Personalization Important for Future of Pay-TV World, Parks Conference Told

The jump in OTT customers who have no pay-TV service is "scary" to the pay-TV industry, said Parks analyst Brett Sappington. The number of broadband U.S. households with OTT service but no pay TV grew from 9 percent in early 2015 to the current 14 percent, while the number of OTT services is multiplying yearly to its current count of 116, said Sappington. Some 80 percent of U.S. broadband households subscribe to pay TV, vs. 66 percent for OTT, but well over half of pay-TV customers subscribe to at least one OTT service, he said.

The NFL’s announcement last month that Twitter is the exclusive partner this fall for 10 free streamed OTT games worldwide across multiple devices is evidence of changes to come, panelists said, though they differed on the impact. Mike Fisher, Brightline vice president-product strategy/business development, called the NFL/Twitter experiment “cool” and a “big thing,” but downplayed the overall effect on the monetization model of NFL football and TV. “Nobody’s going to want to spend three hours watching a football game on their phone. It’s not going to happen,” said Fisher. Another panelist shot back: “You haven’t met my teenagers.”

Pay-TV providers will profit either way that consumers turn for their video content, said Michael Hawkey, general manager of Rovi’s discovery business group. Consumers pay for both the content and the pipe that delivers it, he said. “If a consumer is going to OTT, you’re still paying for the content either directly through advertising or a subscription,” he said, saying video consumption is actually rising because it can be viewed on any screen. “You’re watching more content, you’re going to pay for that content,” he said. “You still have to pay for the pipe.”

The amount of content available is making it harder for pay-TV providers to influence the content discovery process and control consumers’ eyeballs, Hawkey said. The technology is there to offer search functionality and recommendations, but “getting it in front of the consumer” is a challenge, he said. Rovi’s Fan TV app allows consumers to search content from more than 50 OTT services, “but I can’t play that content,” he said. “I search it on my phone, but I can’t play it.” The problem is linking the search functionality with playback, he said.

Hardware companies could have an advantage there, said Arlen Marmel, Ellation vice president-marketing and distribution, saying it’s hard for service providers to solve the content discovery issue. A recent Apple TV software change that allows Siri to “voice-search within a particular app and find content from another app provider” closes a gap in what historically has been a “very wide chasm,” Marmel said. “I think Apple has ambitions to do something much more aggressive over time, but it’s a very subtle step toward a future” where the hardware providers own the “last mile” to the customer, he said. Hardware makers are in the best position to aggregate content from various sources and create a “discovery layer on top of it,” something service and content providers can’t do because they’re ultimately “challenged to work together in a manner which is compelling to consumers,” Marmel said.

That is a “nightmare scenario” for networks that control the search landscape within their own properties, said Marmel. Searching across NBC’s own app and those of its Bravo and E! properties is “spectacular,” he said. Once the networks lose the ability to keep the viewers within their own content worlds, they could choose not to provide the metadata that enables consumers to find the programs they want to watch, said Marmel. As soon as a viewer asks Siri to “show me a show that’s like this” and that takes the viewer to a Viacom or Fox app, “NBC loses the viewer inside of that app,” he said. “That’s when they start to get concerned and they skimp on putting the metadata in, and they say, ‘I don’t want that recommendation hooked into it.’”

Panelists varied on the potential of skinny bundles, such as Dish Network’s Sling TV. Marmel called it a “false truth” that the skinny bundle can save pay TV. At $80-$100 a month, data and OTT packages aren’t saving consumers money, he said, especially when there’s “irrelevant content.” YouTube and sites like Asian-themed Crunchyroll with 750,000 subscribers are showing audiences are “willing to pay for content,” said Marmel.

Fisher said Dish’s point with Sling wasn’t to get people who had cable to cut back on service, but to get customers just out of college -- the “cord nevers” -- accustomed to the idea of paying for TV and then go from there. Providers “aren’t going to attract more customers by reducing the variety of content they can see,” said Andy Chambers, Assurant Solutions vice president-connected home, saying skinny bundles “aren’t the right way to go.” The content experience will determine which provider a consumer subscribes to, he said.

The skinny bundle concept is a “temporary situation,” said Elisabetta Romano, head of TV/Media, Ericsson. While the skinny bundle whittled down the number of channels a subscriber might see from an unwieldy 400, “we are not yet getting to the point where I can access the content I want wherever I want from any kind of device,” she said. Romano advocated customized programs down to individual channels and “bundling it in a different way.” Channel aggregation is fine, she said, providing it’s “aggregation of the content that I want.”

That opens the door to personalized advertising, said Rovi’s Hawkey. Romano concurred, saying the advertising out there now is annoying to most people because it’s too generalized. She supported the idea of advertisements targeted to her based on location or interest. But she acknowledged targeted ads would require consumers to be willing to relinquish some data privacy, which consumers have inconsistent opinions on. They will post personal information on social media sites at the same time they say they don’t want to make personal data available to marketers.

On whether the day will come when consumers can pay for their own personal channel and select content on a per-program basis, panelists said the model is unsustainable. “One of the things that makes TV so wonderful is the subsidy from everyone,” said Marmel, citing the “misses” required to get hits such as Game of Thrones. Reducing entertainment to just striving for the hits would result in “no risk and not a lot of creativity,” he said. “I hope we get to a world that’s more personalized, but bundling and aggregation is critical in any creative pursuit.” Electronic sell-through already exists, he said, but it’s expensive to buy TV shows and movies on an a la carte basis.

Marmel described Amazon, Hulu and Netflix as streaming “broadcast networks to the English-speaking world.” Cable hasn't remade itself in a similar way, he said. The concept of a channel must be re-invented for the digital world, he said, citing ESPN’s Grantland, which transitioned to The Ringer. The 360-degree experience will likely include podcasts, video and print along with community and viewer engagement. "I view that as a network in the new world," he said.