BY ALEX WEPRIN
As consumers embrace a TV future that is increasingly veering toward streaming and on-demand, legacy media companies are pivoting to stay relevant in a world where Netflix, Amazon and Hulu are seen as The Next Big Thing. For traditional companies, this changing business model means forging a direct relationship with viewers, and greatly expanding the amount of content they produce. As an increasing number of consumers ditch large pay-TV bundles (cord-cutters) or never sign up for them at all (cord-nevers), new streaming options are necessary to reach them.
Disney is planning a direct-to-consumer streaming service featuring movies and TV shows in 2019, while CBS already has launched CBS All Access and a Showtime streaming service. Time Warner's HBO Now is gunning for subscribers of premium content, while players like FX and AMC target super-fans with ad-free offerings.
"In a world where you have a huge amount of choice—almost infinite choice of content—providing consumers the shorthand to be able to find shows they like and the means to access them becomes all the more critical," says Brian Sullivan, president and chief operating officer of Fox Networks' digital consumer group.
Addition, Not Subtraction
In November, it was reported that 21st Century Fox had held talks to sell its entertainment assets, including FX and Nat Geo, to Disney. Disney, which already owns ABC, Marvel, Lucasfilm, ESPN and its own vast library of intellectual property, wants to control more original content as it plans its own streaming service for 2019. Comcast, owner of NBCUniversal, is reportedly also interested in some of Fox's assets.
AT&T's proposed takeover of Time Warner was also driven by the company's vast content offerings, which include HBO, TNT, TBS and CNN.
As legacy media companies like Disney, Fox and CBS ramp up their streaming offerings, they are betting on content consumers can't get elsewhere to lure subscribers.
Original and exclusive content, says independent media consultant Brad Adgate, who has worked with companies like Comcast to help analyze data, "is a huge selling proposition that they can leverage to get sign-ups."
That new streaming content is helping to supercharge the TV and content landscape, and it is largely additive.
Consider CBS. The company produces and airs shows on the CBS broadcast network, and on its pay-TV channel Showtime, The CW and CBS Sports Network.
Now, however, in addition to the shows it produces for those channels, it is producing original shows just for its CBS All Access service, which bundles originals with a vast content library. Star Trek: Discovery, The Good Fight and comedy No Activity are among the first of what CBS says will be many original shows for the service, which will add a reboot of the classic series The Twilight Zone in 2018.
CBS says it produces twice as many shows as it did just five years ago, and other media companies report a similar increase in programming. (According to DGA research, in the five years beginning in 2012, the total number of Guild-covered scripted episodes rose from 3,200 to 4,400 per season.) Disney, for its part, says it plans to produce between four and five original series and a similar number of original movies for its upcoming Disney-branded streaming service.
"Our intention as a company is to take advantage of the opportunities that exist today for good television, and to produce more of it," Disney CEO Bob Iger told analysts this month on the company's most recent quarterly earnings call.
Similarly, executives at both Showtime and HBO have said they are increasing the amount of money they spend on original content. As premium channels, they make programming available across all of their platforms, linear and streaming.
"HBO doesn't target programming for a particular service," says Simon Sutton, executive VP of global distribution for HBO. "However, a daily news program from Vice or a program like Sesame Street that is watched over and over again by children are attractive offerings on an SVOD platform."
The push for original content is also where the biggest opportunities lie for DGA members. The demand for fresh programming is driving creative and business opportunities for directors and their teams.
The rise of streaming services is not limited to entertainment. Sports and news options are still nascent, but expected to expand. CBS has the streaming news service CBSN, and plans to launch a streaming sports network called CBS Sports HQ this year. Fox has streaming soccer service Fox Soccer Match Pass. Disney, meanwhile, will launch an ESPN-branded streaming service in 2018.
Fighting for Millennials
The rise of these streaming services is tied to another key trend: millennials are less likely to subscribe to a large pay-TV bundle, and are much more likely to watch content on their smartphones or on internet-connected devices, according to Nielsen's Total Audience Report.
As the average age of television viewers continues to rise (according to Nielsen, most networks have average viewers with a median age in their 40s or 50s), companies are turning to streaming services to reach younger viewers who would otherwise be tuning out.
"One of the things we have seen in our research is that when [traditional media companies] move the conversation to OTT, their service skews much younger, so the demographics look totally different," says Andrew Hare, VP of research at Magid. "The vast majority of subscribers were not on the cable bundle."
