Broadcasters turn to ‘stacking’ rights to gain edge over OTT competition

If 2013 was the year that the idea of binge-watching as a phenomenon hit the mainstream, then 2014 may be the year that traditional broadcasters seriously get into the game. Broadcasters in Canada and the U.S. are buying up the rights to offer complete seasons of television shows on their websites, mobile TV and video-on-demand platforms, in an effort to help curb cord-cutting and to open up new advertising opportunities, including targeted ads. “The natural process of renegotiation between pay TV operators and programmers is yielding a swing of streaming rights in favour of pay TV,” Erik Brannon, an analyst with IHS who focuses on U.S. cable networks, said in an interview. “And I think that this has got to be scaring Netflix.” David Purdy, senior vice-president of content at Rogers Communications Inc., said rights to current and old seasons of shows in their entirety can help broadcasters fight their competition. Canadians’ high usage of peer-to-peer file sharing is partly because historically, there have not been “as many legitimate ways to get caught up on your favourite television shows as there were in other parts of the world,” he said. Purdy added that peer-to-peer piracy and over-the-top services, like that offered by Netflix Inc., are the primary drivers of online video streaming. “And certainly part, if not all, of that traffic could be seen to be unnecessary if we had the full-season … rights and the ability to look back at previous seasons as part of our cable offering,” he said. “So I think it’s critical we move forward on some of these initiatives.” Purdy predicted broadcasters will roll out services based on these types of rights, which are sometimes referred to as “stacking” rights, later this year. He noted that Shaw Communications Inc. has already announced full-season stacking rights for some of its prime-time shows, and said that he is “optimistic” other media companies in Canada will make similar announcements. “Really, the fall will be when this should happen in a truly meaningful way,” he said. This will mean that content would be available online, on-demand, on set-top boxes and mobile and would stay there for a full season, instead of staying up for only two or three weeks and only being available on one platform, Purdy said. Currently, the rights broadcasters hold differ by the organization and by program, said Theresa Truetler, president and CEO of the Television Bureau of Canada, in a phone interview. “Our understanding from our members is that how they approach in their negotiations … how long they can keep a season, how long they put it on VOD, how long it goes on their website, again, it differs,” she said. Fighting new online competitors isn’t the only reason companies are looking to get these rights, as the content that stacking rights would make available could enable broadcasters to increase the amount of advertising they offer. But doing that has meant they have had to find a way around the current television advertising model. In Canada, it’s the number of viewers who watch a program in the seven days after it has been broadcast that counts towards the ratings, said Purdy. “After seven days, it’s unclear what happens — the broadcasters don’t get credit for ads that are seen ,” Purdy said. Running those ads longer than seven days can also violate rules set by actors’ and writers’ guilds, meaning that broadcasters have had to figure out how to “refresh” those ads after seven days by replacing them with new ones. “The ability to load an episode of, say, Modern Family onto a server and then refresh the ads as required, is critical to being able to deliver on a full-season stack and quite frankly, effective TV everywhere strategy overall,” he said. Rogers is currently deploying that technology and doing trials, he said. “By, say, the fall of next year, we’ll have the ability to do that for all the assets that we have on-demand, and certainly all the assets we have online and on mobile as well.” Monetizing full-season content through advertising won’t dilute broadcast ad revenues, Purdy added. “It’s additive,” he said. “This viewing is occurring right now. It’s just occurring outside of the system on peer-to-peer filesharing sites or over-the-top services that have no advertising. It’s happening, but it’s happening in a way that doesn’t help the traditional broadcaster and/or distributor.” According to the Television Bureau of Canada’s Truetler, the only way to arrive at the best business model will be for broadcasters to try different things. “I really think we’re on the verge of an experimentation period,” she said. One potential opportunity on-demand video could offer, Treutler added, is the ability to offer targeted advertising to individual viewers. Though the United States is further ahead in this area, the combination of video-on-demand and targeted advertising only accounted for 0.2 per cent of total TV revenues in 2013, a number that is projected to double in 2014, she noted. “The absolute numbers right now in the States are tiny, very tiny, but the growth is rapid, so five years from now, six years from now, who knows what it’ll be,” she said, adding that Internet advertising similarly grew from a very small share of revenues to a significant one over the past decade or so. “As Canadian broadcasters watch what’s happening south of the border, I’m sure that this will factor into their strategies for rights negotiations going forward,” Treutler said. According to IHS’ Brennan, a key benefit that stacking rights offer broadcasters is the ability to build loyalty among customers, and to get viewers, especially newer generations, in the habit of paying for a TV service. “If I’m Rogers or Shaw or , I want to have as much content displayed through my portal as possible, so that I’m the one in control of the delivery to the eyeball,” Brennan said. “I want everybody to be viewing content because I’m allowing them to view content, not because they found it someplace else.” Brennan said that while opportunities like advertising and perhaps even subscription revenue will arrive in the future, “the idea is that TV everywhere and new rights acquisition not only serve to be the impetus for new loyalty streams, but they’re drivers of significant loyalty.” Brennan added this is a “vital strategy” for cable companies especially, given the emergence of IPTV offerings from companies like BCE Inc, Telus Corp. and Bell Aliant Inc. (in which BCE Inc. has 44 per cent stake). “Canadian cable really is under threat… from coast to coast from IPTV, and I hate to say it, but Canadian cable really has to start hustling to build loyalty,” he said. Offering full seasons of TV series would enable viewers to catch up on shows they’ve missed by watching complete series from the first season. This type of “binge-watching” behaviour has so far generally been the turf of streaming services, and perhaps it’s not surprising those companies are now putting up roadblocks to broadcasters’ stacking endeavors. According to an article in New York Magazine’s online outlet Vulture, published last fall, broadcasters’ pursuit of stacking rights is running into opposition from Netflix, which said it could pay “dramatically” less for those shows that have had their current season stacked by a broadcaster. “To Netflix’ credit, absolutely, every time the property is shown outside of Netflix it devalues it in terms of Netflix viewers,” Brennan said. “So on one hand it is a threat, but on the other hand, this is part of the whole risk-reward scenario of over-the-top television that we’re experimenting with now.” While that conflict may be emerging, Treutler said she is not sure that “what’s behind all of this is looking behind their shoulders at over-the-top services.” She said it’s technological developments in general that have enabled change, allowing viewers to watch content in different ways and pick up behaviours like binge-watching. “Because of all these different opportunities, similarly, broadcaster models have to change,” Treutler said. “This is merely a broadcaster evolution because of what consumers are able to do now.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Nicholas Kyonka nkyonka@thewirereport.ca.

Broadcasters turn to ‘stacking’ rights to gain edge over OTT competition

Broadcast | January 22, 2014

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Broadcasters turn to ‘stacking’ rights to gain edge over OTT competition

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