The Essential Truth of Licensing Cable TV Networks

Steve Burke, CEO of NBCUniversal, made a simple statement yesterday that underlies the future of multichannel competition.

“Our job at NBCUniversal is to license our products and maximize the cash flow of our individual channels. If people are interested in putting together OTT businesses, like Sling or the Hulu product or Sony or others, we are going to sell to those suppliers. We want to make sure that we make as much or more selling to an over the top supplier as we do selling to an MVPD.” (emphasis added)

The implication is clear and Burke's view is no different from that of the leaders of Fox, Disney, CBS, etc. Apple is not going to get to carry and pay for NBCU's popular channels, they are going to have to take the whole bundle or pay a premium for taking less. That's what Sony is looking at with PlayStation Vue.

Maybe Sling TV isn't taking the whole bundle, but thinking about it more broadly. If Dish Network rolls out a secondary Disney channel a bit more broadly to its 13 million DBS subscribers, Disney will certainly be willing to give up not getting the full bundle onto Dish's Sling TV service with its less than 1 million subscribers.

There is no good reason for the owners of the must-have content to support new competitors who give them worse economics than they get from the incumbents. New entrants to the market always pay more for the must-have programming. DBS paid more than cable. Telcos paid more than DBS.

If the incumbent's business is declining and the upstarts are growing there is even more reason to insist on the same or better terms. Unless somehow an upstart grows without must-have programming. At that point, it is no longer must-have content, of course.

Burke was speaking at the Bank of America Merrill Lynch Media, Communications & Entertainment conference in Los Angeles.

A previous post: Getting Content for Dish's OTT Service

Apple Will Not Be Disrupting the Pay TV Market This Year

Yesterday, Bloomberg reported that Apple had planned to shelve their long-rumored service to compete with cable/DBS/telco video. It turns out that there isn't a lot of appetite among the top basic cable programming services to break the bundle that they have prospered in for decades.

Close observers of this scene are not surprised by this development. Competition to the pay TV programming continues, but except for PlayStation Vue and Sling TV it is not direct competition. It is indirect, disruptive competition from Netflix, YouTube, and Hulu.

The strong basic cable programmers probably see these three things:

1. The growth is gone from pay TV subscriptions.
2. Supporting the strongest over-the-top video competitors to the pay TV ecosystem (like Netflix) that yield far less value to the programmers than the pay TV incumbents probably isn't a wise move. That's what Time Warner thinks. If there is a way to sell these rights to one of the pay TV incumbents, that would probably be best and keep value in that ecosystem.
3. If there isn't an appetite among the pay TV incumbents for those rights, and the programmer needs the money from an over-the-top video distributor, it is better to take money from the smaller over-the-top video competitors like Amazon, as HBO did, rather than build up the leader.

What about HBO Now and CBS All Access? HBO, Showtime, and Starz are not in the basic bundle, they are available a la carte. CBS is already available for free to anyone with an antenna. They are never sold a la carte or for free and thus don't have the same place in the cable bundle as ESPN, CNN, or Lifetime.