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September 23, 2013

The battle for the binge TV viewer is on.

Big pay-TV operators including Comcast Corp. and Verizon Communications Inc.'s FiOS are taking steps to vastly expand their on-demand TV offerings. In doing so, they are edging toward turf occupied by online players like Netflix Inc., creating a tug of war over where people turn when they want to "binge" on a full season's worth of programming. Consumers are watching less programming as it airs on TV and increasingly seeking on-demand entertainment. Netflix and some other online players have largely popularized binge-viewing, and pay-TV companies want to keep pace.

Comcast struck a deal to offer all episodes of some 21st Century Fox Inc. broadcast and cable shows on its on-demand service this season, people familiar with the matter say. Details are being worked out, but among the contenders are the Fox network's "The Mindy Project" and FX network's "Justified." The content also will be available on mobile apps. Fox is planning similar partnerships with other pay-TV operators, a person familiar with the situation said.

Until now, Comcast and other pay-TV providers have generally offered four or five episodes of a current show on a rolling basis, with an older episode dropping off the on-demand menu as a new one is added. Under the new arrangement, every episode will be available after it airs all season. Netflix-which has become a go-to service for viewers watching past seasons of series like AMC's "Breaking Bad"-contends that overexposure of shows through on-demand services will reduce their value before they become available to the streaming service when a season is over. Ted Sarandos, chief content officer of Netflix, says the company has told TV content owners it won't be willing to pay them as much for their programming if they give full-season rights to pay-TV operators. "The less exploited shows are through on-demand services, the more valuable they are to us," he said in an interview. He said that as pay-TV operators try to keep themselves relevant in a world of binge-viewing, they are trying to "marginalize Netflix."

Comcast said it launched its on-demand service a decade ago and started offering recent episodes of many TV shows "when Netflix was only shipping DVDs by mail." Now, the companies that supply TV programming must choose who to keep happy: Netflix and other online distributors-a source of fast revenue growth-or the traditional pay-TV distributors that are much bigger customers. Two camps are emerging. Some content companies, like 21st Century Fox and NBCUniversal, are more willing to give expanded on-demand rights to pay-TV operators. (NBCUniversal is owned by Comcast, the largest pay-TV provider.) Others such as Walt Disney Co. and CBS Corp. are more reluctant. (21st Century Fox until June was part of the same media company as Wall Street Journal-owner News Corp.)

John Landgraf, chief executive of cable programmer FX Networks, which is owned by 21st Century Fox, said content owners should support traditional distributors, because the stability of the pay-TV industry depends on their continued success. "Ultimately, if you look at where the bulk of investment for programming comes from, now and forever it will come from people who pay cable subscriptions," he said. Netflix is "freeloading" off the current distribution system, he said. A Netflix spokesman disputed that assessment, saying the company invests more than $2 billion per year in content and its service helps build audiences for shows. Some Hollywood executives credit Netflix for making certain types of shows, like serialized dramas, more viable to produce.

Mr. Landgraf said there are significant downsides to Netflix relationships for content-owners. Netflix strips off the branding of channels when it airs their shows. And it takes out commercials, unlike on-demand services, which not only include ads but often disable the fast-forwarding feature, making that inventory more valuable to advertisers. 21st Century Fox views its expanded deals with pay-TV operators as a test, as it tries to determine the best way to appeal to consumers who want to binge on content, said a person familiar with the situation.

It isn't clear how much pay-TV operators are willing to pay to offer on-demand viewing of full-seasons of shows. FiOS's vice president of video strategy, Terry Denson, says he expects to get full current seasons on demand "at no incremental cost" if he is already paying a carriage fee for the TV channel. Some pay-TV providers argue they shouldn't pay extra fees for the content because on-demand catch-up viewing can drive people to shows and boost ratings, helping the media companies. Free TV viewing through operators' on-demand services increased by more than 40% in 2012 from the year earlier, according to research firm Rentrak. NBC's show "Grimm" is a case in point, Comcast said. Thanks to Comcast subscribers being able to catch up to the current season via on-demand, "Grimm" ratings jumped 58% last fall among those subscribers compared with the show's ratings across the whole pay-TV industry, the company said. "You're seeing new audience and that's manifesting in higher ratings," said Matt Strauss, Comcast's senior vice president for digital and emerging platforms.

Other media companies are more cautious, not wanting to limit their flexibility to get the biggest streaming-rights payments possible from Netflix and Amazon.com Inc. CBS last week renewed an agreement that gives Amazon exclusive rights to all episodes of the hit summer show "Under the Dome" four days after each episode airs on television. This summer, pay-TV operators could only offer a handful of recent episodes, while Amazon had the whole season. In a statement, CBS said it's "in favor of all distribution methods that are incremental to the overall revenue picture."

With the new fall TV season getting into swing, Disney's ABC has given Netflix the exclusive right to carry all the previous seasons of certain serialized dramas like "Revenge" and "Scandal." Comcast's on-demand service has access to only a handful of those shows' previous episodes. Verizon FiOS's Mr. Denson said the willingness to give too much great content to online players is shortsighted. "You're creating a beast that's going to come back and eat you," he said. Mr. Landgraf said Netflix's efforts to convince content owners not to license their programming represents a radical shift in the industry's pecking order.

