s add-on packs and HBO subscriptions.

And if that figure, assuming it’s in the ballpark (Re/code’s report is based on unnamed execs said to be familiar with Sling TV’s performance; Dish isn’t commenting), seems to show that Sling TV’s doing a decent job retaining subs. Recall that Sling TV CEO Roger Lynch told B&C prior to the service’s national launch in February that hundreds of thousands of consumers had pre-registered for the service, and that few of them were existing Dish subs.

Keeping subs paying is a particular challenge for Sling TV, a service that is exposed to potentially high rates of churn. Sling TV subs can sign up and leave pretty much as they please month-to-month, though Sling TV does offer device bundles (with Roku, Amazon and Google) that require three-month paid commitments.

As for the kind of consumers who are attracted to Sling TV, Lynch told us in April (subscription required) that it’s the anticipated mix of cord-cutters and consumers who had never taken a pay TV service, as well as “supplementers” who have a pay TV service but buy Sling TV on top.

And we’ll have to see if how Sling TV reacts to sub growth down the road, or if it finds itself in a position where it’ll have to keep that in check. Sling TV hasn’t revealed such specifics about sub caps associated with its distribution deals, but recall that, last year, Time Warner Inc. chairman and CEO Jeff Bewkes hinted that the OTT service would be limited to 2 to 5 million subs. More recently, Discovery CEO David Zaslav put it at 2 million when the topic came up an investor conference.

Either way, it appears that Sling TV will need to be careful to grow too big too fast, but it still has a bit of headroom with which to work. In the meantime, it's starting to introduce some Spanish-language packages that don't require subs to take Sling TV's  core $20 per month service. 

Apple's plan to launch an over-the-top pay TV service this fall could be delayed because the company wants, but is having trouble securing, “widespread access” to the live TV feeds of local broadcasters, Recode reported Friday, citing unnamed sources.

According to the report, Apple aims to differentiate on other over-the-top MVPDs by offering local broadcast stations nationwide. Sling TV, Dish’s new OTT service, is looking into offering locals in a broadcast tier that subs could add on if they choose to, but won’t be required to. Sony’s new PlayStation Vue service, meanwhile, has been launched in three markets – New York City, Chicago and Philadelphia – but those initial rollouts got underway without ABC in the lineup.

The report follows ongoing rumors that Apple has been in talks with programmers, including major broadcasters, to introduce a slimmed-down pay TV service sometime this fall that would cost $30 to $40 per month.

Unnamed industry execs told Recode that they don’t believe Apple has signed any TV programmers for its proposed service. An industry source told Multichannel News recently that Apple would be “hard-pressed” to launch a meaningful pay TV service this fall based on the lack of progress it's made in notching distribution deals with major programmers. 

After years of speculation and rumor about the mythical Apple television, here’s another round of it that might put the topic to rest for a while… Apple, The Wall Street Journalreported Monday, quietly shelved the project more than a year ago after finding that it would be difficult to produce a product that could set it apart from the pack.

Apple “searched for breakthrough features to justify building an Apple-branded television set” but came up short, the paper reported, citing unnamed sources.

Such breakthroughs that were apparently under consideration sound pretty ho-hum – Ultra HD/4K display, sensor-equipped cameras to make video calls, among them.

But Carl Icahn, in an open letter on Monday to Apple CEO Tim Cook holding that the company’s shares are worth a lofty $240 (they’re trading at about $130 per share at the time of this writing), remains confident that Apple will still make a go at the TV, as well as connected cars.

“Apple is poised to enter and in our view dominate two new categories (the television next year and the automobile by 2020) with a combined addressable market of $2.2 trillion, a view investors don’t appear to factor into their valuation at all,” Icahn wrote.

With respect to the long-rumored Apple television, that’s sort of a replay from October 2014, when Icahn expressed confidence in another open letter that Apple would introduce a 4K set sometime in fiscal year 2016.

Icahn wrote this week that he still expects Apple to start selling two Apple television sets – UHD models with 55-inch and 65-inch screens, in FY 2016, so at least he’s consistent. He also sees Apple generating revenue of $15 billion in FY 2016 on sales of 10 million units, rising to $37.5 billion on 25 million units in FY 2017. 

“[W]e view television’s role in the living room as a strategically compelling bolt-on to the Apple ecosystem,” Icahn wrote, adding that he also plays into the rumor that Apple is preparing to launch its own "skinny bundle” of pay-TV channels and a new Apple TV device.

