Videoage International October 2017

24 October 2017 V I D E O A G E I t was a very light lunch indeed at Aretsky’s Patroon in New York City with Sean Cohan to talk about a heavy subject: whether the supposed plight of cable TV services is affecting the business model of cable TV channels. The 42-year-old Cohan is president of International & Digital Media at A+E Networks, a joint venture of Disney-ABC Television Group and Hearst. With offices in 26 cities around the world, the company operates cable TV and digital channels and is involved in original production, international distribution and content sales, among other activities. The International division has offices in New York, London, Rome and Singapore, and oversees 76 channels around the world, reaching more than 225 million people outside of the U.S. in over 200 territories in 39 languages. The salad-based lunch, accompanied by a good glass of red wine (for this reporter only) and espressos, was a prelude to VideoAge ’s interview with the owner of Mediacom, Rocco Commisso (see front cover story), who tends to strike fear among content suppliers, but who, he said, has a good relationship with A+E. Apparently the Italian-born Commisso inspires lunches, so a second pre-interview lunch meeting was taken with Ben Pyne, the then-president of Global Distribution at Disney Media Distribution, who had a somewhat challenging, but highly respectful relationship with Commisso, mainly for Disney’s ESPN per-sub fee negotiations. That, too, was a chicken salad-based lunch but it took place at Pyne’s club The Links in Manhattan, which served great food (and wine for both). However, in addition to requiring a jacket and tie (this reporter loves ties, but is jacket-averse), no paper or electronic device was allowed in the dining room for note-taking. What is reported on page 20 came from mental recollections, which were later confirmed by Pyne. The club, founded in 1916 by a golfer, is a favorite spot of the banking elite and has some connection with the world of golf. Pyne, an avid sports fan (he’s also a former president of ESPN Network Affiliate Sales and Marketing), was drawn to it when his older brother, John, became its president. Subsequently, an additional meeting was arranged with Cohan (this time in his New York City-based office), after the Commisso interview, in order to supplement the early lunch with some food for thought about questions that arose on the MSO side. The surprising outcome of the three interviews was that the widely reported dire predicaments for the future of cable TV do not worry either the MSO or its content suppliers. Reading reports from research companies such as Pew, Forrester, or MoffettNathanson, any journalist would feel obligated to address the concerns, which can be summarized as: “One in sevenAmericans is a cord cutter and an additional nine percent have never had a cable or satellite TV. In the first three months of 2017, cable and satellite services lost 762,000 subscribers. There are 45 million cordless American consumers and it is estimated that by 2025, half of all TV viewers under age 32 will not pay for TV in the current model. In addition, according to Nielsen, broadcast-only TVHH in the U.S. have increased by 41 percent to 15.8 million in the last five years.” So, in this respect, it was only natural to start the lunch follow-up with a question such as: For cable channels, where is the growth coming from, considering the plight of cable TV services with cord cutters and cord nevers? Cohan answered simply: “The growth for content companies in the cable space is coming from international opportunities and newer platforms and lines of business. We are also expanding our content production initiatives including in-house scripted studio A+E Studios, and our digital content efforts at 45th & Dean [an in-house agency to develop branded content for advertisers]. That said, the cable network business is still a very successful business and the foundation of our company. We have 90 million subscribers in the U.S., and several of the most loved brands in the industry, including A&E, History and Lifetime.” Indeed, the so-called cable cutters and cable nevers do not worry either the MSOs or cable TV networks, since these are limited to video subscribers who are then compensated by the growth of cable broadband subscribers who, in turn (as indicated in a separate article on page 22) need the service in order to connect to the plethora of new digital offerings developed by the same cable TV networks. From various news reports it is also clear that compensating for the loss of cable subscribers is not a reason for growth, which is to take advantage of a host of digital incarnation within the MSO system, like the launch of new linear skinny bundles, the launch of on-demand services, and access to a range of platforms like Facebook, Snapchat and YouTube. Therefore, the follow-up question for Cohan, a business major from Harvard and Stanford, was: How can the current three-tier business model be improved (per-sub, advertising and international content sales)? “In actuality,” said Cohan, “The current business model of distribution and advertising remains strong. Advertising will continue to grow and evolve due to the increased ability to provide targeted sales. In addition, we have more to our business model, like subscription fees from consumer on-demand/OTT services like Lifetime Movie Club, revenues from A+E Studios, live events like AlienCon, and merchandising, amongst other activities. We think diversification is key.” In effect, today’s cable TV networks have a five-tier business model which includes OTT services and what can be called “others,” like merchandising and live events. Moving on to other concerns, at least according to the usual researchers, it was asked If channel consolidation is inevitable and if it will continue? Plus, if the strategy of having many channels (i.e., more leverage with MSO) is working out? To that, Cohan answered: “Yes, but having more channels doesn’t necessarily give more clout in negotiations. What is critical to our value to partners is the strength and clarity of our brands, their content, and consumers’ passion for them. A reasonable-sized portfolio of relevant, differentiated, strong brands with great storytelling will continue to be formidable. In our case, as an example, brands like History, A&E and Lifetime are leaders in cable, appealing to a broad range of enthusiasts.” Indeed, past experiences have demonstrated that having, for example, 18 channels doesn’t give more leverage with MSOs. What is important is consumer affinity. People have to be crazy about the channels. VideoAge also wanted to know If OTTwas going to change the relationship with cable operators? “ OTT is unlikely to change our relationship with cable operators. Over the years, the industry has evolved from cable to satellite to fiber delivery, and now OTT. Froma linear perspective, this is another way for A+E to reach consumers,” said Cohan. “Our on-demand OTT services like HVault are increasingly offered by our cable affiliates. In addition, our on-demand propositions are complementary to our linear offerings. “The development of these services and spaces are opportunities to engage the consumer and elevate their interest in the brands; and often present additional opportunities to work with operators,” he said. It’s also true that for many cable TV channels, OTT services don’t compete with MSOs because they resell them, plus the editorial tends to be different. History Vault (HVault), for example, was described as a direct-to-consumer subscription video-on-demand service and A+E Networks’ second SVoD product, after Lifetime Movie Club. HVault features a range of content from History’s library without commercial interruptions. ( By Dom Serafini ) Lunch with A+E’s Sean Cohan: Cable TV Nets in the 4G Era MSOs-TV channels Symbiosis Sean Cohan in his New York City office