OTT: Wave of the Future                                       January, 2018

by Cathy Corcoran                                              

 

"The fourth wave is upon us," said Mark Greenberg, president of the consulting firm MSGCI, "and if you want to survive, you'd better learn how to swim in it."

 

The wave is OTT (Over the Top programming). “Broadcast was first,” Greenberg said, “followed by cable, then satellite, and now OTT.”

 

The structure of the TV business is changing, but it’s changed before and will probably change again. "But we’re still producing programs, still distributing them, still selling them, and people are watching more than ever," he said.  "A decade ago, we were producing a couple of hundred new TV series a year. Today, it’s nearly 500.  We’re bringing more programs to more people in more places on more devices.”

 

Greenberg will chair the NATPE Streaming Summit on Tuesday afternoon. A member of the NATPE Board of Directors, Greenberg has ridden most of the earlier waves in the business, from his early days in sales and marketing at HBO, to his work at Showtime, where he was responsible for Strategic Planning, Digital Media and Sales and Marketing.  He then became the founding CEO of Epix, where he led its rapid expansion and distribution across new consumer devices, including Xbox, PlayStation®, and Roku®.

 

“The technology comes at us fast and furious,” he said. “What companies need to do today is not just react.  We need to develop a strategy for dealing with this technology.”

 

Streaming Summit panelist Sandra Stern agrees. “I’ve been in the business a long time,” said, “but there have been more changes in television in the last ten years than in the previous 50 years.”  Stern is President of Lionsgate Television Group, a company with nearly 90 TV series airing on 40 networks.  “It’s an exciting time for everyone,” she said.

 

Exciting, yes, but scary too. “On the creative side, it’s a glorious time for television,” Stern said. “The world has opened up to writers, directors, actors and show runners, who can provide the programming that viewers want to watch. The production values on these new series are amazing, the camera work, the sets, the acting - it’s great.”

 

Of course, more shows with increased production values take more money, and the business side of things can be tricky. “In the past, we’ve been accustomed to dividing the business and licensing side of TV in certain ways,” Stern said.  “Now, because of new technology and changes in customers’ viewing habits many of the rights that studios used to be able monetize are now falling on the network side of the ledger. It’s put real pressure on the business model of TV and created real instability.”

 

Originally a production company, Lionsgate acquired the Starz Network in 2016, giving them more control of the distribution process.  Stern said that the merger has been “Everything we hoped for and more.” 

 

Lionsgate has no plans to become simply a production arm of Starz - they will continue to produce programs for a variety of channels and other outlets, and Starz will also produce some of its own programs - but the Lionsgate distribution team has been able to take some of Starz own series and help them monetize them in new ways. On the Lionsgate side of the merger, Starz provides not only increased avenues for distribution, but a more reliable revenue stream. 

 

And revenue is what it’s all about.  OTT players Netflix, Hulu and Amazon TV all started out by purchasing classic TV series and movies from distributors.  At Epix, Greenberg sold so-called “white label” programming to OTT companies. “Viewers watched our shows on Netflix and Hulu, never knowing - or caring - that the shows were coming from Epix. We all made money and everyone was happy.”

 

But now, OTTs are producing their own programming, much of it top quality. Hulu’s “The Handmaid’s Tale” won the Emmy award for Outstanding Drama Series, and Netflix’s “The Crown” won the Golden Globe for Best Television Series. Netflix has 110 million subscribers globally, and has reportedly allocated up to $8 billion on content in the coming year. “It’s hard for networks - hard for anyone! - to compete with that kind of money,” Stern said.

 

OTT means not just more content, it means consumers watch this content differently, now bingeing on their favorite programs when an entire season of shows is released all at once.  These viewers watch TV the way they read books.  “No reads one chapter of a book only for an hour on Wednesday night at 9 o’clock,” Stern said. “When I’m engaged in a story, I read the whole book.  And I watch a TV series one episode after another until my eyes are falling out.”

