... With all of the supposed cord cutting going on...
Wait. What. My cord cutting is now "supposed?" I've been fooling myself all these years? Now I am disappointed in myself.
Meant that cord cutters aren't turning into a viable revenue source at a rate that would encourage cable exclusive channels to consider OTT. We're nowhere near that.
Its tough to make a point when you're typing on your phone.
I agree that where things stand right now OTT isn’t quite there yet. As I said though it is heading that way. I do believe that eventually pay television networks will be more adaptive to the change to OTT in time. I do disagree that it wouldn’t be profitable for those networks.
Most networks and pay-per-view content providers operate on a 40/60 revenue split with providers. Although networks receive a chunk of that split, they don’t receive the lion’s share of that revenue. By going direct to consumer via OTT it puts more revenue and control in the hands of networks and content providers.
I have discussed this several times on this board, but again I need to reference the forthcoming WWE Network as something that I feel will be a game changer not just in regard to pay-per-view television, but throughout the industry as a whole. Vince McMahon has long been an industry giant when it comes to pay-per-view television as well as the cable television industry in general. McMahon’s company has provided networks with significant profits over the years and has provided cable and satellite providers as well as distributors the same over the years with his pay-per-view events. The problem McMahon and other pay-per-view content providers have faced in recent years has been as the cost of pay-per-view has steadily increased, it has put the cost out of reach for most people, resulting in declining buyrates.
McMahon announced plans for his network which would see all of his pay-per-view events transfer to being carried by his network a few years ago. The problem he encountered was much like networks like networks such as Epix and Weath TV (Now AWE) he struggled to get carriage clearances by cable and satellite providers to launch the network via the traditional medium.
He (McMahon) himself stated following the official announcement of the launch last month as an exclusive to OTT 24/7 live and on demand network that the agreements cable and satellite providers wanted would have been too restrictive actually netting the company somewhere around thirty-six cents per subscriber. This again is do to the 40/60 model that is the norm for cable and satellite providers.
Although it is a gamble doing things the way he is doing it, I believe it will make McMahon and his company much more money because they will get the subscribers directly and thus will get much more of the revenue as compared to the traditional model. WWE also did a good job of making sure their contracts with NBC/Universal to carry their weekly television shows came up for renewal just prior to their network launch.
They have stated that they intend to keep those weekly television shows on traditional cable television, but by having to renegotiate their agreements now it puts much more of the advantage in their favor not only because of the network launching in a little over a week, but also because they see how profitable those shows have been for the networks, particularly how much those networks make by taking the lion’s share in terms of advertising.
This will give them more confidence to either shop around to different networks, or to take their entire block of cable programming as well as the former pay-per-view events directly to their own network. In addition to the obvious hook they have in terms of drawing subscribers with an extensive on demand library that will be available out of the gate when it launches WWE will also make money when it comes to advertising without having to deal with that revenue split with the networks. In the scenario that all of their weekly programming does migrate to the network in terms of first-run and not replays, the advertisers that pay high rates to networks for advertising time on their cable programs will reach out to WWE directly. When you also consider that WWE will be offering all the network programming, including the former pay-per-view events included with a monthly subscription, it is bound to be successful.
As it becomes successful, other networks will be bound to follow. HBO has stated that they have considered offering it’s streaming service on a subscription model to people who do not have a participating provider. It is only a matter of time before the restrictions that networks face with their streaming services are no longer an issue. I believe networks like HBO will be watching what happens with WWE in terms of their subscriber base at the end of the first year, and then we will likely see more networks adapt a similar model. WWE’s network is only launching in the U.S. initially with the service going abroad later this year and early into next year. I think the network’s subscription base will easily be in the million to two million range if not more by the end of it’s first year. It is a much cheaper option than what people have had to pay in the past and subscribers will get much more content than they have in the past. When you factor in the availability of the network on various platforms I think it’s bound to be successful.
In terms of Epix, I feel they would be better served if they bypassed the cable and satellite providers by offering their service which includes live feeds of all it’s channels, (Which HBO currently does not offer on it’s OTT service) directly to people via subscription. Epix has struggled to get clearances on cable and satellite since it’s launch and it was a part of contention in the recent dispute between DirecTV and Viacom. AWE has faced similar challenges when it comes to carriage agreements, but they have offered the service direct to people via OTT for a yearly subscription price. Epix could do the same thing. I feel it is only a matter of when and how before OTT eventually phases out cable and satellite in it’s current form. I do think that cable and satellite providers will venture into OTT as a means of survival eventually, but I think the landscape will be different. OTT also offers less restrictions and a wider range of what networks and services can offer and where as opposed to cable which can be limited to certain areas and regions, etc.
In regard to the Weather Channel, I am aware of Weather Nation being used as a replacement for the channel while DirecTV continues to negotiate with the network. The problem is much like other networks WN has had issues getting clearances and has been used in a similar situation as a replacement when Dish Network had a dispute with the Weather Channel when the channel was known as The Weather Cast. When that dispute was resolved WN was subsequently dropped, thus limiting it’s exposure and potential growth.
Weather Nation does offer it’s service direct to people via Roku so it will allow them to maintain if DirecTV does end up doing the same thing Dish Network did. OTT does give the upstart networks a new avenue if providers don’t want to give them a chance. OTT is the way things are heading. Just one man’s opinion.