Icahn then went on CNBC, saying that he read the WSJ article but stands by his belief that Apple will still pull the trigger on its own television set.  

For now, Apple’s public video strategy continues to center on the current generation (and recently price-reduced) Apple TV device, and support for services such as HBO Now, HBO’s new stand-alone OTT service.

But when the HBO Now deal was announced, Cook open the door to much more, noting that the aim of Apple is to “reinvent the way you watch television, and this is just the beginning.”

ESPN's recent decision to part with longtime network personality and writer Bill Simmons was based on a business decision and not any personal conflicts, ESPN network president John Skipper told reporters Tuesday after the network’s upfront event.

Skipper said the decision not to renew Simmons's contract was all “business, not personal,” but said  the decision did not come down to money.

Simmons, who lauched sports and entertainment website Grantland in 2011,  has been one of ESPN’s most popular personalities during his 15-year tenure, but has had several runs-in with ESPN executives during that time.

“He was at ESPN for 15 years and he did a fabulous job for us," Skipper said. "He re-invented at one point the way you do sports writing and became the most read sports writer in the history of the medium,” he said.

Skipper also weighed in on ESPN’s lawsuit last month against Verizon over the telco’s controversial Custom TV “skinny” bundle package, saying that the network is not against new technology but existing carriage agreements have to be renegotiated before any changes can be made.

“We’re in a dramatic time of technological change and clearly the way people consume video devices on different on different kinds of subscription packages is a dramatic transition,” he said. “We don’t resist the change; we do have contracts and it means that if you want to do things that are different you need to discuss it with us and we’ll have a conversation as we did with Sling TV."

Skipper also said the network’s decision to simulcast its NFL Wild Card game on ABC as well as the move of its longtime awards show The ESPY to the broadcast network was based in part on getting more exposure for the events on a bigger platform. “The Wild Card game is to get a bigger audience,” he said. “We’re going to become more opportunistic with ABC.”

CHIGAGO — Even as the faithful began to filter into the McCormick Place Convention Center here there was a feeling that this show would be different, and not just by the change of name from now retired “The Cable Show” to the inclusive new INTX: Internet & Television Expo.

Cable TV companies, the original disruptors, are being disrupted.

New “over-the-top” competitors are forcing deep trepidation and profound business strategy shifts for multichannel-TV distributors, who are creating new “skinny” bundles of TV with Internet to respond to the threat. To draw — and retain — customers, cable’s biggest operators are accelerating upgrades to make broadband speeds top out at 1 Gigabit per second and more.

And they are spending furiously — hundreds of millions of dollars, in the case of giant Comcast — to fortify the issue that despite genuine advances, stands today as the Achilles’ Heel of the entire industry: customer service.

Cable networks are seeking new metrics to measure the millennial shift to viewing on new devices, and they’re fretting over a more Darwinian ecosystem that will surely kill off the weaker networks, a certain result if new “slimmer” bundles take hold. Upstart channels won’t have a chance on linear television, and it’ll be harder for entrenched networks to show growth. Welcome to the jungle.

On top of these challenges, there will be little help from Washington, as Federal Communications Commission chairman Tom Wheeler made clear to the flummoxed crowd in Chicago, who sat, literally and figuratively, in the dark on his intentions. Unlike the last few glory years of the industry, federal regulators’ eyes will be trained hard on Internet distribution, with the ability — if not the intent — to control pricing.

Greater scrutiny was the point of the FCC’s lengthy suffocation of the $67 billion Comcast- Time Warner Cable merger, which was summed up by Comcast chairman and CEO Brian Roberts not with any verbal explanation, but by cutting his speech to a clip of an explosion from the movie Fast & Furious 7 (released, of course, by Universal Studios).

But the convention’s host — National Cable & Telecommunications Association president and CEO Michael Powell, cable’s articulate and admired general — reassured the assembled troops that cable’s long collective history of innovation wouldn’t stop soon.

For readers who couldn’t make to Chicago, following are five takeaways from the staff of Multichannel News.

1.A New Gold Standard for Broadband Speed: 1-Gig Is Here

Despite the specter of Title II hanging over the future of U.S. broadband, regulators aren’t slowing cable’s push to bring speeds of 1 Gigabit-per-second and more to residential customers.

Among MSOs, Cox Communications and Comcast last week trumpeted news of the new gold standard of Internet speed.

