NBCUniversal CEO Steve Burke says NBCU will do business with over-the-top distributors like Sling and Hulu but doesn’t expect them to attract a lot of subscribers.
At the same time, NBCU plans to experiment with businesses selling content directly to customers.
“OTT sounds like a better business than in reality it is,” Burke said at the Bank of America Merrill Lynch Media, Communications & Entertainment conference on Wednesday.
Burke said the new competitors to cable have a challenged business model.
“The fact is if you want a decent sized bouquet or bundle of cable channels your programming costs are going to be 40-50-60 dollars. And if your programming costs are 40 50 60 dollars, you’re going to have a consumer proposition that’s going to be 40 50 60 dollars or more,” Burke said. “If you’re a consumer that has cable and you get 200 channels I’m not sure why huge numbers of people are going to run out and get excited about paying $45 for 25 channels. From a consumer point of view it doesn’t seem to make sense to me.”
Burke added that he had five millennial children and none of them subscribe to cable or satellite. “They’re not going to pay $45 for 25 channels,” he said.
But Burke said NBCU would license its networks to Sling, Hulu, Sony and others who want to get into the distribution business to maximize cash flow, adding “we want to make sure we make as much or more selling to an over-the-top supplier as we do selling to an MVPD.”
He predicted that with subscribers dropping at traditional distributors there might be incremental business coming from newer entrants.
“I don’t predict large numbers, but I think the likelihood there will be a significant portion of whatever the number ends up being that is truly incremental. That would be good for NBCUniversal,” he said.
The leaders of all of NBCU’s businesses are also looking for digital business opportunities. The company launched Seeso, a streaming subscription comedy service and more might be on the way in the sports area.
“Mark Lazarus, who runs NBC Sports, has spent a lot of time talking to his team about ways that you can do individual sports direct to consumers and we’ve experimented with the Tour de France,” Burke said. “I think you’ll see us experiment more in the future."
But Burke said he was leery of upsetting the current pay-TV ecosystem.
“The cable-satellite MVPD ecosystems is such a wonderful ecosystem that you wake up in the morning saying ‘I don’t want to damage this ecosystem.’ But at the same time, I need to try things and experiment and make sure I’m doing new things that can be complimentary to that ecosystem as viewers sort of demand that they get everything, anywhere they want at any time on any device.”