OTT Starts Rocking The Cable Boat

• by P.J. Bednarski , Staff Writer @pjbtweet, March 6, 2017

It’s interesting to see the domino effect of technological and consumer change. As OTT gains a real foothold with a wider public, we’re beginning to see what happens when there's a shift in where people are getting media.

Increasingly, it is not coming from not cable/satellite. It's hardly a stampede, but there is a sizable bunch of early adopters using new over-the-top services. 

A new bearish report from MoffettNathanson Research says cable networks are in for tough times in 2017 from an advertising standpoint. More significantly, pure-play outlets, like Scripps, AMC and Discovery may be out of position on emerging OTT services.

Unlike the network groups and Time Warner, those standalones are in trouble. ABC, NBC, CBS, Fox and Time Warner have live sports, news and decades of programming history behind them. Formidable as they are, those pure-play cable groups do not. MoffettNathanson has “sell” ratings all three, warning of “fundamental challenges that lie ahead.”

Without sports, news or event programming, the report implies, they’ll have a tough time getting or keeping footing on OTT carriers.

Unlike the fat days of cable, when new networks popped up seemingly weekly, the new mode is skinny, for which networks — really popular and well known networks, like Food, HGTV and TLC — are just a lot of baggage.

At the same time, the pay TV business, where all of those pure-play networks have prospered, is declining — not exactly imperceptibly. MoffettNathanson says the pay TV business ended 2016 declining at the rate of 1.7%, “its fastest rate of decline ever.”

Yet some of those networks have had  healthy advertising performances that seem, in some cases, to be falling now. “We remain worried that cable network viewership will erode more rapidly than consensus estimates for long-tail and non-live networks,” today’s research paper says.

Moffett Nathanson earlier noted some of the cord-cutting reports out there were a little too panicky. Going forward, it warns: “This time the headlines will be justified--albeit with some nuance.”

That seems to suggest that more cable networks will find ways onto the OTT platforms. Big players like Time Warner and Viacom are missing from the new YouTube TV service. And now that there are four established streamers, the likelihood is that Hulu should be able to creating a new streaming service that takes advantage of the changing pay and OTT landscape.

Affiliate fees — what cable operators pay networks per subscriber — seems to be under intense pressure.