Effros: The Exclusivity Binge

Commentary by Steve Effros

There are two trends that started to peak last year that have had a significant impact on the way we watch television programming. I think they will accelerate this year and then we’ll finally get some sense whether they are good or bad either for the business of video delivery or consumers.

I speak of program exclusivity and “binge” watching, or at least availability. Neither is actually new, but both have taken on much larger dimensions and are changing the nature of making and marketing video entertainment.

Let’s start with exclusivity. This is not a new concept for either broadcasters or the cable industry. The FCC’s original rules on permissible carriage of broadcast signals by cable operators had specific rules, still in place, that protected “exclusive” programming shown by a local broadcaster. The cable guy had to black out a distant signal that was carrying a program the local broadcaster had purchased “exclusively” for that market.

But now exclusivity has taken a very different turn and is making things much harder for consumers. Netflix, Amazon, Hulu and the rest are all spending immense amounts of money to create exclusive content. We’re talking about $8 billion for Netflix alone forecast for 2018. Now the whole point of exclusive content is that if you have a “must see” program then viewers have to deal with a “must buy” program service. Again, not new. HBO was the original model. But it has now become ubiquitous, and since the advent of OTT, the programmer no longer pays for delivery. Consumers buy the program availability from Netflix, but then they have to pay to get the video delivered as well. In other words, if there are three, four or five services all with “exclusive” “must see” programming, the consumer bill is going to get very high.

The reason the programmers are paying so much is they have to produce so much. Most new shows or series are not “must see,” and never will be. But platforms like Netflix or Amazon or HBO are now totally tied to creating at least one blockbuster each year to keep their subscribers. That gets very tough.

Link that trend with “binge watching” and you can see the outlines of a real problem; if a programmer only has one or two “must see” series, and you can watch those series all in one or two long nights of binge viewing, what prevents the consumer from simply subscribing for one month, seeing the “premier” show, then dropping off the subscription list until the next really good thing comes along? At the moment, nothing. I suspect this may change in the future if there is any indication that is becoming a trend. Yearly subscriptions, anyone?

Of course, HBO has avoided this potential problem by eschewing the “binge watch” format for its most popular shows, and given the buzz created by watching one episode a week of something like “Game of Thrones” and then reading a week’s worth of analysis and gossip about it, creating more buzz, maybe they have something. Maybe the “old way” still makes some sense. We’ll see.

In any case, there is a certain irony in the exclusivity trend. From a policy point of view it’s diametrically opposite the original “cable” rules that said, for instance, all broadcast stations “must” be carried on the “basic tier” to everyone. This may be the logical beginning of the end for “must carry” and “retransmission consent” leverage. Why carry broadcasters at all? More on that soon.

Steve Effros was President of CATA for 23 years and is now an advisor and consultant to the cable industry. His views do not necessarily reflect the views of Cablefax.