TV everywhere: Pay-television executives hope to hang on to customers by letting them watch shows on their portable devices

TV everywhere: Pay-television executives hope to hang on to customers by letting them watch shows on their portable devices

Jul 20th 2013 |From the print edition

ALFRED HITCHCOCK once compared television to indoor plumbing. “It didn’t change people’s habits,” said the master of cinematic suspense. “It just kept them inside the house.” If television chained entertainment-junkies to the couch, online video has now released their shackles. Faster broadband, the rise of mobile phones and tablet devices, and services like Netflix, Hulu and YouTube that stream shows to people anywhere with an internet connection have freed viewers to watch programmes wherever they wish.

Pay-television executives have also chosen to take part in this liberation movement, by offering their subscribers “TV everywhere”. Their companies give their customers an access code that lets them watch channels streamed live—or individual shows on demand—on their mobile devices, much as they can on Netflix or Hulu. These days almost every TV operator in America, and many elsewhere in the world, offer subscribers something along these lines, says Ben Reneker of SNL Kagan, a research firm.TV everywhere is “one of the best revenue-to-cost enhancements you could ever come up with in a consumer setting,” says Jeff Bewkes, the boss of Time Warner, a big media firm that owns cable channels including CNN and TNT. It costs only a few million dollars to build the online platform to deliver it, but it could work wonders in persuading subscribers to stick with their costly pay-TV packages.

It also helps attract young consumers to pay-TV, says Brian Sullivan, the boss of Sky Deutschland, a German satellite broadcaster. The real pay-off from TV everywhere will become more evident over the next decade, as today’s teenagers start to establish their own households. Each young American who subscribes to pay-TV will probably spend around $40,000 over their lifetime in subscription fees, says Laura Martin of Needham, an investment bank. If TV everywhere deters 5% of current subscribing households from cutting the cord, it would protect around $4.2 billion a year in revenues, according to Ms Martin’s calculations.

So far TV everywhere’s rollout has been slow. Mr Bewkes and a few others have been pushing for it since at least 2009. Executives were at first worried that customers would pirate their shows or share passwords with friends, so they made the authentication process as tough as solving a crime on “NCIS”. Some companies still restrict use of the service outside the home, limiting its appeal. Many have done too little to promote it to consumers. BSkyB, a British satellite-TV firm, has been offering Sky Go, a TV everywhere service, for two years, and around 35% of its 10.3m subscribers now use it. But no American operator has had such a big uptake.

For years television has battled doomsayers who predict that Netflix and other online-video services will prompt consumers to abandon pay-TV. But few households have done so, because the distributors and programme-makers have been adept at making it hard for them to get popular new shows quickly without being signed up for pay-TV.

Even so, new competitors are trying to grab the remote control. This week the Wall Street Journal said Google (which owns YouTube) was seeking deals with television companies to set up its own internet-streaming service. Intel is expected to launch a similar service later this year. Netflix, Amazon and other online distributors will plough a combined $750m this year into making their own exclusive shows, to differentiate themselves from each other and from cable channels.

The fight to preserve the old television system while exploiting the new is producing plot twists as complex as a daytime soap’s. The three broadcasters that own Hulu—Disney, 21st Century Fox and NBCUniversal—want to see the site, which had revenues of nearly $700m in 2012, become profitable. But too much success might upset traditional pay-TV firms, which are big customers for the three broadcasters.

Unable to agree on what to do with Hulu, the three owners put it on the market, reportedly attracting several bids of more than $1 billion, including one from DirecTV, an American satellite operator. However, on July 12th the owners called off the sale, saying they would now keep Hulu and invest more heavily in it. They were probably worried about the risk of selling a business that could eventually disrupt their own, if its new owner made a success of it. Television may be more mobile than it was in Hitchcock’s day, but it still offers plenty of suspense.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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