• by Rich Routman , Op-Ed Contributor, October 22, 2013

While it’s common for content rights-holders, specifically in sports and lifestyle, to link their digital video rights to their broader television negotiations, this linking is having a meaningful impact on the opportunity to unlock scale through premium digital video assets.  For years, media properties have been “warehousing” content, as it has always been more beneficial to both their subscription and advertising businesses to provide access only to premier content through the owned and operated channels.  

However, the scale and efficiency that content rights-holders could garner in the open digital market for such video distribution far exceeds the value of a singular exclusive deal.  Right-holders need to create a distinct value for their digital rights and no longer lump them into larger television negotiations, opening up the bidding to digital specialists focused on maximizing reach and efficiency of high quality, tightly controlled, digital video content.

Global head of rights for News Corp. Simon Greenberg  recently commented, “I’ve read rights-holders talking about how they are embracing digital.  Well, I’m not sure they really are. I don’t think that they fully understand it.  You are never going to embrace digital properly if you keep linking it to live rights. It’s a completely separate package of rights on its own.” 

While I agree with this idea in most instances, there are a few U.S. rights-holders that have taken an aggressive strategy in U.S .sports. However, the carving out of digital video rights for ancillary distribution really comes down to leverage. How much leverage do rights holders have in their live broadcast negotiations?  And, can they extract the maximum value for television while still carving out flexibility to bolt on a robust digital strategy?

Greenberg also argued that successful and creative exploitation of mobile and Internet offerings would “complement the television proposition.”  Far from cannibalizing the value of the main live rights, as some rights-holders fear, this would “enhance the consumer experience; the value associated with the rights should rise and everyone should be a winner.”  On this aspect of Greenberg’s comments, I am in violent agreement since it’s proven that one viral hit will result in driving tune-in for the live event (e.g., a good portion of what makes SportsCenter so valuable is the use of highlights actually driving live program tune-in).

If there is a business case that proves this argument is successful, it’s clearly Hulu. However, given the feared cannibalization that Hulu’s business model could have on ownership and their respective affiliate sales and subscription businesses, the company is starting to experience some public scrutiny and the potential for volatility. 

Conversely, Vevo (dubbed by some as Hulu for music) continues to flourish, as its ownership is not quite as focused on the multibillion-dollar cable subscription business (a business that does more than just keep the lights on for most of Hulu’s board members and their respective companies).  Bottom line, we will never see the true scale that digital video is capable of (not dog-on-skateboard scale) until the industry develops a more aggressive distribution strategy for prime-time digital assets: assets that command or have commanded real TV GRPs.  As we move away from the warehousing of premium content assets and broaden distribution to a point of ubiquity, history has proven that the dollars will continue to follow.