Cox said its 1-Gig “G1GABLAST” residential service has been launched in parts of four markets: Phoenix; Orange County, Calif.; Omaha, Neb.; and Las Vegas. Cox, which first launched G1GABLAST in Phoenix in October 2014, is also in the process of extending that fiber-based service to systems serving Arkansas, Louisiana, Rhode Island, Oklahoma and Virginia, and expects to light up service in those markets sometime this summer.

Comcast, meanwhile, said it had begun to roll out “Gigabit Pro,” a 2-Gbps residential service delivered via fiber-to-the-premises technology, in Nashville and other systems in middle Tennessee, as well as the greater Chicago region, including northwest Indiana. All told, Comcast expects to make Gigabit Pro available to 18 million homes that are within “close proximity” (about one-third of a mile) to its fiber network.

Much-smaller Mediacom Communications is preparing a 1-Gig trial in the university town of Columbia, Mo., using DOCSIS 3.0 technology.

While those services are being rolled out on a limited and targeted basis, cable operators aim to bring gigabit broadband to its more broadly deployed hybrid fiber/coax networks using DOCSIS 3.1, an emerging CableLabs-specified platform that will be capable of delivering up to 10 Gbps downstream and at least 1 Gbps in the upstream.

At INTX, Comcast offered a glimpse at its D3.1 strategy, showing off a fancy-looking “Gigabit Home Gateway” slated to go into production later this year and become available to customers in early 2016.

Although competition from Google Fiber and AT&T’s fiber-based “GigaPower” appears to be accelerating cable’s advances, it’s still not clear what apps and services will require such lofty capacities.

“I still think a Gigabit is overkill for some time,” Tony Werner, executive vice president and chief technology officer of Comcast, said on a panel last Tuesday (May 5) covering innovation and the future of media.

For now, it’s about future-proofing the network as apps and services develop that will require gigabit speeds.

“We think 1-Gig is about enabling the next generation of the Internet,” Philip Nutsugah, Cox’s vice president of access product development and management, said Thursday (May 7) on a panel dedicated to the gigabit topic. “As a service provider, we need to stay ahead of the demand curve.”

— Jeff Baumgartner

2. Cable Stops Worrying and Learns to Love OTT

INTX amplified the idea that 2015 will be the year cable learned to stop worrying and love over-the-top video. Instead of fearing OTT and considering it an enemy to the traditional pay TV ecosystem, operators are starting to embrace it.

That became increasingly apparent after a handful of cable operators, including Cablevision Systems and Mediacom Communications, struck distribution deals with Hulu, the OTT subscription video-on-demand service (see “Distribution: Hulu Antes Up” in Next TV).

Mediacom last week also became the latest in a growing group of pay TV providers to sign agreements that enable them to bring Netflix to MSO-leased set-top boxes. In Mediacom’s case, it will offer Netflix as an app on its TiVo-powered platform. But instead of signing on for Open Connect, Netflix’s private content delivery network, Mediacom and Netflix agreed to an interconnection deal under which the MSO will build fiber directly to Netflix’s facilities.

Comcast, meanwhile, is pushing hard on X1, a next-generation, Internet protocol-capable platform. So far, though, Comcast has not been nearly as aggressive with integrations of Internet-fed OTT video apps on the set-top. At this juncture, access has been largely limited to services such as Pandora, Instagram and Facebook. But Comcast’s platform is technically capable of supporting integrations with just about any OTT service.

TiVo has been preaching the value of TV-plus-OTT for years, and the message appears to be getting through, at least among its pay TV partners.

But Tom Rogers, TiVo’s president and CEO, said cable operators should be pushing even harder to blend their traditional TV service with increasingly popular over-the-top options.

“The cable guys can own that; they should own it,” Rogers said. “Instead, what is going on is programmers are creating individual streaming services. People are then thinking they can put together their own bundles, and that’s happening outside the integration and single experience that the cable operator can offer.”

The cable industry, he suggested, needs to be even more aggressive.

“It is amazing to me that they aren’t just putting their stamp on it,” Rogers said. “The best possible way to get it all and get it on a great interface … is the integration of traditional and over-the-top TV the way that only cable can do it.”

— Jeff Baumgartner

3. Bundles Are Gettiing ‘Skinnier’

Could 2015 be “the Year of the Skinny Bundle?”

Big multichannel distributors operators are creating “skinny” TV packages with Internet service, an effort to attract millennials and retain subscribers.

Peter Chernin, the former top Fox executive turned producer and online video entrepreneur, told the INTX crowd on Tuesday (May 5) that rather than destroy traditional channel packages, skinny bundles would “rationalize” them. “We’re going to see a tremendous explosion of new alternatives, largely IP-delivered,” he said. “That will ultimately force the bundle to justify itself, which is not the worst thing in the world.”

