05 January 2012

TV Everywhere is the New Normal - The Comcast-Disney Deal

Last week Comcast cut a new long term deal with Disney and ESPN (full press release below) which gives a wide view to two major trends in the multichannel television business.
The first is that the programmers' hand in programmer-distributor negotiations is improving and looks to continue to improve. That's a reason that Comcast went long on its commitments, and, for that matter, acquired NBC Universal. The programmers' hand is improving because the telcos successfully entered the distribution market and basic economics says that new successful entrants mean more competition among the distributors. One of the ways that plays out is that a distributor now has more to lose from being without a top programmer for a period of time than than the distributor had to lose when there wasn't as much competition.

The second trend is that TV Everywhere is the new normal.

The last time the distributors attempted to rewrite the basic terms of distribution was nearly a decade ago when Comcast started taking the postion that they wanted VOD rights to all of a channel's top programs and that they didn't want to pay anything extra for it. Generally speaking, that didn't work out. The programmers had a number of problems with that approach: they didn't have VOD rights from their suppliers, providing VOD effectively favored cable distributors over DBS and programmers did not want to do that, Nielsen was ill-equipped to measure VOD viewing, so the risk of VOD diluting the programmers' advertising stream was potentially very significant and finally, Comcast wasn't offering anything more that business-as-usual rate increases on the core channel. The predictable result was that biggest basic cable programmers dragged their feet on VOD and looked for ways to make it work for them (e.g., sampling for new shows).

VOD also required separate delivery and preparation of the content that was available (another cost for the programmer) and VOD delivery was either very expensive or pointless for content that has a short "shelf life" (e.g., live sports, news, American Idol, weather forecasts).

What has changed since then is...nearly everything.

  • The programmers have been increasing license fees because of their stronger bargaining position and the distributors have complained about it. 
  • The distributors wanted additional value and the programmers were generally sympathetic to that position. 
  • Nielsen gradually made progress on the measurement issues and recognized they needed to track viewing in a more holistic way than with a meter on the set. 
  • The advertisers came around and adopted C3 as the accepted viewership currency, creating the precedent of accepting something other than 1970s-era traditional viewing as having value.
  • Internet-delivered video drove much higher broadband penetrations. 
  • Netflix did a lot of great pioneering work and made live streaming into a value-add and then a business. 
  • OTT video is the looming threat to both programmers and distributors.
TV Everywhere is a way to benefit the existing system, which is in both of their interests, at least for now.

TV Everywhere won't be the future forever --
  • at some future date, perhaps the programmers will be able to monetize over-the-top OTT video without killing the core multichannel business, the goose that laid the golden egg
  • the rising cost of the multichannel subscription is creating a "price umbrella" for nascent OTT alternatives
  • video piracy might undermine both core multichannel subscriptions and nascent OTT alternatives
 -- but it should be the dominant multichannel trend of at least the next five years.


The Walt Disney Company and Comcast Corporation Announce a Long-Term, Comprehensive Distribution Agreement That Advances the Successful Multichannel Business Model

Deal Provides Xfinity TV Customers Broad Access to Top Sports, News and Entertainment Content Across Multiple Screens in and Out of the Home
PHILADELPHIA, PA and BURBANK, CA  -  January 4, 2012

Comcast Corporation (Nasdaq: CMCSA, CMCSK) and The Walt Disney Company (NYSE: DIS) today announced a long-term, comprehensive distribution agreement that will deliver Disney’s top quality sports, news and entertainment content to Comcast’s Xfinity TV customers into the next decade on television, online, on tablets and handheld devices. The new agreement enhances the multichannel business model and supports the companies’ mutual goal to deliver the best video content to customers across multiple platforms using the latest technology and cloud innovation.  For the first time ever, Comcast’s Xfinity TV customers will be able to watch ESPN, ABC or Disney shows live or on demand and across multiple screens.  The companies also agreed to collaborate over the term of the deal to create new, innovative viewing experiences for Xfinity TV customers.
The networks and services covered by the agreement include: ABC, ABC Family, Disney Channel, Disney XD, ESPN, ESPN2, ESPNU, ESPN Deportes, ESPNEWS, ESPN Classic, ESPN Goal Line, ESPN Buzzer Beater, ESPN 3D, ESPN GamePlan, ESPN FullCourt and ESPN3; retransmission consent for seven ABC-owned broadcast television stations (WABC-TV New York, WLS-TV Chicago, WPVI-TV Philadelphia, KGO-TV San Francisco, KTRK-TV Houston, KTVD-TV Raleigh-Durham, and KFSN-TV Fresno) as well as more than 10 high-definition networks.  Additionally, Comcast will launch Disney Junior, a new 24-hour basic channel for preschool-age children, parents and caregivers.  Comcast will also provide its Xfinity TV customers with broad access to a suite of live Disney networks on an authenticated basis and expanded Xfinity On Demand content through Disney’s comprehensive TV+ initiative.  In total, 70 services are covered by the broad scope of this new agreement.  License fee schedules for different services under the deal will be phased in over time.
“Comcast was the first video provider to create technology that enabled us to deliver content to customers where and when they want it across any viewing experience,” said Neil Smit, President and Chief Executive Officer, Comcast Cable. “We are very pleased to have reached this unprecedented and innovative, long-term agreement with Disney which embraces the future of entertainment and allows Comcast to continue to bring our vision of TV Everywhere to Xfinity customers whether at home or on the go.”

