2014 is shaping up to be a watershed year for online video and OTT. Court decisions, content battles and online originals are all in the pipeline, and set to upset a lot of apple-carts in the months to come.
Just two weeks into the New Year, and the courts have already weighed in with a decision on Net Neutrality. Verizon challenged the FCC’s right to write rules regulating broadband, and Tuesday the Federal Appeals court rendered a decision siding with the telco. Of course, the verdict engendered horror or jubilation, depending on which side of the debate the opining party stands on. The short term and long term impacts are far from clear, and most certainly not simple.
However, later this year the Supreme Court will decide if Aereo is infringing the rights of broadcasters with its antenna rental and network DVR service. For digital media, this is easily the most important case since the Cablevision network DVR decision, upon which Aereo is relying heavily for its defense. Ironically, the Supreme Court refused to hear an appeal in the Cablevision case in 2009. Whichever way the justices decide, the decision will send shockwaves through the media distribution industry which will reverberate for years to come. And the impact will not be limited to Aereo, broadcasters and the pay-TV industry. It may call into question the legality of cloud media storage services like UltraViolet, and even touch fair use standards established decades ago.
One of the principle reasons for the ugly fight between Time Warner Cable and CBS last year was so-called “stacking rights”. This is the ability of content owners to be able to distribute the same content through multiple outlets; such as pay-TV, VoD and online. CBS wanted to retain those rights while TWC wanted a measure of exclusivity. CBS allegedly won the battle.
FX’s CEO John Landgraf highlighted how important these rights are when he announced FXNow, an app providing access to FX shows over the web for pay-TV subscribers. FX, and other programmers, have seen ad revenue erode as more people watch shows through DVRs and on-demand. Viewers are only counted if they watch live, or within 3 days of broadcast. Mr. Landgraf claimed FX was losing as much as 40% of its advertising revenue to delayed viewing.
His solution is to launch an app which will proved access to the newest FX shows to pay-TV subscribers with access to the cable channel. The network can sell ads directly to run against shows delivered with the app. As Mr. Landgraf said:
We need to find new opportunities to mitigate those losses. <FXNow> will allow us to begin rebuilding our advertising business.
Expect the battle for stacking rights to flare up every time a TV channel comes to renegotiate its deal with an operator. Where content owners prevail (which they often will), they will follow FX’s lead into online delivery.
Netflix’ Emmy for House of Cards last year signaled that television channels do not hold a monopoly on the creation of great content. The streaming giant has announced it is doubling down on its commitments to originals, as have Hulu and Amazon.
Free-to-web video could also be on the brink of an explosion this year. With online video ads expanding fast, advertisers are beginning to realize that a lot of eyeballs are moving some of their video viewing online. This could signal the beginning of a virtuous cycle: where more ad dollars encourage the creation of more quality content, which draws more eyeballs and more ad dollars.