Editorial: The Gold Standard

By B&C Staff -- Broadcasting & Cable, 1/28/2013 12:01:00 AM

This is a milestone week for the television business, with the 50th edition of NATPE unfolding Jan. 28-30 in Miami. It is a timely moment for a golden-anniversary gathering of stakeholders. They are grappling with a range of developments rapidly transforming the industry, from ballooning sports rights costs to the complexities of digital deals to the increasingly burdensome regulatory maze in Washington. Plenty of business transactions will percolate in the Florida sun. But we also call on industry leaders to invest equal energy in the conversation and articulation of their vision for how to embrace change in the dynamic marketplace they must navigate.

Subscription video-on-demand (SVOD) is a perfect case in point. As B&C’s Paige Albiniak points out in her cover story this week, deals from over-the-top (OTT) platforms such as Netflix have quickly climbed into the billions of dollars. Having initially seen these digital players as competitive threats, studios and content producers are having to adjust their thinking as a massive new revenue stream comes into focus. There are now 425 million devices connected to the Internet in U.S. homes, according to an estimate this month from NPD Group. Many consumers watch TV on those devices, a key reason Netflix announced in its fourth-quarter earnings release Jan. 23 that it has reached a new record of 27 million streaming subscribers.

It is abundantly clear that a historic growth opportunity awaits traditional programmers online, and the conversation about how to balance that quest with the need to keep other partners happy and invested is not an easy one. It also isn’t helping that a big missing voice in that conversation belongs to the FCC. The commission is pushing video toward the Web. But until it tackles the elephant in the room—the regulatory status of online video distributors in terms of things like access to programming or carriage requirements—and lets the industry know what obligations and opportunities come from moving content online, programmers can’t know the true costs and benefits.

And speaking of cost-benefit analysis, sports rights deals are increasingly tricky terrain, with the staggering figures being thrown around equal parts impressive and disconcerting. Advertisers spent a record $13.3 billion on sports in 2012, and the price of rights is widely expected to keep climbing. Time Warner Cable is reportedly finalizing a $7 billion-$8 billion agreement for Los Angeles Dodgers rights over 20-25 years. That’s the exclamation mark on a series of recent trophy deals, which is a sign of health. But it is also a question mark. Who will bear the costs of these deals? Increasingly, consumers—a fact tacitly acknowledged by Verizon FiOS in its announcement of a new sports-free programming package, which trims significant dollars off a monthly subscription. Also, it’s fair to ask, can rising costs be considered a bubble? Rupert Murdoch doesn’t think so. As Nomura Equity Research analyst Michael Nathanson put it in a recent research note, Murdoch sees a potential News. Corp national sports network thriving on “what the company believes will be increasing value of live sports over the next couple of decades.” Still, it’s hard to forget the flopsweat last summer at Comcast and NBC over the London Olympics, which wound up eking out a modest return but cast doubt on future Olympics values, especially given global time differences and the ubiquity of realtime competition results online.

These are not easy issues to sort out, and there are no clearly defined right or wrong strategies. But we encourage everyone at NATPE, on stage or off, in public or in private conversations, to take advantage of the collective brainpower and invest themselves in moving things forward.

For inspiration, attendees might look at another milestone being marked at NATPE’s 50th edition, the show’s 10th annual Brandon Tartikoff Legacy Awards. This year’s honorees—Tele München Group chairman Herbert Kloiber, Cops creator/ executive producer John Langley, BET Networks chairman/CEO Debra Lee and Modern Family cocreator/ executive producer Steven Levitan, serve as illuminating examples. They traveled the industry’s often twist-filled roads and found a way to retain and leverage their creative vision to achieve business success. Like the dozens of previous honorees, they personify the legacy of Tartikoff, who brought a unique sensibility and passion to his work, meeting the challenges of his era head-on and passing the test of leadership with flying colors.