April 2015
Volume 35 No. 3

April 2015
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The television business is becoming more complex. But the challenge is not with the business as much as the communication aspect. Soon MBAs will need to be replaced by lexicographers.

By Dom Serafini

This time around I’d like to be perfectly clear. I’m curious to see, whether during the upcoming Upfronts in May, the Newfronts will solidify the fate of the Back Nine model for the FTA U.S. networks, considering that, with fewer episodes (of the series out of Development Hell) it would be easier to Eventize the programs, even though some of the series should have Legs.

For sure we’ll find out on the Lots of that Organic Market, known as the L.A. Screenings (except at Lionsgate, which uses Four Wall), where we’re hoping for not too many Straight-to-Series.

The question is also whether 5G technology will help LTE broadcast or the OTT system more and thus aid Telcos and MSOs.

Another issue related to content is Net Neutrality, which is opposed by Telcos and MSOs because it makes Internet SVoD operators more profitable. But streaming video outlets now provide Hollywood studios with a large amount of production funds, which simplifies the Ultimates for the companies CFOs, COOs, CCOs and ultimately the CEOs, especially now that the ARR doesn’t have the DVD window as an important consideration.

However, it’s not clear whether moving away from the Back Nine system will improve FTA’s C3 metrics. At both the Upfronts and Newfronts, C3 will definitely be revalued together with the C7 even though the FTA will continue to insist on L3 and L7 and one of the questions asked by advertisers will surely be, “If L3<L7, L=C, andL7=C3, how do you calculate the CPM?” Certainly, with an increased TVHH base, L7 is FTA’s favorite metric, even though the FTA audience is losing out to Disruptive TV, while HUT is increasing.

Then, speaking of DTTV, its introduction, originally resisted by U.S. broadcasters, has given FTA stations the opportunity to Double-Window with cable on their Mux channels, while Repurposing content on their Web channels, thus offering a Second Screen experience and getting a better Cume, which ultimately will help their L7.

Also helping FTA is the opportunity that DTTV offers for Branded and Sponsored content on their Mux, which could be richer than Adjacencies. In addition, the extra inventory will help with the now necessary Make Goods, although the Pods are problematic. Another problem is that some MSOs don’t carry FTA’s Mux, thus reducing their DMAs.

Conversely, in addition to the Net Neutrality, MSOs have a few additional problems, and not just with Retrans fee, Churn, Cord-cutters, Cord-nevers and Cord-rippers, but also with companies that, like Google and Amazon, keep buying Dark Fiber and White Spaces on the open market, ultimately risking making Telcos and MSOs become mere Dumb Pipes despite their potential as Triple and Quadruple-Players and the fact that their ARPU continues to climb.

Cable channels on the other hand have to contend with A-La-Carte Subscriptions, which could be problematic for the least popular channels that, in order not to be Unbundled and lose their Per-Sub Fee, have to offer value, which can come from experimenting not only with 4K and even 8K technology, but also through offering original programming, taking a cue from AMC, perhaps going back to producing MFTV.

The risk for smaller channels compounds if one considers the fact that, with an A-La-Carte system in place, their EPG position could be increased and thus further challenge their two-Tier business model. And this is without considering the losses from Opt-out selling.

Most of these problems, however, are ameliorated, at least for content creators (especially those who don’t produce a Zebra), by the Back End provided by growth of the international market, especially in LATAM, EMEA and MENA with the only drawback being increased piracy due to illegal streaming and downloads, which will hopefully be alleviated with Day-and-Date releases. Additional Back End is provided by the new opportunity offered by FTA’s Mux for Off-net and First-run shows.

I certainly hope to have been exhaustive and comprehensive. Nowadays it’s impossible to be clearer than this.