Pay TV operators can help make or break a programming service by deciding whether or not to carry it on their lineups, and at what terms. These executives make million-dollar decisions on who gets an audience and who’s left begging. The rising cost of programming — including relatively new categories like retransmission-consent cash to broadcasters — has made those decisions harder than ever to make, and has put more pressure on the heads of content acquisition at cable, satellite and telco TV providers.
They have had to anticipate what, besides obtaining online rights, will be “the next big thing” to future-proof contracts. They figure out which of the growing number of regional and national sports networks are must-haves and which can be passed by. All the while, they must assemble the best package of channels to compete against a growing host of competitors getting into the multichannel-video business, including phone companies and Google.
To get a sense of how these “gatekeepers” approach their job these days, Multichannel News executive editor Kent Gibbons interviewed five executives who have become the contentacquisition chief at his or her company since May 2011, when the magazine last profiled the industry’s gatekeepers. Each one was asked the same questions.
NAME: Andy Albert
TITLE: SVP of Content Acquisition
COMPANY: Cox Communications
BACKGROUND: Joined Cox in 1995 as director of programming, before getting promoted and then eventually succeeding his boss, Bob Wilson, who retired at the end of 2013.
MCN: What are the key lessons you learned from your prior boss or the person who held this job before you?
Andy Albert: There are a couple things that I learned from Bob Wilson. One is really about integrity. I think when people describe Bob, they will say his word was good and you could trust him when he said something. And he was always very calm and I think that is something that I’ve picked up from him as well, that calmness is important.
I guess two other things are that relationships still matter. And we always have to have our ultimate focus on the customer.
MCN: What’s the current ranking of must-have elements in any deal? Online rights, packaging flexibility, accountability in terms of performance, most-favored nation status regarding what other distributors pay, or basically the rate you pay?
AA: Well, it sounds like you’ve got the list. (Laughter.) Certainly, we want the broadest array of rights that we can possibly get for what we’re paying. I think what’s important these days is to have a fair and transparent deal, so that we know where we stand in relationship to others both in terms of rights and in pricing. And finally, what’s important to us, what’s important to our customer, is flexibility, to give customers what they want in a kind of packaging that they want it in.
MCN: What do you think are the key elements of making multichannel video packages something that the next generation of consumers is going to consider as must-have a product as fast broadband?
AA: There’s a couple things there. We’ve done a lot of research on that. I think that having a good user interface is important, intuitive. We’ve been trying to get the user interface right for years. Certainly the customers coming on these days, call them I guess the kids out of college, and everybody really is looking for multiplatform, TV everywhere, personalized TV.
I think that one of the things that we’ve launched that’s gotten great usage is recommendation engines. So it’s more about a service designed for me. It knows what I want and helps me find what I want in this big sea of content that’s out there.
We’ve launched more DVR storage with more tuners in it. It’s interesting that six tuners seems to be a sweet spot on how many tuners a person needs. I guess I’ve never found that I need six but many of our customers do. Whole-home DVR, which I do use a lot, is a great product. And I think the last thing that our customers are telling us is they want more flexibility. They want the ability to have more choice in putting together some level of packages. That’s not an argument for a la carte, it’s more of an argument for, “Put together things that make sense for me.”
MCN: How do you think the pushback against the rising cost of sports networks is going to play out? Will we see more regional networks dropped, will there be tiering or more tiering or will there be more drops?
AA: Sports is such an interesting area. [There] could be a tipping point on the [Los Angeles] Dodgers [and their new Time Warner Cable-backed regional sports network, SportsNet LA]. Is this where the model fi nally has to change? I don’t know the answer to that. But sports costs are certainly something that as an industry we need to get our arms around.
MCN: What is it about the Dodgers deal?
AA: It’s very expensive. There’s no flexibility in how they will allow us to offer it. We serve a lot of customers and not all of our customers are Dodgers fans or are sports fans. And I think that we need some level of flexibility to be able to provide content to the people who really want it and are willing to pay for it and we shouldn’t have to burden all of our customers for sports content when not all of our customers watch sports.
MCN: Are you mostly optimistic or mostly pessimistic about the multichannel video business going forward?
AA: I’m really optimistic. I think that the content that’s being created today by so many different people is outstanding. People are watching more video than ever; they’re watching it on different screens. I think it’s really an exciting time. I’m glad to be sitting in this position at this time because there’s so much opportunity and so many things that we can do with new technology.
