Are Broadcast Rights Nearing A Death Spiral?
- View Original
- August 22nd, 2017
When live-streaming applications Periscope and Meerkat first came on the scene in March 2015, I became immediately aware of their potential to disrupt the entire sports and entertainment broadcasting industry. It made perfect sense that ubiquitous mobile technology that allows users to stream or view content in one click would catch on like wildfire. To that end, I began to document and study the growth of this type of mobile consumption and, to the extent it was used to pirate proprietary content, dubbed it “nano-piracy.” Nano-piracy networks (NPN) are defined as private networks where live-streaming applications are used to stream live or recorded content to the public or a defined group of viewers. In June 2016, Facebook Live and YouTube Live hit the market, and the growth has been impressive, to say the least.
Through technology developed by my company, we were able to document and record streams and viewers in real time. We sampled over 180,000 such streams and documented over 3 billion viewers. During the same period, I was curious to see what, if any, effect this new technology might have on traditional linear television. The numbers have been staggering and present what I believe to be an existential threat to traditional monetization models and digital rights valuation.
Now, to be clear, there are many factors exerting pressure on traditional linear viewing, ranging from new options for streaming services from companies such as Netflix, Hulu, Amazon, Roku and Apple to new technologies like Kodi, CameraFi and other streaming technologies that have multiple uses. For example, CameraFi can be quite helpful and simple for streaming a business meeting to participants located around the world; however, it is equally useful for re-streaming live-broadcast proprietary content to viewers without cost. That’s an example of nano-piracy, and it’s growing.
In addition to the myriad of new streaming options, the practice known as “cord-cheating” — which is the sharing of access accounts to OTT and subscription streaming services without paying for the right to legally access the content — has become wildly popular and, to a large extent, has been allowed to fester unchecked.
Once again, the result is the gradual erosion of traditional linear offerings.
The Rights Death Spiral
According to a study published by TiV0, a staggering 77.3% of the more than 3,000 respondents surveyed indicated a preference for true a la carte television offerings (a pick-and-pay model where customers only pay for the channels they subscribe to).
Taken to its logical conclusion, the reality is that the current trend of massive losses of pay-TV subscribers may be the beginning of a death spiral for broadcast rights. Already companies such as Sling are starting to touch the third rail of pay-TV by marketing a skinny bundle under the somewhat misleading moniker of a la carte TV. The Crystal Ball
If you accept, as I do, that bundled content programming has long since eclipsed its apogee, then market forces will continue to erode the current pay-TV model. Here is a likely scenario:
- As the bundle unravels, how many smaller programmers will be able to afford distributions deals with multiple-system operators and multichannel video programming distributors?
- The acceleration of cord-cutting and a la carte streaming will inevitably lower traditional ratings and viewership. Traditional viewership metrics are becoming less meaningful since nano-piracy makes it far more difficult to accurately gauge a program’s true audience.
- The exodus from the pay-TV model, coupled with less relevant viewership metrics, will inevitably lead to a decrease in ad spends based upon both the reality or perception of declining value in traditional television advertising.
- Skinny bundles and a la carte TV will cause downward pressure on smaller content owners, likely causing them to seek new distribution and monetization models that will probably include live-streaming behemoths like YouTube (Google), Facebook Live and Periscope (Twitter), which are eagerly awaiting and building toward a mass digital migration to streaming.
- Both live and recorded content owners will start to experience a lessening in the desire of broadcasters to enter into long-term, massively lucrative distribution deals as MSOs and others confront downward revenue pressure.
- Facing greater pressure to meet revenue needs in order to remain profitable, television networks will succumb to the cord-cutting reality, which will require them to seek new distribution models in the currently less lucrative and diffuse world of online streaming. Sooner than later, it is likely that movie studios, sports leagues and broadcast networks will look to lessen overhead by cutting costs across the board.
- Facing declining ratings, can artist and athlete compensation survive at their current levels? Probably not. Less money coming in will mean less money going out. It may not start with major network deals, but smaller distributors such as regional sports networks will likely look to pare down the overhead in light of continuing viewership pressure and competitive legal and illegal streaming options.
Is the situation really so dire? Not yet. However, the number of quality streaming options is likely taking many executives by surprise, and those who do attempt to understand the new landscape my be left in the scrap heap of digital history. Does anyone want to meet me at Blockbuster to check out the new releases?