Anne Sweeney, Co-Chairman, Disney Media Networks and President, Disney/ABC Television Group, added, “This landmark deal is a great example of what can be achieved when programmers and distributors collaborate and innovate together to meet the ever-evolving needs of consumers and enhance the viewing experience. By combining the best news, sports and entertainment content available today with cutting-edge technologies, we’re able to fully realize our comprehensive TV+ initiative, and introduce a brand new suite of authenticated services to Comcast subscribers.”
Added George Bodenheimer, Executive Chairman, ESPN, Inc., “Given the scope of assets Comcast and Disney/ABC/ESPN are making available to consumers, this agreement is unprecedented in our industry. It reinforces the value of the multichannel subscription and takes full advantage of new technologies, which serve all of our viewers.”
The extensive and expanded rights package for Comcast’s Xfinity TV customers includes rights across multiple platforms for:
  • Comcast’s Xfinity TV customers will receive more ABC, ABC Family, Disney and ESPN content through their set-top-box and, at this time, Disney and ESPN content online, including:
    • ABC On Demand, ABC’s fast-forward-disabled On Demand service, which currently features a selection of top-rated primetime entertainment programming, including episodes of such popular current ABC shows as “Castle,” “Grey's Anatomy,” “Once Upon A Time,” “Private Practice” and “Revenge.”  Full current seasons will be made available on a number of shows.  Additionally, Xfinity TV customers will have access to a variety of ABC News programming as well as some local ABC owned-station content.
    • ABC Family On Demand, which features a variety of top-rated full episodes, refreshed monthly, from such popular millennial favorites as “The Secret Life of the American Teenager,” “Switched at Birth,” and “Melissa & Joey.”  Full current seasons will be made available on a number of shows.  ABC Family original movies like “12 Dates of Christmas” will also be available.
    • Disney-branded On Demand offerings, including Disney Channel On Demand, Disney Junior On Demand, and Disney XD On Demand.  Refreshed each month, the Disney Channel On Demand offering will include episodes from such series as “Handy Manny,” “Mickey Mouse Clubhouse,” and “Jake and the Never Land Pirates” for preschoolers, as well as variety of episodes from “A.N.T. Farm,” “Good Luck Charlie,” “Wizards of Waverly Place,” and other popular series for older kids.  Select episodes featured on Disney Channel On Demand will be available in innovative new offerings, such as playlists and monthly programming blocks, in addition to a number of episodes available in multiple languages.  Disney Channel Original Movies such as “Lemonade Mouth,” “Geek Charming” and “Phineas and Ferb:  Across the Second Dimension” will also be available. Disney XD On Demand features a variety of episodes from such series as the Emmy Award-winning animated hit “Phineas and Ferb.”
    • Disney Channel’s subscription Video On Demand service, which offers on demand access to select episodes before they air, will now be available to Xfinity TV customers who receive Disney Channel, a service that Comcast will offer to these customers for no additional fee.
    • Expanded on demand content from ESPN, including content from ESPN Deportes and ESPN’s award-winning original content from ESPN Films.
    • The subscription On Demand service “Disney Family Movies,” which features a selection of classic and contemporary feature films and animated shorts from The Walt Disney Studios.
  • Xfinity TV customers will receive broad access to existing authenticated products like WatchESPN, as well as upcoming authenticated products, including WatchDisneyChannel, WatchDisneyXD and WatchDisneyJunior.  These services will give Comcast’s Xfinity TV customers more opportunities to access live and video on demand content, both in-home and out-of-home, on their computers, smartphones, tablets and gaming consoles.  
  • Xfinity TV customers will also receive the recently announced Disney Junior, a new 24-hour basic channel for children ages 2-7, parents and caregivers.  Upon its debut in 2012, the new channel will feature animated and live action programming that blends Disney’s unparalleled storytelling and beloved characters with learning, including early math, language skills, healthy eating and lifestyles, and social skills.
  • Comcast also obtained rights to air certain content from ESPN3, ESPN FullCourt and ESPN GamePlan on Comcast’s Xfinity Sports Entertainment Package.
About Comcast Corporation:Comcast Corporation (Nasdaq:CMCSA, CMCSK) (www.comcast.com) is one of the world's leading media, entertainment and communications companies. Comcast is principally involved in the operation of cable systems through Comcast Cable Communications and in the development, production and distribution of entertainment, news, sports and other content for global audiences through NBCUniversal. Comcast Cable Communications is one of the nation's largest video, high-speed Internet and phone providers to residential and business customers. Comcast is the majority owner and manager of NBCUniversal, which owns and operates entertainment and news cable networks, the NBC and Telemundo broadcast networks, local television station groups, television production operations, a major motion picture company and theme parks.
About The Walt Disney Company:The Walt Disney Company (NYSE: DIS), together with its subsidiaries and affiliates, is the world’s largest diversified international family entertainment and media enterprise with five business segments: media networks, parks and resorts, studio entertainment, consumer products and interactive media. Disney Media Networks comprise a vast array of The Walt Disney Company’s broadcast, cable, radio and publishing businesses, including Disney/ABC Television Group and ESPN, Inc.  Disney is a Dow 30 company and had annual revenues of $40.9 billion in its most recent fiscal year.

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