Later that day, a trio of seasoned execs offered similar predictions that the bundle is officially going on a diet. “I think you’re going to see more experimentation around this from programmers as well as operators. It’s in all of our best interest not to lose customers,” said Kathy Payne, senior vice president and chief programming officer of Suddenlink, during the panel session “Thin to Win: Choice, Change & the Rise of Skinny Bundles.”

Citing company survey findings, she added that market forces, especially OTT offerings, are making “people say, ‘Gosh, why am I paying this much to my cable operator when I have other choices?’ So we have to be nimble.”

Conversation and open diplomatic channels are key, the panelists agreed. Verizon’s bold move was preceded by virtually “no conversation” with programmers, Tonia O’Connor, president of content development and corporate business development for Univision Communications, said. “That was a head-scratcher for us because we’re more than happy to work with our partners to understand what the best option is for the consumer.”

Given the expectation of more OTT services, including some from traditional players (a la CBS All Access or HBO Now), O’Connor added ominously, “The launch of new linear channels as we know them today, there’s probably not a real future there.”

Mike Biard, distribution president for Fox Networks, declined to address his company’s legal fight with Verizon over its skinny bundle when asked by panel moderator Mark Robichaux, editorial director of NewBay Media’s TV Group. Later, though, he took issue with Verizon’s “touting” of a Nielsen study that found pay TV subscribers watch no more than 10 channels. While that notion “gets repeated ad-nauseum,” Biard said, “our research doesn’t back it up. What we hear from third parties doesn’t back it up. The idea that people have different tastes is absolutely true. But those tastes can cross over to a lot of different channels.”

— Dade Hayes, Broadcasting & Cable

4. Cable Ops Spend Big, Will Keep Spending on Customer Service

Comcast made the biggest splash on the customer care front, unveiling plans to spend $300 million on customer service, with several initiatives aimed at what Comcast Cable CEO Neil Smit called “productizing the customer experience.”

Chairman and CEO Brian Roberts unleashed a flurry of product and service announcements ranging from voice-activated remotes, 4K-enabled set-tops and sleek high-speed routers to customer-facing initiatives like an “Always on Time” pledge that will take effect in the third quarter, launching modern updates to its retail stores and hiring 5,500 new customer service reps over the next three years to handle calls.

Roberts demonstrated the voice activated remote at the INTX opening session last Tuesday; it finds shows and information intuitively — he found Forrest Gump by merely speaking a line from the movie: “Life is like a box of chocolates.”

In a moment of levity, Roberts aid into the remote, “show me the Comcast-Time Warner Cable merger,” into the remote, which brought up a scene in Vin Diesel’s Fast and Furious 7 featuring an exploding house.

A new home gateway router, capable of handling 9-Gigabit WiFi, IP video, phone and Xfinity Home is being trialed this year and will be available across Comcast’s footprint by the end of next year.

In Chicago, Roberts unveiled a prototype Studio Xfinity store complete with virtual-reality stations and video games for the kids alongside set-top boxes, modems and other equipment for subscribers. In introducing the store — which he said will be Comcast’s flagship retail operation and will officially open in June — Roberts said the intention was more toward education rather than the hard sell.

Comcast has had to weather several high-profile and embarrassing customer-care glitches in the past, and Roberts said that it has served as a “rallying cry” for employees to rethink how it does business.

He added that the initiatives have been more than two years in the making.

“We’re going to use that negative energy and turn it into positive energy,” Roberts said.

Leading the initiative is Comcast executive vice president of customer experience Charlie Herrin, who has a $300 million budget to make Comcast’s customer care vision a reality. He added that products and services aren’t the only part of the plan — at some point, all of Comcast’s 84,000 employees, from front-line workers to top executives, will go through hospitality training to improve the customer experience.

Comcast customers will soon be able to track technicians via their mobile phones with an Uber-like app that display’s the tech’s name, how far away he is and when he is expected to arrive. The app also has a ratings system for after the tech completes the job — anything less than a four-star rating will prompt a phone call from Comcast to find out how it can do better. With the “Always on Time” initiative, customer accounts will be automatically credited $20 if a tech shows up one minute late.

— Mike Farrell

5. Cable Is a Regulated Industry — and the FCC Is Watching

Federal Communications Commission chairman Tom Wheeler received a frosty welcome from the congregation at INTX last week, who were stingy with applause for a man who had just branded them “gatekeepers” and rocked their world with new regulations that the NCTA has dubbed “a disaster.”

