Nov 09, 2015

    Legacy TV firms struggle against Web rivals


    THE empire has not yet figured out how to strike back.

    The major legacy television companies are struggling to find the formula to stem the loss of customers to Internet rivals like Netflix, Amazon and others.

    Time Warner - one of the mainstays of the industry with its channels including TNT, Cartoon Network, WB and HBO - has seen its stock come under heavy pressure since lowering its outlook in its last quarterly update.

    While Time Warner is still a major industry force, the loss of viewers translates to lower advertising revenues, raising the prospect of a downward spiral.

    Elsewhere in the industry, 21st Century Fox reported lacklustre results dragged down by its box-office performance while CBS reported a rise in advertising revenues.

    Walt Disney - which owns key television assets including ABC and ESPN - reported strong earnings including a record annual profit, but some observers remain sceptical whether the industry "dinosaurs" can stem the online juggernaut led by Netflix.

    The traditional television firms, while working with Netflix, are debating whether to treat the streaming giant as a friend or foe.

    While these firms may sell content to Netflix, they also are trying the Netflix formula of standalone online subscriptions for services such as HBO Now and CBS All Access.

    "We're seeing more companies starting to tell Netflix 'We're not going to sell you our content or as much of it any more, or at least, not at the same price that we were,' " said James McQuivey, analyst at Forrester Research.

    "They want to undermine Netflix at this stage because they decided that Netflix is too powerful. And partly it's a negotiating tactic, because there are things they want from Netflix that Netflix isn't giving them. They want it to pay more money for their shows, they also want Netflix to share data with them."

    CBS is taking a new approach by launching its updated Star Trek series on its online service. Dr McQuivey calls this "a really smart idea", adding that "CBS knows there are millions of Star Trek fans" who will pay for it.

    Dr McQuivey said the major TV companies "have been in experimentation mode" with digital, but now need to step up those efforts. "The experimentation has taught them that they can make some money in digital, but now it's time to optimise the money they make."

    Meanwhile, streaming services like Netflix, Hulu and Amazon are creating original programming, adding to the tensions between old and new media groups.

    Some executives, like Discovery's chief executive David Zaslav, argue that streaming services are eating the lunch of traditional TV firms and question the model of handing over too much content at too low a price.

    Comcast's NBCUniversal, one of the other major TV operators, is fighting back with its own streaming service called Seeso, offering original comedy programmes.

    NBCUniversal's Evan Shapiro said big services like Netflix can confound viewers with too many choices. "By focusing on a specific, yet large niche, and providing a curated experience, we can help viewers find good stuff they might not or cannot find," he said.

    Time Warner chairman and CEO Jeff Bewkes said last week the firm is considering holding back some of its programmes from streaming operators for a longer period.

    "We are evaluating whether to retain our rights for a longer time and forgo or delay certain content licensing," he said. Its HBO unit has a three-year wait before it allows programmes to be shown on Amazon Prime in the United States.

    Executives are also being forced to acknowledge that consumers are gravitating to online services because they offer convenient on-demand viewing, often with little or no advertising.

    Disney chairman and CEO Bob Iger said that "consumers now dictate where they want to access media, and it is essential for legacy distributors to crack the mobile code".