Your browser is not supported. Please update it.

5 November 2015

Verizon, CBS and HBO shift – all point to OTT being the new black

One of the main ways that Mobile First TV  services can take off, is if one or more operators goes into the sports markets and buys up rights. That’s just the strategy that Verizon has underscored this week, adding the National Basketball Association mobile rights to those that it acquired for Football, making it two out of the three big US sports franchises The other is MLB, Major League Baseball, which has an OTT operation of its own.

In 2013 Verizon Wireless agreed to pay $1 billion for four years rights to a collection of popular NFL games delivered to smartphones.

During 2014 the NFL started showing Sunday afternoon games on Verizon smartphones. Previously it had Sunday, Monday and Thursday nighttime coverage, but typically only one game is played on those nights, while about 10 to 12 are played on Sunday afternoon.

Now Verizon and the NBA have announced a major, multiyear content and marketing partnership making Verizon the Official Wireless Service Provider of the NBA, Women’s National Basketball Association, NBA Development League and USA Basketball. It will go straight onto Go90, its Mobile First TV offering.

Go90 will offer daily highlights, original content and access to live out-of-market games through a new (we presume paid for) NBA League Pass. However all Go90 users will get access to some NBA-related content and will be able to cut and share clips and highlights via SMS, Facebook and Twitter. The NBA and Go90 will also collaborate on bringing a number of original exclusive series to the Go90 platform, offering “unique perspectives and voices” from around the NBA.

Verizon will become the title partner of the NBA All-Star Slam Dunk platform. The “Verizon Slam Dunk” contest will debut at NBA All-Star 2016 in Toronto and Verizon will become the presenting partner of the NBA All-Star Balloting Program and a partner of NBA Draft, NBA Summer League and the Jr. NBA.

The NBA finals this year were watched by 19.9 million live viewers, and the women’s more like 13.9 million. The average in-season game brings closer to 7 million viewers, across ABC, TNT, ESPN and NBA TV each week in the regular season. NFL over the past decade has grown its average viewership of NFL games on broadcast TV from 15.4 million in 2004 to 19.2 million in 2014 and we imagine it will be going up this year.

There will be a big overlap between the 7 million regular NBA homes and the NFL homes, but it should mean that something well over 20 million homes are immediate candidates for Verizon, with one to two people in each home a potential new customer. AT&T and the smaller MNOs Sprint and T-Mobile will have to make some form of response, whether that is just signing a partnership with ESPN or carrying a new sports channel, or risk seeing a far higher attrition rate over time.

That is likely to lead to more auctions for sports carried out in the US, in a mimic of the auctions that happen periodically in Europe. The US has a tradition of sharing out sports right across free to air broadcasters with the occasional showing from pay TV networks, whereas in Europe pay TV dominates sports rights, including the incredibly expensive soccer rights, with the UK Premiership being the most expensive sports real-estate in the world. Currently that has been fought out between Sky Sports and BT Sport and both are pay TV channels, and much the same is true in Spain, Italy, Germany and France.

We see this shift to mobile sports right, being led by Verizon, in the US, as  also being about a shift from free to paid services, as well as being a competition between MNOs and the existing pay TV world. Essentially the landgrab for the OTT customer is on in earnest and relatively small amounts of money like $1 billion over 6 or 7 years, is the easiest decision to make for an “enthralled” but guaranteed audience.

There has been a lot of speculation about Netflix shifting to paid sports right, as there has been about it accepting adverts, but it has repeatedly pushed these ideas aside. Modestly it wants to dominate drama and movies, and leave room for MNOs and other giants to fight it out over sports rights and news.

Europe and China in particular, but also Latin America and other parts of  the Asia pacific, will be fascinated by every step of this attempt by Verizon to trigger mass Mobile First TV customer defections – whether they are defections from their existing MNO supplier or from pay TV generally or both. Duplicate actions are sure to occur in Europe and China shortly.

In other news this week CBS has said that it will run the next highly anticipated TV-series reboot of Star Trek exclusively on its CBS All Access OTT platform. It is gambling in a similar fashion to Sports that people are fanatical about Star Trek with some 2 or 3 million people in the US having attended a Trekky convention at some time or another, and some 35 million homes regularly viewing Star Trek at its peak.

CBS CEO Leslie Moonves describe these fans as “some of the most passionate fans in the world, and we can see millions of them joining All Access, where they can watch these new episodes wherever they want and whatever they want and on whatever device they want to use, which is increasingly consistent with how younger viewers are watching our shows.”

CBS has built a reputation among the free to air world as “essential” viewing and clearly plans to leave free to air behind in its distant future in favor of direct to consumer paid OTT services. It likely reasons that if it remains “essential” then it can get just as many people paying $6 a month for it, as watch it now for free. Moonves probably also believes, quite erroneously, that the free to air channels can also maintain their advertising strength despite this shift. Or perhaps he accepts that the ground is shifting under CBS and he just wants to have a foot in both ad driven and paid camps.

Commentators viewed the CBS results with some confusion. CBS showed entertainment and publishing up, and cable networks and local broadcasting down, and revenues down overall by fractions. But when you look at the nature of the revenues, CBS showed that the only revenues streams that were up were affiliate and subscription fees. Commentators reasoned that CBS should be trying to drive more advertising as its dominant revenue form, but Mooves seems to be heading in the other direction.

We can expect the rest of the world to also copy this, seeing broadcasters move towards paid OTT bundles and licensing, and away from a reliance on advertising, which quite frankly ONLY still works in the US. We can expect a rich complexion of original programming, paid sports and the resurrection of nostalgic power bases like Star Trek, and all of these to be harnessed to drive OTT, both inside and outside the US.

Much the same went on at Time Warner where CEO Jeff Bewkes talked up a lackluster quarter with revenue increases only coming from movie arm Warner Brothers and from HBO, while Turner fell by the wayside. Movies and content from TV will have more and more opportunities in OTT services, while HBO is financially pushing its own OTT service in the US, after experimenting successfully with it around the globe.

Bewkes talked about Blindspot and Supergirl claiming they were the two most watched new shows among adults 18-49 year olds this broadcast season. But increasingly he will have to look outside broadcasting to OTT wins to really see how well a program is liked. And even Turner’s successes came from its coverage of the Major League Baseball playoffs.

Revenues increased 5% to $6.6 billion but the company managed to grow operating income substantially because this year it had no restructuring charges.