The Title II regulations recently passed by the FCC will ensure there’s no discrimination against competitors, but MVPDs are concerned that other restrictive parts of the new rules — including price regulation, which the FCC is “forebearing” — could come to life in this or future administrations.

“I thought we operate in a different environment than he [Wheeler] seems to live in,” Time Warner Cable chairman and CEO Rob Marcus said at the start of the general session panel that immediately followed Wheeler’s speech. “In my world, broadband is very competitive. Competition has, in fact, fueled a tremendous amount of investment, and it’s investment we continue to make to make our broadband better. I wonder what the problem is.”

Wheeler defended his recent decisions and assured the crowd Title II would be the law of the land. He said the broadband industry was not competitive enough, and the FCC would be working to change that.

“[It] is important to understand that the tipping point from cable to broadband came while the transaction was under review,” Wheeler said of the Comcast-Time Warner Cable deal the FCC helped quash. “We recognized that the industry had changed and we saw concrete evidence of the new competition and business models made possible by high-speed Internet access. You don’t have a lot of competition, especially at the higher speeds that are increasingly important to the consumer of online video,” he said.

“By bringing competitive alternatives to television viewers, this industry did just that — and the video business was changed forever. Then, your industry went on to upgrade, compete with the telcos, and dominate broadband. Now the question is whether consumers will have competitive alternatives for broadband.”

— John Eggerton

With news of slimmed-down pay-TV offerings from Verizon and others continuing to reverberate at INTX, a trio of seasoned execs offered predictions confirming long-held speculation: More skinny offerings are on the way.

"I think you're going to see more experimentation around this from programmers as well as operators. It's in all of our best interest not to lose customers," said Kathy Payne, senior VP and chief programming officer of Suddenlink during late-Tuesday panel session "Thin to Win: Choice, Change & the Rise of Skinny Bundles."

Citing company survey findings, she added that market forces, especially OTT offerings, are making "people say, 'Gosh, why am I paying this much to my cable operator when I have other choices?' So we have to be nimble."

Conversation and open diplomatic channels are key, the panelists agreed. Verizon's bold move was preceded by virtually "no conversation" with programmers, said Tonia O'Connor, president of content development and corporate business development for Univision. "That was a head-scratcher for us because we're more than happy to work with our partners to understand what the best option is for the consumer."

Given the expectation of more OTT services, including some from traditional players (a la CBS All Access or HBO Now), O'Connor added ominously, "The launch of new linear channels as we know them today, there's probably not a real future there."

For more, please see this story in B&C. 

CHICAGO – Former Fox chief operating officer and current Chernin Group chairman and CEO Peter Chernin said the advent of so-called “skinny bundles” won’t destroy the traditional bundle of video channels, but it will force programmers to rethink how they package their networks.  

At the opening general session of INTX: The Internet & Television Expo here Tuesday, Chernin said that while the industry is seeing an explosion in distribution with the increase in over-the-top and IP video offerings, it doesn’t mean that the traditional video bundle will collapse.

Instead, Chernin said the bundle will “rationalize in some ways. We’re going to see a tremendous explosion of new alternatives, largely IP delivered. Netflix is an extraordinary company; You Tube is an explosion of young demos. That will ultimately force the bundle to justify itself, which is not the worst thing in the world.”

Chernin added that there is opportunity for other companies to move into the advertising-based video on demand space, which has been dominated by You Tube over the past several years. Chernin said that increased video viewing on Facebook, Twitter, Snapchat, AOL and others can also help content creators in that there are more outlets for its content.

“Competition leads to leverage, and for the first time we’re seeing that,” Chernin said. “Personally, You Tube is a great distribution partner and deserves a lot of credit for building that business; conversely, the more competition the better.”

Comcast chairman and CEO Brian Roberts, who earlier demonstrated the cable operators new technology initiatives – including a voice activated remote and an integration of its XFinity Home and video platforms, said that over-the-top video actually is a benefit for cable operators, because it needs a reliable broadband network on which to travel.

“Video from the Internet is a great thing for our business,” Roberts said. Net-net it is powering our growth,” because it highlights the value of the cable voice, video and data bundle.

Roberts said he does not particularly love the term OTT, because, “it’s not going over anything, it’s going right through our broadband.” And he added that companies with strong brands will prevail.

Chernin agreed, adding that especially as technology allows consumers to aggregate their own content and create their own schedules to watch it.

“What will dominate in that world is strong brands,” Chernin said.