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The State of Media and Entertainment 2016
All eyes are on Netflix, but it's facing more competition than ever. The OTT space is booming as new niche offerings appear on a weekly basis.

MVPDs aren’t about to let themselves be cut out of this new world of streaming and are making some surprising moves. Look for that to continue in 2016.

“They’re all kind of figuring out, ‘Yeah we’re pretty evil and we should try and be less evil, otherwise we’re going lose all our business,’” Wolk says. “The fact that Comcast is doing Comcast Stream, the fact that the [Xfinity] X1 box has a pretty slick interface—things like that you wouldn’t have thought would come from the company that we all knew 5 years ago. I think the fact people do have options is scaring them, and that they are in their own lumbering ways trying to figure out how to bring people back and how to be more consumer-friendly organizations.”

For that combination of reasons, Wolk doesn’t see cord-cutting as a threat to MVPDs in 2016.

“Cord cutting is one of these overblown things that the Silicon Valley Insider and other publications love writing about, but it’s never been true. I mean, every time they come out with stats it’s like, oh yeah 0.5 percent of people cut the cord this year. Well, that’s a rounding error,” Wolk says.

How the MVPDs respond to changing viewing patterns will define much of the conversation in 2016. While IDC research director Greg Ireland sees cable and satellite making an effort, he’s not convinced it goes far enough. So far, the efforts seem a little cautious.

“What will we see from Verizon? What might we see from other MVPDs?” Ireland wonders. “I don’t think anyone did anything that got to the level for me of charting new territory or really trying to respond to changes in the market the way Dish did with Sling. I was hoping that what we’d see from Verizon would be leveraging all those VDMS assets and the Intel OnCue assets to really offer a mobile-centric OTT virtual cable service, as opposed to original content made for mobile first or what we’ve seen from Watchable, which in a lot of ways is repurposing shorter-form things.”

While Ireland would like to see the dominant players make interesting choices and shape how people view video, he doesn’t think they’re ready to make big moves in 2016.

“I’d love to say that I’m optimistic that we’ll see stuff emerge in 2016, but I’m also cautiously optimistic that I’m not expecting perhaps anything as interesting as Sling TV,” Ireland says. “Even Comcast Stream—it’s alternate device-centric, it’s not enabled on devices for display on the television. What it’s really saying to the market is, ‘We’ll get out there with a service and we understand that we need these alternate services, but we’re going to handicap them in a way that really forces folks within our footprint to take our “real cable service” if they want programming across all of their screens, television included.’”

NBC’s SeeSo service seems primed for success, offering NBC comedy series, original content, and the classic show Monty Python’s Flying Circus. 

What’s standing in the way of innovation is the desire to maintain the ad-heavy status quo, but the ground is shifting little by little, day by day.

“It’s not just the providers themselves, but it’s the programmers as well,” Ireland says. “When I’ve talked to programmers over the course of the year, there are those, like Showtime and HBO, that don’t have to worry about the ad revenue. There are those that are dependent in large part on ad revenue, and they’re loath to introduce too much disruption to the marketplace through launching their own services, even as they understand that the audience that subscribes to traditional pay TV is shrinking and the audience that is then outside of that addressable market is growing. If you want to have services that can appeal to those that are outside of that traditional addressable market you’ve got to come up with new innovative services.”

Cable and satellite are a being careful to fill a need when they see it, but they don’t want to get out ahead of consumer demand. Doing so could upset a lucrative business model before that’s necessary.

“I think it’s treading carefully, not wanting to disrupt what has been the cash cow or the driver of their business, but I don’t think the use of the term ‘legacy’ is misplaced when talking about these services as legacy businesses,” Ireland says. “The market’s changing. Consumer behavior is changing. Our consumption across different devices is changing. Whether it’s service providers and programmers independently, together, both on the same page, nervous about too much disruption is dangerous. Then you may find yourself a couple years from now on the outside looking in as the market has evolved beyond you, as opposed to understanding that you’ve got to make these steps now to stay relevant and have your foot in the door as changes take place.”

The need to satisfy Wall Street quarterly earnings is one reason the big companies won’t take extra risks, Ireland notes. They don’t want the heavy stock market punishments that come with poor subscriber numbers, even though that kind of quarter-by-quarter thinking keeps them from executing a forward-thinking long-term evolution. Nonetheless, they continue to move in the right direction, if slowly.

“We’re seeing great signs that services are evolving. There are plenty of MVPDs now bundling OTT services with broadband. That’s great news, understanding that they’re broadband providers first and foremost, rather than pay TV providers,” Ireland says. “Having that thought process evolve and the bundle strategy evolve are all positive steps. But I think just like we can look back on 2015 and say it was a great year and great evolution took place, we can also be disappointed at the same time, I think we’d have to go into 2016 with that same sober mindset that we may see great steps along this process, but perhaps those of us hoping for that transformational nirvana will once again be disappointed.”

One of the biggest surprises in 2016 will be the sudden relevancy of TV Everywhere. During its 6-year history, TVE has offered scattered access to premium programming and confused subscribers with authentication requirements. In turn, viewing numbers have been low. That will change this year, Wolk predicts, and the reason is Nielsen.

“Nielsen has finally, finally, finally come out with their Total Audience Measurement (TAM), which measures OTT views,” Wolk says. “That means that it’s in everybody’s interest to start pushing that and making it happen. The reason it stalled out was because the networks were not happy about not getting paid for these views. ‘All these people are going to start watching stuff on a TV Everywhere app and it’s not counted and we’re losing money that way.’ Well, now that it’s counted they’re thinking, great the more ways and places people can watch it, the more ratings we get, let’s just go for it.”

Nielsen is way behind on measuring all views, but TAM will shape growth in 2016. When providers can measure every view and sell targeted advertising at a premium, TVE becomes a lot more attractive.

Nielsen’s Total Audience Management should make TV Everywhere a more valuable proposition for cable and satellite providers. 

Our prognosticators also say that Netflix will continue growing original content in 2016 (although neither predicted the SVOD leader’s massive global rollout) and that YouTube Red will struggle to find an audience (and fail).

With so much at stake and an industry in transition, 2016 is sure to be an interesting year. We know what we expect, but we’d love to be surprised by something huge that no one saw coming.

This article appears in the 2016 Streaming Media Industry Sourcebook.

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