Indeed, Marc DeBevoise, the president and COO of CBS Interactive, said at a conference in October that the average age of the CBS All Access viewer is 43. That compares to an average age of 60 for the broadcast network.
"Our whole digital business is effectively the younger version of our television network," DeBevoise said.
Meeting Demand
While many traditional media companies are still relatively new to the streaming subscription world, the demand for such products is becoming apparent. CBS All Access and Showtime's streaming service are each expected to reach 2 million subscribers by the end of this year, executives at the company say, while HBO Now also has around 2 million subscribers.
These numbers may pale in comparison to those for Netflix, which has more than 51 million subscribers in the U.S., but they are a sign of the potential that can follow premium content and a good user experience.
According to research conducted by strategic media consulting company Magid and shared with DGA Quarterly, as many as 31% of 2,400 respondents said they would be interested in a streaming service based on one of the broadcast networks, while more than 20% of respondents expressed interest in services based on cable channels like TNT or Discovery.
The research also showed that subscribers to HBO Now and CBS All Access spend more time per week watching those services on average than Netflix subscribers spend watching Netflix, suggesting that they were more engaged with the programming.
"In a monthly subscription business, you always aim for high level of customer engagement," says Sutton. "The HBO brand represents a level of quality across genres so, though high-profile programs present opportunities for acquisition campaigns, it is just as vital to showcase HBO's documentaries, original films, talk shows and theatricals. We curate top-quality entertainment, and the range of offerings is the value of the subscription."
Some companies are taking different approaches. AMC Networks' flagship AMC channel offers ad-free streaming of current series for $4.99 a month. The catch? It is, for now, marketed as a premium add-on, available only to Comcast cable customers. FX has a similar product called FX+.
As these changes in technology and consumer behavior continue unabated, traditional media companies are betting they have what it takes to remain relevant to an audience thirsty for high-quality content.
"Everybody is excited about the opportunities; they are probably a little concerned about the fact that their existing business models are at risk, but the reality is those models were always going to become at risk at some time," Fox's Sullivan says. "The beauty with where we are, not just Fox but the major content creators, is that people may be consuming our content in different fashions and through different services, but the reality is they are watching our content.
"If you peel it away, [consumers] are still watching shows that they love, and that is what they will be doing 10 years from now, just as they were 10 years ago," he adds. "We are just finding a way of getting it to them in a better fashion and with more flexibility, because years go by and generations flip over."
The Individual Streaming Channel Landscape
The Networks
CBS ALL ACCESS
$5.99 per month. The only broadcast network that is available for every consumer to buy a la carte, CBS All Access includes a live stream of the CBS network, CBS library content and original shows like Star Trek: Discovery.
HBO NOW
$14.99 per month. A streaming version of the pay-TV channel, HBO Now features hits like Game of Thrones and Curb Your Enthusiasm.
SHOWTIME
$10.99 per month. A streaming version of the pay-TV channel featuring the same shows as the regular channel.
STARZ
$8.99 per month. Another streaming pay-TV channel, Starz embraces its underdog status with a lower price than HBO and Showtime, while still offering movies and original series.
AMC PREMIERE
$4.99 per month. A premium add-on for select Comcast subscribers, AMC Premiere offers current AMC series and new episodes as they debut on TV.
FX+
$5.99 per month. A premium add-on for cable subscribers, FX+ offers ad-free access to much of the channel's vast content library, as well as new programming.
Disney
(coming 2019) Price TBD. The upcoming Disney-branded streaming service will include its library of films and TV shows, as well as new original movies and shows created exclusively for the service.
ESPN+:
(coming 2018) Price TBD. ESPN's upcoming streaming service will feature live sporting events that are not covered on the linear channels.
The Big Three
NETFLIX
Starts at $7.99 per month. Netflix kickstarted the streaming revolution. Originally a DVD mailing service and then a buyer of library content from traditional media companies, Netflix is now committing billions of dollars to create its own content, as media companies begin to start hoarding libraries for their own streaming services.
AMAZON PRIME VIDEO
Starts at $8.99/month, or included with Amazon Prime. Prime Video has original films and TV shows, a wider variety of features than Netflix, as well as a limited library of content from other channels, such as HBO.
HULU
Starts at $7.99 per month. Owned by Disney, NBCUniversal, 21st Century Fox and Time Warner. The company offers library content from its owners, as well as original TV shows and a streaming live TV bundle.