By Nigel Walley
Hulu’s decision not to launch in the UK, having failed to secure deals with the major broadcasters makes absolute sense, and should be seen as a vindication of the policy (used previously against Joost) of freezing out unwelcome market entrants. Decipher has always believed that the UK broadcasters should refuse to syndicate to any player that doesn’t have a connection to one of the main TV platforms on which their core product, broadcast channels, are distributed. Hulu clearly fell into this category of player.
One of the failures of analysis of the PC VOD market is a refusal to recognize that there are three very different types of PC VOD player. They are likely to have very different roles to play in the emerging landscape. In this analysis, there are broadcaster-owned players like iPlayer and ITV Player; platform-owned players like Sky Player and the soon to launch Virgin Player; and third-party aggregator players. This third group (including Hulu, MSN Video, YouTube, Blinkbox and SeeSaw) were always going to be inconsequential in the long run as they don’t offer the broadcasters anything other than an extension of distribution of stand-alone VOD assets, without reference to the core broadcast channels that originated them. It was clearly the job of the UK broadcasters to put Hulu out of business, not support them.
If we can assume that the other third-party players will ultimately be frozen out of the market for full TV programmes, it leaves the more interesting question of how the competition between broadcaster-owned and platform-owned players will pan out. When discussing this with people in the market, we are surprised at how often they view the SkyPlayer as a broadcaster-owned player. To understand the landscape it is much more important to recognize Sky Player as a ‘platform-owned player’. This means that BBC content could logically appear on Sky Player, but never vica versa. Consumers expect to see content from other broadcasters contained within the menus provided by Sky (and Virgin) on any platform. We believe that the platform owned players will eventually win the competitive battle with the broadcast players, and that broadcaster catch-up content will have to be syndicated into the platform players, for three distinct reasons:
Reason 1 – The Platform Owned Players Will Eventually Have Market Advantage
- The platform owned players will have their own content and will most likely get the BBC content as well (the Trust insist they get given it) so they will have decent content to build loyalty with. Companies like ITV and Five are going to have to do the deals and get onto the platform players so they don’t end up with their catch up content being marginalized.
- The platforms are used to building stuff and getting it to market (witness SkyPlayer on Xbox and on Fetch) without anyone outside the organization questioning their budgets or priorities.
- The platforms have got the names and addresses of 15M potential users and can therefore promote their own players directly.
- They can cross-promote from set top box to PC VOD, allowing subscriptions and functionality to cross over from TV to PC (as Sky already do with Sky Player)
- They will be the only players not worrying about ‘how to get onto TV’ as they are already there via the TV VOD integrated into the bigger VOD service delivered through the parent company’s set top box. This leaves the simpler task of ‘how to getting onto a customer’s second TV’, or ‘getting into the TV of a home that doesn’t have an account with the parent’. (Sky seem to have made a good start on this behind iPlayer, with SkyPlayer on Xbox, Fetch and Humax Freeview ).
- The platforms all have sophisticated ‘3 screen strategies’ which will increasingly link their PC players into a home ecosystem that includes the STB and mobile. Content, functionality and viewing profiles will move simply between the devices and players. .
Reason 2 – They Offer Unique Advantages to the FTA broadcasters
- However much a minority of people use VOD as an alternative to broadcast, for the foreseeable future, a broadcast channel’s main business will be running broadcast channels for the majority. This means that PC and TV VOD needs to be positioned as a complement to broadcast, not a competitor, and they need to be delivered in a way that means viewers can flow quickly and simply from one to the other (and back). This will be much easier in a TV platforms player than from a player unconnected to a broadcast mechanism.
- The platforms will want to buy a broader VOD package from the broadcasters covering TV and PC VOD. They will ask for all or nothing. This means the only way that a broadcasters will be able to get a premium payment from the platforms for their VOD content, is if they are giving them all of it.
- The platform-owned players will be the only ones that will be able to support, in a significant co-ordinated way, the commercial broadcasters aspirations to move into pay (for both broadcast and VOD). Commercial broadcasters will be asking the platforms for a range of commercial functionality that allows consumers to ‘buy a premium channel packages for TV and PC’ (eg an ‘ITV pay strategy’ – allowing consumers to buy premium ITV linear and VOD content). To deliver the VOD part of this, the broadcasters will have to locate their PC VOD programming behind the pay wall.
- The FTA broadcasters all seem to want a customer relationship management (CRM) strategy – ignoring the fact that broadcasters don’t by definition have ‘customers’, they have ‘viewers’. Without help from the platforms, there is no interaction with the viewer on which to build a relationship or gather the necessary data around consumption of the core product – broadcast. (Data gathered online via web properties are just trifles round the edges). However, plugging broadband into the back of STBs has allowed the TV platforms to plan for the necessary connections to measure absolute viewing down to household level. The platform-owned players will be the only online players that could access this data to create user profiles that link a viewers’ broadcast consumption to data on their TV and PC catch-up consumption. (the holy grail of data). This will lead to a position where broadcasters will prefer their PC VOD programmes are viewed in this environment rather than their own players.
Reason 3 – Free To Air Broadcasters Have Stuff The Platforms Need
- The FTAs have high profile content that would make the platform-players really successful. The FTAs should use VOD programmes as bargaining chips to be traded for commerce and data functionality that they need.
- Broadcasters can do clever things around sports rights (in particular that will allow Sky and Virgin to deliver FTA hosted sports content, that they can’t bid for themselves, through their players (in the same way that a viewer watches Champions League on ITV through a Sky system).
We have reached a strange impasse in the relationship between broadcasters and platform, with both sides wanting to take on parts of the others business, and no constructive middle ground being gained. Rather that try and compete with the platforms and their players, Decipher believe that it is time for the FTA broadcasters to change tack and put together highly positive, proactive strategies for working with SkyPlayer and Virgin Player, giving the platforms their content in return for a range of data and functionality services around VOD and broadcast content.
FTA broadcasters like should put together an ‘everything that we could possibly want’ vision of the future, and go in and trade with the platforms for it, in return for working positively with their players (and agreeing not to go on Blinkbox or YouTube). The BBC should just make sure their programming cuts through on every Sky platform, not try and compete in a platform market that it is never going to succeed in.