TV Everywhere? More like TV Nowhere.

NBCUniversal tried to “digitize” TV, and failed. But TV is still around.

How did old school TV survive the digital revolution?

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Ripe for digital transformation

Anyone who pays for TV knows it is an industry ripe for disruption. You pay ~$100 a month to have a clunky box from the 90s connected to your TV, use a giant remote control that lets you surf an old-school looking interface to find the 6 channels you actually watch among the hundreds you pay for. Once you do find your show, you are interrupted every 10-12 minutes for a series of GEICO ads and annoyingly catchy songs about your local personal injury lawyers.

Amid the digital revolution, it is a miracle this horrendous consumer experience still manages to exist. Why hasn’t the whole model already moved online, like Netflix? Well, they tried – you just never heard of it.

The solution: TV Everywhere

“TV Everywhere” is an industry-wide term coined around 2009 [1], in attempt to extend the TV experience to an array of new screens like laptops and mobile devices. The simple solution was this: prove you are a paying TV customer, then access all content online.

To understand the reason behind launching TV Everywhere, it is helpful to understand NBCUniversal’s place in the media ecosystem in the exhibit below:

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TV Everywhere would allow content creators like NBCUniversal to get paid extra for digital distribution of content, and the distributor gets to offer a more compelling product to compete against the rising digital players like Netflix and Amazon.

An epic flop. Why did it fail?

The seemingly promising initiative has been unsuccessful, however, for several reasons:

  1.  Inconvenience
    • Requires logins
      • Most users don’t know their username/password
      • Has to login each time for different apps/sites
    • Varying usage restrictions
      • # of simultaneous streams / # of authenticated devices / # of episodes viewable
      • Some only available within home wifi network
  2. Confusing and difficult to understand
    • Content available online vs. TV was different
      • Some are linear simulcast of TV, some are on-demand
      • Content type varies by provider
    • Content provided at both distributor level as well as content provider level
      • “Do I watch NBC News on Comcast App/Site or NBC News App/Site?”
    • Content restriction
      • New content available online only x hours/days after airing on TV
      • Content taken off after x episodes then moved to 3rd party like Netflix

It’s no surprise this confusing value proposition failed. 75% of consumers have still never heard of TV Everywhere even as late as December 2015 [2]. But why did TV Everywhere come with so many strings? The crux of the failure boils down to one fact: the existing infrastructure is too valuable to NBCUniversal compared to the digital opportunities. 

The current model, despite its inconvenience to the end consumer, offers the best economics to the traditional ecosystem. It is far more important for NBCUniversal to retain TV dollars than to seek digital pennies. Let’s look at the two main revenue streams as a TV channel: advertising and subscriber fees.

TV is still the holy grail of advertising as it is the only platform that can deliver audiences at scale whereas online viewership, particularly ad-supported viewership, is extremely scattered. TV is also uniquely accepted in our culture as a platform that runs 3-4 minute breaks of 30-second ads during a show. No online platform can interrupt a viewing for that long and retain its viewers.

Subscriber fees is a stream of revenue which distributors like Comcast and DirecTV pay NBCUniversal per subscriber for the channels provided. Because the current distributor model forces customers to pay for big bundles of TV channels, NBCUniversal can lock in significant revenues for its marquee channels like USA and Bravo which command high subscriber fees, as well as lesser known channels like Chiller and Esquire despite their low to nonexistent viewership. Consumers are far more resistant paying for subscriptions online, even $2-3/mo, yet the average pay-tv bill per month is $103. [3]

Where does NBCUniversal go from here?

The TV industry has been lucky to have bred such a deep-rooted culture in the living rooms of American families who cannot imagine a world without TV. Despite its inferior product, it will continue to successfully fight the digital revolution and hold a strong place in our everyday lives for several years to come. However, the tide is slowly but surely shifting:

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In the long term, NBCUniversal knows it must embrace a digital transformation and has started taking initial steps such as founding Hulu, a JV among NBC, FOX, and ABC which aggregate the 3 broadcast networks’ top shows on one online platform. It offers a simple and significant enough value to viewers to retain a healthy dose of advertising and subscription revenue even in the online space.

