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Sling TV, with its streaming service for news and sport channels, was the last brick needed to fill the gap between cable and SVOD offer. At these point, accepting a slight delay but winning in exchange some break from commercials, the chance to bing watch your favorite show and to get them on any device, you can basically feed yourself with all the programs you want without needing a cable subscription.

Why would you still pay $80 on average for cable, when you can have the same content for $44 per month?

Cable subscriptions are declining and the channels with a strong library, those that can offer a valuable experience and have a loyal base, are expanding their distribution venues in order to reach those customers unwilling to pay for cable.

CBS launched All Access in October, at the cost of $5.99, with an offer of thousands of episodes from many of CBS’ current programs, classic series in its library as well as content from its local-TV stations. It’s an extra window that adds up to local TV stations, cable outlets, international broadcasters, Netflix and Amazon.

HBO is on its way to create its SVOD service, while STARZ announces that if HBO will be successful, it will probably soon follow its example. Viacom announced the launch of a SVOD service for NIckelodeon, after the network’s slip in the last quarter.

The battle for cable channels today is in the maths behind the calculation of views, which is the base for advertising revenues

This number should take into consideration the shift in the consumers’ habits, both in terms of time windows and in terms of platform. As more and more people indeed opt for different forms or fruition, the major players move along 4 parallel lines:

  • promote the adoption of VOD instead of DVR, as DVR allows to skip commercials and therefore threatens the revenues coming from ads. One way is by allowing an almost simultaneous presence of VOD content, called “instant VOD”, which consists in offering a show minutes after initially airing, as well as early windows. Figures show a predicted increase of VOD from 50% to 60% of households in 2017;
  • dynamic ad insertions that allow sponsors to keep the ads that run alongside the video content current, and therefore increase the value of ads over time;
  • “live-plus-3-day” and “live-plus-7-day” ratings, which expand ratings to a longer window, as they include several more days of time-shifted viewing;
  • consider viewership data from many sources, from traditional Nielsen numbers to cable VOD-playback stats to a range of methods for tracking streaming activity, in order to consider the audience that is increasingly watching TV programming across multiple platforms.

As this is the cable scenario, the 3 Big SVOD players rely on the exclusivity of their content in order to differentiate themselves from competitors. This explains the rise of expenditure in programming. By David Bank’s calculations, SVOD spending already exceeded syndication dollars spent by broadcast stations in 2013 and it will more than double the $3.3 billion projected for 2015. While the bulk of off-network syndication revenues will still come from agreements with cable channels ($18.4 billion), in 2015 SVOD syndication deals will be worth $6.8 billion to content producers. That’s up from the $5.2 billion that Hulu, Netflix and Amazon collectively spent on content this year.

For the same product, SVOD providers are willing to pay big bucks for it. For Fox’s New Girl Netflix paid 3 seasons of the show $900K/episode, much more than MTV/TBS, which jointly shelled out $400K/episode.

Vimeo just announced that it will will “fund and distribute original content from Maker Studios in exchange for exclusive rights to post the videos on its on-demand platform”. This will create an exclusivity window with different prices based on the project

All this said, in a nutshell, cable and SVOD providers run on parallel tracks.

The strategy of cable networks revolves around 3 variables: revenues from ads, revenues from licensing agreements and revenues from SVOD (when they have it) * # of cable subscribers. SVOD in this scenario represent an additional revenue stream to be carefully managed towards existing licenses.

SVOD-only providers, by the other way, are running to ensure exclusive rights on the best content, create their distinctive features that differentiates them from competitors, and start their own original production, which is strictly related to the creation of their own identity.

The most fascinating part of all this to me, is when I think of Netflix, which more than every other player heavy derives its acquisition and production strategy from insight and analytics. The figure of the entertainment mogul tastes of decadence. Netflix extracts data from the preferences of its current viewers, and through algorithms it determines the future acquisitions that best match these preferences. At the same time the subscribers’ base changes and is enriched of new data every second. This creates a living organism that replicates himself and keeps on evolving.

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3 thoughts on “Cable rhymes with Ads, SVOD rhymes with exclusivity

  1. Updates on the same page:

    NBCUniversal is planning a comedy video subscription service could be $2.50-$3.50/month.

    Sling TV just made cutting the cord more attractive, adding AMC and IFC to its core $20/month sub package.

    Liked by 1 person

    • Nice, hadn’t heard anything yet about a comedy service. Not having Comedy Central anymore was one reason I didn’t want to lose cable but more and more of their content can be found online anyway so I didn’t mind losing it too much.

      Like

  2. Pingback: TV Everywhere becomes My Digital TV | GIADA PALMA Today in L.A.

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