 

Of course, not all viewers watch this way. “You’ve also got to provide shorter form programming for people who have less time, or less concentration, those who only want to watch for 15 minutes,” Stern said.

 

New OTT players aim to provide that kind of programming and more.  Apple, Google, YouTube and Facebook are now in the game, each backed with billions in Silicon Valley dollars.

 

Facebook’s Head of Development & Programming Mina LeFevre is at NATPE this week, along with her boss, Ricky Van Veen to talk about their new initiative to acquire or fund original scripted and unscripted shows for exclusive distribution on their service.  Lefevre came to Facebook in 2017 from MTV, where she oversaw all of scripted development and programming.

 

Among other shows, she’s now overseeing the Facebook series, “Returning the Favor,” hosted by Mike Rowe, famous for his shows “Dirty Jobs,” which aired on Discovery, and “Somebody’s Gotta Do It,” on CNN.  

 

Rowe has said, “‘Returning the Favor’ is a non-traditional show, on a very large platform (Facebook), inspired by a very simple idea – to introduce America to regular people who are doing something decent, and then, do something decent for them in return. In other words, it’s a show that rewards the kind of behavior I think we’d all like to see more of.”

 

He added that the project came together very quickly. “I have no idea how many episodes we’re going to do, and the truth is, we’re figuring a lot of this out as we go along.” 

 

LeFevre said that “figuring things out as whey go along,” is all in the plan for Facebook.  “We’re not just looking to ‘air’ a show,’"she said.  “We want interactivity, a deeper engagement with our fan base. At Facebook, we already have connective ‘tissue’ that binds communities. We want our video programs to enhance that connectivity. Mike Rowe already has more than 5 million very engaged fans on Facebook. He was a natural fit for us.”

 

Initial Facebook program offerings have been of the unscripted variety, but they are beginning to feature scripted shows as well. “We’re not a linear network that has to fill up preset time slots,” LeFevre said, “so we’re experimenting with both short and longer form programming.”  Currently, they have a ten-episode scripted series available with actress Kerry Washington (“Scandals”).  Each episode is ten minutes in length, and though set in a high school, is geared to an adult audience. Another scripted show will be teen drama “Skam,” already a huge Scandinavian hit, where it broke all streaming all streaming records in Norway, Denmark and Sweden and attracted an active international fanbase on social media. Fans even promoted on line translations to aid in viewers’ understanding in other countries. 

 

Lefebvre said than in the next two years, Facebook plans to be a major OTT player, providing a much broader more open environment where consumption of content becomes community oriented in a much more natural way.  And in five years?  “Oh no one can predict what’ll be happening in five years,” she said.  “Things are changing too quickly for that.”

 

The biggest change of course could be the 700 pound gorilla in the OTT marketplace - the proposed $60 billion merger of Disney and Fox, where Disney would acquire Fox’s studio, its cable networks including FX and Nat Geo, the company’s regional sports networks, India’s Star, Fox’s Sky and Hulu holdings, the Endemol Shine Group and other businesses. Fox would retain its broadcast network, Fox Sports and Fox News.

 

If approved, this could dramatically affect both old and new OTT players, who will find it harder to compete with the mega dollars involved in the new Disney world.

 

Referring to the proposed merger, Sandra Stern said that, though she has no knowledge of the deal other than what’s she’s read in the press, she still remains optimistic about the future of OTT for Lionsgate and other companies.  “I’m sure (Fox chair) Rupert Murdoch knows a lot more than I do about certain things,” she said, “but ultimately, we’re all looking for the same thing - the next big hit.’

 

Mark Greenberg said, “When you factor in costs and CPMs, broadcast TV is still the most cost efficient way to reach a large audience, but today, more than 50% of current viewership is not on broadcast. You can’t ignore that and stay in business.”

 

Sandra Stern said, “I’m not a Pollyanna. There are real business challenges now and in the years ahead, but there’s so much opportunity here.  It’s up to us to figure out a way to reinvent the business in ways where we can all make money.”