TV Innovation Summit: Experts Warn of OTT Overreaction

As the industry contemplates OTT and skinny bundles, here’s some advice: Don’t start a price war. Cable has been priced above the rate of inflation for 30+ years, and “you want to be careful about displacing a model like that,” MoffettNathanson’s Craig Moffett told the crowd at Cablefax’s TV Innovation Summit Thurs. EPIX CEO Mark Greenberg issued a similar warning: “There’s an overreaction by the industry that it needs a cheaper price. In business school, they teach you that a price war is a bad idea,” he said. Instead, Greenberg urged the industry to focus instead on value adds, complaining that less than one-third of the TV universe even realizes that MSOs offer TV Everywhere. That sort of logic raises questions about the shift to the skinny bundle, though Cincinnati Bell is seeing success with its launch of a slimmer package under the MyTV name earlier this year. The company came up with something that looked like it would be appealing to consumers and charged a $39.99/month base with 10 additional genre packs if consumers so desired them. Around $45/month turned out to be the sweet spot, said Cincinnati Bell dir, content & consumer product marketing Michael Morrison. So how is the package doing? Cincinnati Bell had its estimates and goals, but the results have “blown that completely out of the water,” he said. He estimated about 60% of the bundle’s customers are new—and they over index in the millennial demo. And though 40% of existing customers tweaked their package by downgrading, Morrison said that prospect is “not scary at all.”

In fact, the new customers have both helped to offset programming costs and turned out to be “a customer we’re all trying to reach.” And here’s the thing—distributors are becoming less afraid of cannibalization. “We have literally cannibalized ourselves over 14 decades, so we’re not really scared about what’s happening next,” said AT&T Entertainment Group svp Vicki Jones. At AT&T, whether it’s the upcoming DirecTV Now OTT launch or integrating AT&T’s multiple touchpoints into a seamless experience, it’s about getting the chess pieces in place for what’s next, she said. Mediacom may be smaller in scale, but its playbook is similar. “If we don’t cannibalize ourselves, others will for us,” said Mediacom marketing svp David McNaughton. Mediacom’s focusing on simplifying the experience, rolling out 30-min arrival windows and night appointments, offering TiVo. “It’s really being open to new experiences that make life better for the customer,” he said. Another theme from the day was thinking outside of traditional packaging, be it through a company like Frequency, which integrates digital short-form content along with traditional TV, or Olympusat, which has launched a white label OTT service targeting Hispanic Americans. “I think everyone is starting to realize that it’s more about quality, more about packaging,” Frequency pres Ian Aaron said, adding that 35-40% of TV watching will be digital first in a few years. When talking the monetization piece, what does it take to survive in this complex environment—with mobile platforms to be monetized and programmatic advertising picking up steam? To some extent, new skills. “Understanding the fundamentals of programmatic is key,” said Google strategic partner lead, media & ent Peter Dolchin. “You can’t escape it.” The common thread may be data, but programmatic processes differ on linear and digital. But the notion that programmatic is indirect and nonhuman “is not necessarily what we’re going to see in a premium environment,” according to Ooyala AdTech Platforms gm Scott Braley. There will still be relationships involved. “I don’t think the martini lunches are going anytime soon,”’ he said. He added that in terms of skills, business strategy folks need to learn the technology side, and vice versa. Discussing the FCC’s set-top box proposal, A+E Nets analytics & CRM svp Lee Boykoff said the industry does have to think very carefully about who will curate TV content—as someone inevitably will. He added that in the distant future content will be consumed on all IP—whether through an STB or another mechanism.