NAME: Tom Montemagno
TITLE: EVP of Programming
COMPANY: Cablevision Systems
BACKGROUND: In November 2012, was promoted from senior vice president of programming acquisition when his boss, Mac Budill, moved to NBCUniversal. He has been with Cablevision for more than 24 years.
MCN: What are the key lessons you learned from your prior boss or the person who held this job before you?
Tom Montemagno: The majority of my career, I’ve been in a close partnership with Mac Budill, who is now president of TV networks distribution for NBC. We worked together for 20 years. And I guess if I had to summarize the high points of what he has instilled in me I would label them as preparation, strategy, being a keen listener and having confidence. Also, Mac is by far one of the best reactionary, on-the-fly negotiators I’ve ever come across. That’s something harder to teach, but it’s something I aspire to replicate. He is really good on his feet and I’ve learned a lot from him in that regard.
MCN: What’s the current ranking of musthave elements in any deal? Online rights, packaging flexibility, accountability in terms of performance, MFN status regarding what other distributors pay or basically the rate you pay?
TM: It’s a combination of everything. Obviously, the rate is critically important in this environment. Having rights and flexibilities that are competitive in the marketplace and give us the ability to off er the products and services in the way that our customers want them is very important.
MCN: What do you think are the key elements of making multichannel video packages something that the next generation of consumers is going to consider as musthave a product as fast broadband?
TM: I think mobility is critically important. The in-home app that we have is extremely popular with the customer base, in particular with the youth, and extending access to our programming out of the home on every device they want to consume it both in the home, out of the home. So on their smartphones or if they want it on their Xbox, participating with the programming community to authenticate on all of those devices is important.
But I will say that [of[ the research we’ve seen [about] the next generation — yes, they are consuming video on many, many more devices. But there is also a very high percentage of their viewing done on the big television.
I’m excited about Ultra HD and the constantly improving picture quality and technology advancement on the big TV set. I think that will provide relevance for them to continue to want the subscription.
And I think there are programming ideas that are coming about that are hyper-focused on this generation, cross-platform access and ideas that appeal to them. So it’s something that we definitely need to strategize more on and find ways to keep up with their interests. But the economics of what they could afford is a key component.
MCN: How do you think the pushback against the rising cost of sports networks is going to play out? Will we see more regional networks dropped? Will there be tiering or more tiering, or will there be more drops?
TM: I’ve been doing this a long time and this has been a prevalent problem forever. I think that the costs are rising; the more pressure we’re putting on the big bundle, the less affordable it’s becoming. I think one of the things that we’ll see all of us push for is more flexibility in being able to sell more affordable tiers that don’t include sports. So I think, hopefully, you’ll see some relaxation on the distribution requirements. It’s still a very important component for the customer. Will there be a breaking point? I don’t know.
MCN: Are you mostly optimistic or mostly pessimistic about the multichannel-video business going forward?
TM: I am optimistic that there are going to be lots of new products and product extensions and interesting things that we’re going to be able to do for the customer. But with that is going to come continued challenges with rising programming costs and shrinking margins that we face as an industry. But I’m still excited for what’s on the horizon for us and for the customer.
NAME: Kathy Payne
TITLE: SVP, Chief Programming Officer
COMPANY: Suddenlink Communications
BACKGROUND: Joined Suddenlink this past February, succeeding Patricia McCaskill, who is retiring this year. She came from Cox Communications, where she served as a lawyer and content acquirer for two decades.
MCN: What are the key lessons you learned from your prior boss or the person who held this job before you?
Kathy Payne: I have had the distinct privilege of working with Bob Wilson at Cox. I worked for Bob for 13 years and he was an excellent negotiator. Among other things, I learned from him that every deal is remarkably complex with a lot of moving pieces, and you have to keep your eye on all the details but also always remember the bigger picture. It’s easy to get lost in the details when you’re working on a really complex deal but you always have to keep in mind what’s your end goal, where do you want to be. And that was one of the important lessons he taught me.
He also taught me the importance of working closely with other functions and departments in the company — engineering, legal, finance, public affairs, marketing and others in order to get the rights the company needs and then to promote those rights after they are secured. But perhaps the most important lesson that Bob taught me was if you don’t ask for it, you won’t get it.
MCN: What’s the current ranking of musthave elements in any deal? Online rights, packaging flexibility, accountability in terms of performance, MFN status regarding what other distributors pay or basically the rate you pay?
