The television industry could soon be sliced up between the haves and have-nots. This week Sony became the second company after Dish Network Corp. to offer a slimmed-down cable bundle via its Web-TV service called PlayStation Vue. But like Dish’s Sling TV, its offerings are made up almost entirely of channels owned by major media companies. As more and more TV viewers cut the cord and migrate to over-the-top products with skinnier packages, some analysts say independently owned networks -- already at a disadvantage -- are at risk of being completely left behind.
Winter Horton, chief operating officer of the Spanish-language broadcaster Estrella TV, isn’t worried, and in fact embraces the coming disruption. “Bring it on,” Horton told International Business Times. “The more outlets the better. We think this is something that actually benefits us.”
That’s a rosy outlook from someone who whose industry is about to undergo a tectonic shift. On Wednesday, the PlayStation Vue launched in three cities, offering 80 channels across three tiers of service. It follows Sling TV, which offers an even skinnier bundle of just 17 networks for $20 a month. In the meantime, Apple Inc. is rumored to be readying its own service, and a number of individual networks -- including HBO and CBS -- are gearing up to go direct to consumer.
Media analysts have been warning for a while now that converging forces -- cord-cutting, new distribution methods and a general decline in ratings -- are threatening to wreak havoc on the bundled status quo, creating an unequal system where standalone programming is squeezed out.
Presented with that argument, Horton said Estrella TV stands to gain more than it will lose. He said much of its audience already falls into the very demographic that over-the-top services (meaning content transmitted over the Interent without a cable subscription) are trying to reach. “If you look at our network, we’re growing the fastest with millennials right now,” he said. “The people that are adopting the Apple TV services, or the Sling, or all these OTT services, are the people that like our programing.”
Horton’s professed excitement for over-the-top TV is echoed by some of his cable-TV counterparts. “This helps us tremendously,” said Charles Segars, chief executive of Ovation TV, an independent cable network focused on arts programming. “I think that anybody who has a vibrant brand that is curating specific content around a particular subject matter, the more players there are delivering video content -- and trying to get a critical mass to deliver that content -- only makes it better.”
A Mad Scramble
Not everyone shares their optimism. Brandon Ross, an analyst with BTIG, said standalone channels will be at a serious disadvantage if consumers begin to embrace slimmer packages at cheaper prices. “There’s going to be a scramble to get into these packages, and it’s going to be a lot more difficult to get carriage if you’re not part of an organization that has networks that have some heft to them,” Ross said.
The issue, Ross said, boils down to basic mathematics. More distributors may mean more outlets, but it also means smaller audiences. The cable bundle as it exists today is essentially a one-size-fits-all model, but as the model is sliced and diced, there will be winners and losers. He said standalone networks tend to have less bargaining power, and many already have significant market penetration on linear cable.
“If you look at today’s current ecosystem, a lot of these networks have as full a distribution as they really need,” he said. “Now there are going to be several more of these [multichannel video programming distributors] that they’re going to have to go and negotiate with. If they’re left out of these packages, and subscribers move to those packages, then they’re screwed.”
The Status Quo Is No Picnic
In a world of unlimited choices, even bigger networks will have to contend with smaller audiences. As BTIG warned on Wednesday, not even ESPN -- currently the most-watched network on cable -- is safe from the fraying of the traditional bundle. Market penetration translates to revenue for TV networks, and being in fewer households means facing reduced advertising rates and affiliate fees.
“If the skinny bundle becomes the way, and you’re not in every package, whatever number of households you’re in is going to be less than what you’re in now,” Ross said.
It’s a scary future, but perhaps it’s one of the reasons that some independent networks are expressing optimism about it -- for them, the present is not exactly a walk in the park. The debate over media consolidation is an old one, and smaller networks have long complained of unfavorable treatment at the hands of cable companies like Comcast Corporation or Time Warner Cable Inc. As we speak, Estrella TV is locked in a contract stalemate with Comcast in three markets. The network has accused Comcast of trying to squeeze it off the air in areas where Telemundo has been losing viewers to Estrella, while Comcast asserts that Estrella has “limited appeal” and is not worth the programming fees it's asking for.
Horton said a plethora of new distribution channels in those markets might just even the playing field. “If you look at some of the giant companies like Comcast, they’re the ones that stand to lose,” he said. “Because where they want to block people out, we’re going to have plenty of outlets to get our programing out there in spite of them.”
At the same time, it’s telling that many independent networks are not interested in talking about the implications of over-the-top TV -- at least not right now. We reached out to the Weather Channel, Al Jazeera America, the Tennis Channel, Z Living and others, but they either declined to comment or did not respond.
Back at Ovation TV, Segars said he is in no rush to negotiate OTT deals with Sony, Dish or Apple, but he expects that he will as the services expand their subscriber bases and seek to expand their channel lineups. “We’re taking a wait-and-see approach,” he said. “We do believe curated arts content will work extraordinarily well on those platforms and we’re going to be the one to lead it.”