NBCUniversal also needs to battle some key issues for a true digital transformation. Rights negotiations will get more complicated as content is distributed through an increasingly complex and changing system, and correct measurement of viewership on the newer platforms will be critical as it is the currency for advertising payments.

(Word count: 799 words)

 

Footnotes

[1] Chris Albrecht, “Everything you need to know about TV Everywhere”, GigaOm, 2009. Accessed November 2016, https://gigaom.com/2009/06/23/what-you-need-to-know-about-tv-everywhere/

[2] GfK 2015 Annual Report. Accessed November 2016, http://www.gfk.com/investors/publications/annual-report/

[3] Aaron Pressman, “The Average Cable TV Bill Has Hit An All Time Record”, Fortune, 2016. Accessed November 2016, http://fortune.com/2016/09/23/average-cable-tv-bill/

Exhibits

NBCUniversal Ecosystem: self made

eMarketer Chart: Accessed November 2016, https://www.emarketer.com/Article/US-Adults-Spend-55-Hours-with-Video-Content-Each-Day/1012362

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4 thoughts on “TV Everywhere? More like TV Nowhere.

  1. Let’s assume a perfect world for the content consumer: Everything is available online, “a la carte” – perhaps by station (e.g., ESPN) or perhaps by show (e.g., SportsCenter).

    In this world, would available content better mirror consumer preferences? Bundles wouldn’t subsidize channels that nobody watches, so a particular show/station’s revenue would be a perfect reflection of how many people are willing to pay for it. Thus, lower viewership stations would be phased out and replaced with others. Would this be better for consumers, or would it lead to a lack of creativity in available shows? In addition, would content creators make more or less money?

  2. Great post!
    I agree that NBCUniversal must embrace a digital transformation however it shouldn’t be in the long term, as you mention, since as time passes platforms such as Netflix and Amazon are gaining market share on the video space. It is unlikely that elder people adapt to the digitalization of TV providers, however it is not the case for younger people. Already two years ago Nielsen reported that streaming video subscribers aged 18-to-34 watch 20% less TV than they used to before signing up for a service and those in the 25-to-54 bracket watch 19% less (http://www.wsj.com/articles/netflix-amazon-have-the-measure-of-tv-heard-on-the-street-1416432393). Thus, NCBUniversal must start engaging their customers with something more than Hulu, which still lags behind its digital competitors Netflix and Amazon. And I believe one key differentiator is content, which is king in video. Thus, I suggest one way to keep them engaged is by creating more interesting content like Netflix does.

  3. NBC has a right to be concerned. Their entire model is built on their IP and offering it at a premium price to the masses through cable. How does NBC enter the digital world and compete with platforms that operate with a negative margin? Additionally, piracy and crowd-sourced websites continue to grant users just the right amount of access to this IP and NBC cannot afford to give it away for free. One thing that TV still offers that online platforms have not yet mastered is the notion of live TV and live streaming. Yes some have it, but it is fragmented. SNL goes on at midnight saturday night and even if you have Hulu you can’t watch it for a few days and all of the music acts have been cut out. Is this enough to hold viewers to cable TV? Probably not. But I imagine it could be a point of differentiation in an online world where we watch what we want when we want.

  4. Cool post! In addressing one of Rob’s thoughts on a la carte TV, I think its important to keep in mind that while content is key, it is very hard to maintain and recreate great content for long periods of time. In order to maintain the variety and creativity in shows that we experience now, stations should be given leeway to withstand the cyclicality of ratings. This is where the bundling is important as the subsidization is necessary for different stations at different times. AMC, for example, has understandably not been able to maintain the ratings it had during its amazing run with Mad Men, Breaking Bad, and Walking Dead, but I do not believe it should be phased out as it has a proven track record of finding good content. Additionally, given that USA does not have a reputation of developing quality original TV series (sorry Burn Notice fans), it could have been phased out before acclaimed show Mr. Robot made it on the air.

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