A new study suggests that pay-TV providers might not be able to count on today’s 18- to 34-year-olds as longtime future customers. At the Cable Show today in Washington, Pivot — Participant Media’s cable network that launches August — released the first of what says will be an annual industry report about how millennials consume TV content. The study looked at “broadbanders” (aka “cord cutters” or “nevers”), those who do not currently subscribe to pay TV services but have broadband/Internet access and watch TV programming, and “cross-platformers” (aka “strayers”), subscribers who have both broadband and Pay TV. Among the key findings: 13% of 18-34 year olds (8.6 million) who already have broadband service are committed to a broadband-only existence, a much higher percentage than in previous reports. In addition, many cross-platformers are looking to stray from the “pay-TV ecosystem” (17.9 million 18-34s, as well as 32 million 18-49s). But the report also indicates that 7% of at-risk cross-platformers would consider keeping their pay TV subscriptions if offered programming streamed live and on demand anywhere/everywhere, and 58% of broadbanders would consider subscribing to TV for a bundle of networks from their broadband provider, streamed live and on demand. Not surprisingly, 92% of respondents ages 18-34 want VOD streamed everywhere and anywhere and 94% would feel more positively about networks that offer VOD streamed everywhere.
It’s a shame that the general public usually can’t read industry reports from Bernstein Research’s Craig Moffett. When he’s on, which is frequently, his stuff is as thought provoking and engagingly written as anything you’d see in The Atlantic or The New Yorker. So I’ll consider it a public service to summarize his compelling effort this morning to bust one of the tech world’s most fervent beliefs: that that some company — perhaps Google, or Apple, or Netflix — will topple the pay TV oligopoly by offering cable programs or channels, possibly a la carte. Microsoft recently backed away from its dream of offering a cable-like service through its Xbox game console. Others will also give up, Moffett says, because the problem isn’t that Comcast or DirecTV are ignoring consumer demand to break up the expanded basic package. Six companies — Disney, News Corp, NBCUniversal, Time Warner, CBS, and Discovery — account for 90% of all viewing hours. They demand that their channels be sold in packages, ”and only that way,” Moffett writes. Didn’t the music industry try to do much the same thing with CDs before it had to back down and sell individual tunes for 99 cents? Yes, but the music industry had to respond to Napster offering songs for free. The danger of that happening to TV channels “is nothing like what the music industry faced ten years ago (at least, not yet),” Moffett writes.
BSkyB has for years held exclusive rights to the movies of the major Hollywood studios in the first subscription pay-TV window, the UK’s Competition Commission pointed out in a provisional report issued today, saying Sky’s large subscriber base is preventing rivals BT and Virgin Media from bidding successfully against Sky for these rights. BSkyB responded by saying it will cooperate with the the ongoing regulatory review but believes that no regulatory intervention is required.
“At the heart of the problem is Sky’s strong position in the pay-TV market, with twice as many subscribers to pay TV as all other traditional pay-TV retailers put together,” said Laura Carstensen, who headed the commission probe. Sky supplies some other pay-TV companies with its movie channels, but the industry watchdog said that prices charged for the service are too high. Consumers are paying up to $98M a year too much to see films on television as result of Sky’s dominance, the commission said. Subscribers to Sky’s 12 movie channels pay roughly $60 a month.
Lionsgate CEO Jon Feltheimer touted upstart pay cable channel and broadband service EPIX and implied that the company is open to tweaking its groundbreaking but controversial distribution deal with Netflix. Now 2 1/2 years after it was announced, EPIX (the partnership of Lionsgate, Viacom and MGM) is available in some 30 million homes but has yet to land carriage deals with top cable operators Comcast and Time Warner Cable as well as DirecTV. But during his keynote speech this afternoon at the Mipcom TV market in Cannes, Feltheimer stressed that “EPIX is working” and that “it has achieved one of the fastest accelerations from startup to profitability of any channel in history — profitable after only 10 months of operation”.
He called EPIX’s recent deal with Netflix an example of capitalizing on “our opportunity to layer our traditional partners with new partners,… establish more flexible pricing and ultimately create a win/win scenario for all.” The pact, which allows Netflix to carve out a new window for streaming movies 90 days after they debut on traditional premium pay television, has raised eyebrows among traditional distributors like Time Warner Cable which has said such an agreement makes EPIX less attractive. Feltheimer suggested the length of the window can be negotiated. “There’s nothing sacrosanct about the 90 days,” he said.
During his speech, Feltheimer poked fun at the company’s prolonged ownership battle with Carl Icahn (“Believe it or not, one of my toughest critics is here in the audience …
2ND UPDATE: I’ve just learned that Relativity Media will be in the distribution business sooner rather than later as it attempts to become a mini-major. Hmm.
UPDATE: This exclusive deal with Netflix might be impressive if more of Relativity Media’s movies did better at the box office. So it’s not exactly earth-shattering that Ryan Kavanaugh just told me that, at 12:01 AM Tuesday, Netflix is sending out a news release about Relativity no longer delivering its movies to pay TV channels. Instead, Relativity’s pics will now be shown via Netflix’s online streaming service. Insiders are calling this the “largest pay TV deal ever” — if that’s what it is. This will include going forward up to 30 movies per year. The first movies to go through the deal are the Nic Cage starrer Season of The Witch, the Brothers Strauss’ Skyline and The Fighter starring Mark Wahlberg and Christian Bale. And maybe the Sundance-buzzed documentary Catfish and Wes Craven’s horror film My Soul To Take, among Relativity’s future movies. (How many underperforming Relativity films will be included as well?) Sorry, but it’s hilarious to think this deal will make HBO or Showtime or Starz or Epix shudder, especially as they continue to move away from showing movies and more towards original programming.
French publisher Lagardere has begun the process of selling its 20% share of the pay-TV group Canal Plus now that talks with 80% owner Vivendi have broken down. Vivendi was not going to pay the €1.4 billion ($1.8 billion) Lagardere wanted. Analysts I’ve spoken say that the IPO threat by Lagardere threat could be a way of forcing Vivendi back to the table.
But it also could backfire. Juliano Hiroshi Torii, media analyst at Societe Generale, tells me Vivendi could just wait a couple of years and buy back the 20% for less than the €1 billion it’s already offered. Analysts say that in current market conditions, combined with the need to offer potential investors a discount, Lagardere is unlikely to get more than that if it goes down the IP0 route. Lagardere hopes potential investors will be tempted by thinking they can turn the stake in a couple of years’ time. Hiroshi Torii says, “It’s an ineffective threat because Vivendi is not in any hurry to buy.”
Lagardere publishes magazines Elle and Paris Match and runs TV and radio stations. Its move to seek a sale has been widely expected since the group has long said it wanted to exit Canal Plus. Analysts say Lagardere trades at a 15-20% discount as investors punish it for owning minority stakes outside its core magazine and book publishing business.
Vivendi has been buying up other minority stakes and may not want Lagardere’s 20% getting away. Vivendi bought …