For years, he said, the companies that invested seed capital to create shows-major TV networks-have "rightfully" dictated terms to the companies running reruns, requiring, for example, that syndicators wait four years before running repeats every day of the week. Now, he said, Netflix is the new syndicator of the digital era, but is trying to call the shots. "It is fundamentally out of step with how things work," he said. Wall Street Journal

Ahead of its stock market debut, Twitter Inc. is hoping for a breakout role on TV this fall: moneymaker.

As television networks crank up their marketing machines to promote new fall shows, Twitter wants to squeeze more dollars out of its ability to generate real-time online buzz. Twitter's trend-tracking hashtags have already become common marketing tools on TV, but networks haven't always paid for their benefits, often capitalizing on Twitter's power as a free marketing tool. Getting companies to pay for Twitter publicity is a crucial distinction for the seven-year-old company as it tries to convert its online influence into a business model-especially when rival Facebook Inc. also wants to become a hub for real-time conversations.

In recent months, Twitter has been courting television networks and advertisers as it rolls out more-sophisticated marketing products. New partnerships are likely this week, as Twitter executives gather with the media industry for the Advertising Week conference in New York. One of Twitter's key ad products is called Amplify, which allows Twitter to sell ads together with television and other media companies. With Amplify, networks post short video replays on Twitter in near-real time. The video is sponsored by a brand. The network and Twitter each get a cut of the ad proceeds. (Twitter declined to detail the split.) "Now we are able to talk about how to make money together and how to give sponsors an interesting two-screen approach to things," said Glenn Brown, the Twitter executive who has been pitching Amplify to networks.

Until recently, Twitter had developed only a few, simple ad products, which serve as its main source of revenue. A "promoted tweet," for example, sits atop users' main feed of rolling tweets, while a "promoted trend" slots at the top of the trends list that run on one side of the screen. The San Francisco-based company earlier this month filed confidential papers with the U.S. Securities and Exchange Commission to begin the process for an initial public offering, but it doesn't disclose ad sales. Research firm eMarketer Inc. estimates Twitter will generate just under $1 billion in world-wide ad revenue in 2014, up from $583 million this year.

Twitter unveiled its split-revenue Amplify product in the spring, with initial network partners including A&E Networks, BBC America and ESPN, which is majority owned by Walt Disney Co. 21st Century Fox's Fox Sports also signed on early, but hasn't yet run any significant initiatives with it. (21st Century Fox and Wall Street Journal owner News Corp were part of the same media company until June.) At this point, CBS Corp. hasn't signed on to Amplify, but Twitter plays a starring role in CBS's fall marketing efforts. The network is in the midst of a weeklong tweeting extravaganza to promote its lineup, dubbed #CBSTweetWeek, featuring stars from "Hostages," "NCIS" and other shows interacting with fans on the social-media service. CBS is hoping that the tweeting will create buzz for its shows and drive more viewers to tune in, said Marc DeBevoise, the executive vice president and general manager of entertainment, news and sports at CBS Interactive. As for Amplify, he said, "We are looking at a number of sponsorship and revenue models around the Twitter ecosystem."

Part of the ambivalence stems from the uncertainty about what, exactly, the payoff is for television networks. "We see a connection between increased Twitter activity and increased ratings," Mr. DeBevoise said. "The problem is, we can't tell which is doing which." Media measurement company Nielsen issued a report in August showing that an increased volume of tweets caused "statistically significant" increases in live TV ratings in 29% of the episodes that it studied. Nielsen is planning to roll out a Twitter-related ratings service on Sept. 30 that will measure the audience that sees tweets about a show.

Heavy tweeting about shows doesn't always translate into viewership. In July, Comcast Corp.'s Syfy channel's B-movie "Sharknado" became a Twitter phenomenon, at one point generating a stream of 5,000 tweets per minute. But it drew only 1.4 million total viewers, according to Nielsen, ratings roughly in line with its previous movies. Still, Syfy sees Twitter as an important tool for connecting with audiences. "We will pay to 'trend,' and we will pay to get the insights that their analytics give us," said Michael Engleman, Syfy's executive vice president of marketing, digital and global strategy.

Advertising on Twitter is growing fast but it is still a small part of the advertising pie. Ad spending on Twitter grew 81% in August from August 2012, but made up 1.2% of the spending by the media industry, compared with 17.4% on Google, according to data from the Standard Media Index. Standard Media measures ad spending through the majority of major agencies, accounting for an estimated 60% of outlays. Twitter faces a major rival in the battle to become the TV industry's small-screen partner. Facebook earlier this month said it would give a few media partners the ability to tap into its "public feed" of all the Facebook posts that are made public by members.

The media partners will be able to see Facebook member posts on certain topics, and slice them by demographic information, such as gender. For now, the service is free. The live broadcast of the season premiere of "Dancing With The Stars" on Disney's ABC last Monday featured real-time social-media conversations about contestants pulled from Facebook-?much like the way Twitter reactions are shared during broadcasts of "The Voice" on Comcast Corp.'s NBC. Fox Sports, which has yet to use Twitter's Amplify, became the first sports network to seal a data deal with Facebook. "We see Twitter as a great companion to our programming on air. I would say Facebook has the potential to be that as well," said Pete Vlastelica, senior vice president of digital at Fox Sports. Wall Street Journal

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