KP: All of those are important. I think to Suddenlink the most important thing is price. It is our primary focus. But online rights really are table stakes now. And packaging flexibility is extremely important as well. I think really all three of them interplay together and it’s really important to us to stay competitive and stay relevant to the next generation and all those elements are important. We want to have flexibility. We want to give customers choices that match their lifestyles and their pocketbooks.
MCN: What do you think are the key elements of making multichannel-video packages something that the next generation of consumers is going to consider as must-have a product as fast broadband?
KP: I think the key elements are that the video services need to be diverse, mobile and affordable. This generation has grown up with TV everywhere. They have grown up with getting content on the Web for free, they’ve grown up with Netflix and Hulu and using their parents’ passwords to get video content. So their expectation is that it should be affordable, it should definitely be mobile and it should be interesting. They are the generation that follows Twitter and Facebook and they’re keenly aware of what shows are the big buzz. And so you really have to give them compelling content, but they are also the generation that was most affected by the recession and it needs to be affordable.
MCN: How do you think the pushback against the rising cost of sports networks is going to play out? Will we see more regional networks dropped, will there be tiering or more tiering or will there be more drops?
KP: I think sports costs are going to continue to be a big pressure on operators. The problem is that the sports networks expect really high rates. Often, RSNs are in the range of $4 to $5 per subscriber per month. They expect expanded basic carriage and that is just becoming increasingly difficult. A lot of our customers don’t watch sports and they don’t care about sports and they don’t want to pay a huge portion of their bill toward a product that they don’t watch. And you are seeing that play out in the marketplace with certain RSNs not being launched. The RSN in Houston had a lot of issues, and right now the Dodgers channel is not seeing quick or full distribution. Every year we keep saying we’ve reached the breaking point, and I don’t know that we’re there because sports certainly is valuable live content, but we can’t continue to pay these outrageous costs combined with expanded basic carriage for everybody.
MCN: Are you mostly optimistic or mostly pessimistic about the multichannel-video business going forward?
KP: I am optimistic. I think television is a great product and I think our customers agree with us. Broadband is a great product and we sell broadband, television and phone and our customers love it and we’re growing. So I am optimistic. And I also think you have to be optimistic in the job that I do, otherwise you wouldn’t get deals done.
NAME: Aaron Slator
TITLE: President of Content and Advertising Sales
COMPANY: AT&T Home Solutions
BACKGROUND: Assumed his current role in June 2013, when Jeff Weber was reassigned within the U-verse TV parent. An AT&T executive since 1999 in a variety of corporate roles, he had been managing director of corporate development.
MCN: What are the key lessons you learned from your prior boss or the person who held this job before you?
Aaron Slator: I think I’d say two things. One [is to have] patience with the pace of innovation and evolution in the industry. It’s an older industry than people really think it is, and so things don’t often move as fast as some of the stuff that exists in the media. So patience matters, particularly for somebody who comes out of the technology world, where it seems to be all about beta testing and those types of things.
The second one I’d say for me personally is the details matter. I think Dan York particularly was good in helping me understand the contractual terms, the dollars and cents. It is a detailed, complicated business and around the margin is where you are able to create value in the contracts and the negotiations, so pay attention to the details.
MCN: What’s the current ranking of musthave elements in any deal? Online rights, packaging flexibility, accountability in terms of performance, MFN status regarding what other distributors pay, or basically the rate you pay?
AS: From our perspective, it matters in every individual deal what we’re trying to achieve. At a macro level, we’re trying to develop an experience, procure content and develop an ad experience that makes the most sense for our customers, developing a relevant package of content for them in their geographies. So again, it sort of depends by channel — some channels, I think, it makes more sense for us to focus on, and a large part of our focus in the last 12 to 18 months has been extending the rights beyond the television, so TV Everywhere and those types of rights. So what I’d call at a macro level packaging and online rights, the flexibility to serve up to customers content when they want it, where they want it. And then I’d say secondly, at a cost-efficient basis. So I think that sort of plays as well into the packaging side and the cost side, trying to manage that expense as best we can. I think those would be our two biggest priorities.
MCN: What do you think are the key elements of making multichannel video packages something that the next generation of consumers is going to consider as musthave a product as fast broadband?
