Bullish on OTT, and on Premium Nets

Showtime parent CBS is bullish on going over-the-top, saying the combined subscriber count for CBS All Access and Showtime’s OTT service is “nearly 5 million,” headed toward an expected 8 million-plus by 2020. Showtime launched its direct-to-consumer OTT service in 2015. The business has since grown to include access via virtual multichannel video programming distributors such as DirecTV Now, Sling TV, Hulu and YouTube TV. Showtime Networks chief operating officer Tom Christie recently spoke with B&C about OTT trends. Here are edited excerpts of that chat.

Can you give us an update on Showtime being “well past 2 million” over-thetop subscribers?

I think that’s what we want to state publicly. We had a very good January and we are well past 2 million.

You have a direct-to-consumer business and a base of MVPD affiliates that you want to keep happy. How tough of a balance is that? How do you price it to keep the additional business as incremental?

We do want it to be incremental and a lot of thought went into the pricing. We had some research information that suggested to maximize penetration, we should be selling at a certain rate. But we also knew, or could come very close to calculating, the average retail rate Showtime was being sold for amongst all of the multichannel distributors. Frankly, that’s how we arrived at our price point of $10.99, because at the time that was, to the best of all of our information that we had, the average price for which the service was being sold.

How well do you do at retaining OTT customers?

We retain them as well as we do on the video side. What’s been interesting and a real learning experience is that, depending on the device and even the manufacturer, there are different rates of acquisition and different rates of churn. And by that I mean it depends on the set-top box, the tablet, the phone. There are different responses with each of these devices, which suggests to us that each of these devices is being purchased by a different type of consumer.

What do you do with that information, if anything?

It may be, over time, when we have more conviction that what we’re seeing in the first two years of activity is indeed the long-term trend, that marketing dollars might be reallocated in different ways to those devices that have a better consumer for us — meaning consumers who have a longer life.

Can you say which ones you tend to do better on?

I would rather not. I will tell you, very recently, there’s a manufacturer that released a new device and the previous devices hadn’t performed that well, but right now the new device is performing really well. So you never know about what each device is capable of and what consumers are going to be attracted to buy in.

Do you worry that premium networks are vulnerable, now that people are adding subscription VOD services a la carte and might want to cut back in other areas?

Actually, I’ve been here 30 years and I have never been more bullish on Showtime than I am now. I think that for a lot of years the premium category in general and Showtime were not considered the main thing that TV viewers wanted to have. But I think what you’ve seen over the last five years, with the disintegration of some of the multichannel-video subscriber base, what is surviving are these commercial-free, on-demand services that are delivered over the internet, and Showtime is right smack in the middle of that boxing ring. Honestly, I think that we couldn’t be better positioned strategically, and we’re doing the right things to grow our business. I don’t think a lot of these apps will survive, but I’m convinced Showtime will.

So, is Netflix a friend or a foe?

Just because Netflix is in the home doesn’t mean Showtime can’t be in the home. I don’t look at Netflix as an enemy, frankly. They’re a very great service. And my hat’s off to them. But we’re a very good service, too, and I think we can get up to a lot of homes. I think that our traditional competitors HBO and Starz are in the same boxing ring, if you will, along with Netflix, Amazon Prime, Hulu, and those six brands have a shot at being in the business for the long term. They have to execute well, but strategically they are all pretty well positioned. It will come down in the end to execution.

Kent Gibbons

Kent has been a journalist, writer and editor at Multichannel News since 1994 and with Broadcasting+Cable since 2010. He is a good point of contact for anything editorial at the publications and for Nexttv.com. Before joining Multichannel News he had been a newspaper reporter with publications including The Washington Times, The Poughkeepsie (N.Y.) Journal and North County News.