By Liana B. Baker
Jan 6 (Reuters) – U.S. cable and satellite television
operators, already locking horns with programmers over
subscriber fees, are now squaring off over the mobile apps that
viewers are increasingly using to watch TV.
Internet-based services such as Netflix Inc have
gotten millions of viewers accustomed to catching shows on
tablets and phones. And as the incumbents are getting in on the
act with apps of their own, that has become a sticking point
dragging out major programming negotiations, as in the case of
Dish Network Corp and Walt Disney Co, which are
trying to reach a new rights agreement.
These disputes increase the dangers of further blackouts and
may mean delays in the development of apps that combine the
content, technology and marketing muscle of both sides of the
industry.
Missteps by cable and satellite operators also raise the
danger that some consumers will rely more on Netflix, and other
such services, and cancel their pay-TV subscriptions, causing a
major drop in industry revenue. Meanwhile, both sides are
scrambling to draw consumers to their apps and get the most
appealing and profitable deals in place for the future.
Attendees at the Consumer Electronics Show in Las Vegas
this week will sample apps across a range of mobile and
connected TVs. Dish will show off a new version of its “Dish
Anywhere” app, which enables live viewing and lets users
transfer shows from their DVR to mobile devices and watch them
offline, a feature that has upset media companies.
And it is not just Dish: Time Warner Cable Inc,
Comcast Corp, DirecTV and Verizon FiOs
have all created apps in recent years, while the largest content
companies, including Disney, Viacom Inc and Time Warner
Inc’s HBO and Turner Broadcasting System, have
countered with their own.
“Both sides are paranoid. The operators think that if the
programmers can create a one-to-one relationship with the
consumer, some day they peel off and become their own HBO,” said
an executive at a media company involved in content negotiations
who was not authorized to talk to the media.
Among the areas being fought over are advertising revenue
and user data. Ad sales on the platforms are still small and
hard to estimate, but revenue is expected to grow as more
viewing moves to mobile devices, said Jeff Minsky, director of
emerging media at media agency OMD. Both sides are trying to
figure out the best way to split that revenue.
Media companies also want to gather and crunch all the data
about viewing habits they can to sell to advertisers. The
companies receive less high quality data when people watch
network programming through an app from Dish Network or DirecTV
instead of using their own apps.
“The fight is in the details. Who is controlling the user
experience, who is controlling the data and where is the
experience taking place?” said another person involved in
programming negotiations.
‘FIND IT ELSEWHERE’
Executives worry that not adapting to changing habits could
send viewers away from cable altogether. Needham research
analyst Laura Martin, citing PWC figures, estimates that in 2012
consumers paid $75 billion to U.S. pay-TV providers, $45 billion
of which was reaped by content companies while $30 billion was
kept by cable, satellite and telecommunications companies
offering the TV services.
“There’s no question more and more people will continue to
consume whatever content they are looking for on a variety of
devices, not just the television set. If we are not evolving and
providing our content in the way people want to consume it, then
people will find it elsewhere,” said ESPN’s senior vice
president of digital distribution, Matt Murphy, who oversees the
business side of Disney’s viewing apps.
Apps from cable operators and programmers have the same goal
in mind – to demonstrate the value of a cable or satellite
subscription.
But in the quest to show that cable subscriptions are worth
the money, both sides end up competing to lure the consumer to
different apps that feature the same content. Sports fans, for
example, need to choose between the WatchESPN app or Comcast’s
Xfinity TV GO app to watch the same programs.
There’s also fear from operators that if programming
providers build up large audiences through their own apps, they
could one day go “over the top” or dispense with cable. One of
the most closely watched issues in pay TV is when popular
streaming service HBO Go will go direct to consumer.
Deals on programming last several years, so negotiations
have to address how people might watch TV five or 10 years from
now. One large media company was pushing for clauses to protect
its apps in case a cable company one day adopted usage-based
Internet pricing, according to people familiar with the matter.
If cable companies one day make customers pay for how much
broadband Internet they use at home, they could offer use of
their own TV viewing apps free to customers, which would give
them an edge over the apps made by media companies.
Some are trying to bridge the gap. The third-largest U.S.
cable company, Cox Communications Inc, offers
“Contour,” a well-reviewed iPad app that integrates 30 apps
within it, the only offering on the market so far to keep all
the apps under one roof.
APP OVERLOAD
When TV viewers want to use an app to watch a show, they are
likely to turn to channels and networks they know, such as
WatchESPN, WATCH ABC or HBO Go, said David Wolf, managing
director of Accenture’s digital service practice in North
America, whose firm has been gathering research on viewing from
a global consumer survey of 12,000 consumers.
To be sure, usage of these apps is still small compared with
how many people watch TV the traditional way. But it is growing
quickly. The “Watch ESPN” app is available in 55 million U.S.
homes and has been downloaded 24 million times, ESPN said, and
minutes viewed on the app on mobile devices is up more than 6.5
times from two years ago.
The next place viewers turn to are apps that do not require
a cable subscription, such as Netflix or Hulu, Wolf said. Only
then, in third place, will viewers turn to apps made by their
cable or satellite company, he said.
One hurdle facing the world of media apps is that users
often need to figure out their cable account information to log
in. But it’s getting easier. Some operators are letting
customers use Facebook credentials or a phone number to sign in
while cable operators are working on technology for automatic
authentication so a viewer does not have to sign in at all.
Simonette Lowy, a 26-year-old fashion designer in Los
Angeles who uses DirecTV’s app to set her DVR recordings, said
with so much choice out there, it is hard to know which apps
have best streaming quality or carry which shows.
“Why are there so many? It’s too much. People just want
everything in one place,” Lowy said.
(Reporting by Liana B. Baker; Editing by Ron Grover, Christian
Plumb, Martin Howell, Edwin Chan and Steve Orlofsky)