AS: Where AT&T sits versus our competition in the market is, we’re very much a broadband — and when I say broadband, I mean terrestrial-based or high speed wireless data-based broadband — company and a TV company. So we are very interested in extending the content experience beyond the living room, beyond the TV. We are very optimistic about some of these deals that have been cut, like the Dish [Network]-[The Walt] Disney [Co.] deal, that potentially give rise to extending the linear TV experience beyond the living room. Again, as a broadband company, we’re investing tremendous amounts of money in both spectrum and building out fiber capabilities to deliver that experience. We’re architecting our network specifically for video. And so from our perspective, the extensibility of the product beyond the television, beyond the current ecosystem is something we’re very interested in, very much hoping to help drive into the industry.
MCN: How do you think the pushback against the rising cost of sports networks is going to play out? Will we see more regional networks dropped, will there be tiering or more tiering or will there be more drops?
AS: We’ve had some issues with [regional channel Comcast SportsNet] Houston, and you’ve got the Dodgers here in L.A. Again, it sort of gets back to the right price-value equation for the customers and for the consumers. And the dynamic that exists today is the rights fees that are being paid to sports teams seem to be higher than the economic market will bear in terms of what subscribers want to pay under the existing model. I’m not sure how that plays out; I’m probably too new in the industry to really give you a bona fide prognosis on that.
I do think sports matter, right? Live sports are very important for customers. To me, it gets back to what do the owners of the teams expect and is there a better balance that can be struck between how they get what they think they deserve in the local market and how we pass that cost on to consumers. Right now it does seem unsustainable.
MCN: Are you mostly optimistic or mostly pessimistic about the multichannel video business going forward?
AS: Optimistic. All the pessimistic stuff I’m reading gives way to things around over the top. And to me those are very complementary opportunities. I think there is a large universe of people that like the TV product, just want it enhanced a little bit. There’s a growing universe of people that maybe want a diff erent product, but I think there’s a complement in the industry as to how you bring those things together. Advertising is still growing, there are new ad models coming on line, new opportunities. [Electronic sell-through] has come out — that’s driving new opportunities for the industry. There’s a lot of opportunity there from our perspective. We’re investing a ton of money, you know, billions of dollars every year, expanding out on the MVPD product place, so we’re very committed to it.
NAME: Dan York
TITLE: Chief Content Officer
COMPANY: DirecTV
BACKGROUND: Came to the satellite-TV provider in May 2012, succeeding Derek Chang. Had been president of content and advertising sales at AT&T, after earlier working at content providers In Demand and HBO.
MCN: What are the key lessons you learned from your prior boss or the person who held this job before you?
Dan York: It was very beneficial to get his insights on the culture at DirecTV and the history and some of the nuances behind our relationships with many of our programming partners.
MCN. What’s the current ranking of must-have elements in any deal? Online rights, packaging flexibility, accountability in terms of performance, MFN status regarding what other distributors pay, or basically the rate you pay?
DY: While it’s critical to get the right price/ value relationship for the content and be protected against all of our competitors, [both] traditional and new entrants — I’d say traditional and non-traditional — increasingly important is the ability to monetize that content via packaging and other distribution means, such as online and mobile. They have moved swiftly up the priority list recently. With regard to MFNs, of course, they are crucial to protect our business and our customers. It’s necessary to be able to audit the programmers to make sure they are compliant with what their contract says.
MCN: What do you think are the key elements of making multichannel-video packages something that the next generation of consumers is going to consider as must-have a product as fast broadband?
DY: We study various consumer segments very carefully and increasingly see the consumers are sophisticated and they want the ability to right-size their packages and they expect access to all their content live and recorded, anytime, anywhere without incremental expense.
MCN: How do you think the pushback against the rising cost of sports networks is going to play out, will we see more regional networks dropped, will there be tiering or more tiering, will there be more drops?
DY: The escalation of sports costs, starting with the networks to the leagues, has pretty much reached a tipping point. It’s unreasonable for sports providers to expect 100% of pay TV customers to pay — I don’t want to cite the number but a substantial portion of their pay TV bill for sports when a large portion will never consume that content. Specific examples currently include the Houston RSN and Los Angeles. Just look at Houston as an example that when the price is too high for the value being offered, it isn’t a mandate that it must be carried. DirecTV has grown its subscriber base in the footprint of the Houston RSN since it launched [without DirecTV carriage].
MCN: Are you mostly optimistic or mostly pessimistic about the multichannel video business going forward?
DY: I am optimistic with a key caveat: that our content partners remember that the MPVD ecosystem delivers approximately $50 billion a year to them in affiliate license fees. And their continued focus on incremental digital pennies around the edge increasingly puts that $50 billion golden goose at risk.
