Cutting the Cord, Part 2: Still Small, Still Scary for the TV Biz

It’s the topic du decennie for the television industry: How many people are cutting the cable cord and getting their TV and movie fix from Netflix, Amazon Video On Demand, and other services on new TV add-on boxes such as Apple TV, Roku, and the like, or from other less savory sources? I explored the topic a bit a few days ago, since I’m taking a close look at where television is headed.

This morning, a panel of TV luminaries offered their take at the Streaming Media West conference in Los Angeles. On the panel, entitled Cutting the Cord on TV: Will Online Video Really Lead to Cable’s Demise?, were moderator Jonathan Hurd, director of research firm Altman, Vilandrie & Co.; Bruce Eisen, BP of online content development and strategy for Dish Network; Greg Kampanis, senior VP of content strategy and operations for South Park Digital Studios; and John Paul, executive VP of products for Sling Media.

Hurd said those viewing TV episodes on the Internet daily is still small at 15%, but that’s more than double a year ago. “Cord-cutting, if it’s happening, is relatively small,” he says–about 2% to 4% depending on age group. But the firm asked its survey group if they’ve seriously considered dropping subscription TV services. Most said not, but those aged 18-24 are much more willing–about 25% of them.

Q: What’s the rationale behind putting content online? South Park’s Kampanis says at least 2 million people were visiting sites with South Park content on them, so it saw an opportunity to reach people. Now its sites reach 10 million people, after its launch two and a half years ago. Also, the reality is that after 15 years of the show, a lot of 20-year-olds haven’t seen half the episodes. But he concedes that South Park may be a special case, given the young skew of its audience. He says they’re profitable on the digital side.

Q: How do you see the rest of the networks handling how they put shows online? Kampanis: No unilateral opinion yet.

Q: How does online video affect the various players in the TV industry? Dish’s Eisen: It’s evil! he jokes (sort of). The problem with making shows available to everybody the day after it airs … we’re setting expectations and training people. If I can watch Glee tomorrow morning and not pay for cable, that’s bad. If people decide they don’t need to pay for TV service, one of the pillars of the business of the industry (subscriptions) gets hurt. It doesn’t help anybody to have the foundations of the television industry shaken like that.

Q: NBC Universal recently said Hulu needs to be reined in. Are content providers likely to limit their online efforts? Kampanis: We would rather be behind an authenticated wall. But the industry has been slow to build that. Plus, DVD sales have been down the last couple of years, so we needed to fill that hole. And TV Everywhere still isn’t quite there. Until that time, we need to do something or we’re losing those viewers to Bittorrent or illegal sites.

Q: How do you view the potential for watching online content on TVs? Sling’s Paul: For Sling, the ability to stream your TV onto mobile phones is the biggest driver right now. This (alternative delivery of TV content) is happening. Content guys can’t change it. Companies have to adapt. What’s good for the industry is that Internet video is cheap–cheaper than laying fiber, etc. It’s up to the distribution side of the industry to come up with new models and not fight it.

Q: Tell us about your relationship with Google TV. Dish’s Eisen: It is the next wave and we want to be part of it. We’re obviously the leader in new technology, like Sling, and we embrace it.

Q: Do you see other MSOs (multiple system operators, otherwise known as cable and satellite companies) doing over-the-top (Internet delivery of TV content)? Eisen: Not yet. Paul: What holds the industry back is rights. Companies don’t have the rights to put South Park on the mobile phone, for example. It’s going to take a few years for content owners to get comfortable.

Q: Besides TV Everywhere, how are you combatting cord-cutting? Eisen: Providing lots of alternatives and flexibility on how people want to watch content, such as using Sling.

Q: What about maintaining higher quality on cable subscription and offering lower resolution on online video? Eisen: If we have the high-def rights, then over-the-top will be high-def, though it can change depending on bandwidth available to each home.

Q: What’s the opportunity for 3-D to be a differentiator for cable and satellite firms? Eisen: I don’t think we’re there yet. It’s some ways off. Paul: 3-D might revive theaters. But it seems unlikely consumers are going to adopt it en masse.

Q: How do you view demands of some viewers for a la carte pricing for cable channels? Kampanis: As a cable show, we don’t like that. Essentially, the economics wouldn’t work–it would make it harder for niche shows to survive. Eisen: I don’t think anyone can offer, say, just ESPN.

Q (from the audience): Does it matter that the video is going to TV vs. a PC or mobile device? Kampanis: Yes. We licensed it for real money to Netflix. Being good partners with Comedy Central, we’re not big fans of over-the-top.

Q: What’s the future of networks in the age of Internet TV? Paul: I think linear programming is generally dead. It’s just a matter of when. As we transition to IPTV, it will be on-demand. (Except sports and news.) Eisen disagrees: Linear will be here quite a while. Like NBC–they have an on-demand component, you can get The Office or 30 Rock on demand. Kampanis: F/X and other cable channels have valuable brands. Also, people want to watch Jersey Shore real-time so they can talk about it with their friends the next morning.

Q: Will there be more onus on content providers to ensure good viewing experiences as they go online? Kampanis: Yes. When there’s a problem with a channel, people call Dish or Comcast. Online, we have to handle that. Luckily, people are just as willing to blame their own home networks. Paul: This will be a big issue, especially when Netflix alone can account for 20% of Internet traffic at times.

Q: If Netflix were to write a big check to South Park like it did to Epix and Comedy Central said no go, what would you do? Kampanis: We’re on Netflix. We’re always listening to big checks. But a lot of content owners defer to the cable networks.

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