The Power of the Programmers

Fatty_watching_himself_on_TVI heard from several different sources on the same day that the quantity of choices on Netflix has been declining outside of their original programming. Netflix now carries almost a third less shows than they did just a few years ago. When Netflix got started they carried a significant amount of network TV series and those have largely dried up. A lot of series on Netflix today are older and have been off the air for a while. It seems like there has been a major shift of TV series from Netflix to Hulu.

I’m also reading almost daily about companies trying to put together OTT packages for the Internet and which are getting nowhere in their attempts to gain programming rights. One of the few companies able to do this is Dish Networks which was able to craft Sling TV out of their existing programming contracts. But companies like Apple have been trying for years to put together a package and have gotten nowhere.

Finally, in the news a lot lately are cable providers that have changed their channel line-ups or are putting together skinny bundles and are getting push-back from the programmers. For example, Verizon had to change its skinny bundle package to accommodate a lawsuit from Disney over the placement of ESPN.

All of this points to the fact that programmers still have most of the power in the industry today. There is nothing stopping anybody from putting together OTT packages of original content, and we see a lot of movement to do just that. But getting permission to include normal cable networks in OTT packages is still incredibly difficult. Unless that changes, the OTT movement is liable to remain small and very fragmented.

What is probably the most interesting in all of this is the subtle shift of programming from Netflix to Hulu. It’s something that Netflix talks about a little, but not too loudly because they don’t want to hurt their stock prices. But over time Netflix has lost the ability to show a lot of the current content that people want to watch. They are not getting very much fresh network programming and not nearly as many hot movies as they did in the past.

Hulu is now getting most of that content. For those that don’t know it, Hulu is a joint venture between Disney (ABC Television Group), Fox Broadcasting, and NBC Universal (Comcast). The relationship between Hulu and its owners is an interesting one. For a number of years the programmers were hesitant to make Hulu too good since they saw it as a threat to their much larger sales of programming to cable TV providers. But as it’s become obvious that there is no putting the OTT genie back into the bottle these companies and other programmers are starting to see Hulu as their best way to combat Netflix, YouTube, and the other OTT start-ups. And so these network owners and others have been providing more content to Hulu while also giving them the right to show network shows the day after they air live. They have also developed commercial-free subscriptions and made Hulu easier to use.

The FCC has had an open docket now for almost a year that is supposedly looking at OTT content and programming issues. But that docket has been relatively quiet and I’ve seen no speculation on when – if ever – the FCC will make any decisions in this area. As many of the filers in that docket have noted, the FCC could be on shaky ground if they try to regulate content provided on the Internet. In order to do so they would probably have to somehow classify web video providers as cable companies – something they may be unwilling or even unable to do.

But until such time that the FCC can step into the fray in some manner the content providers continue to hold most of the power in the industry. While they probably can’t bring down Netflix (which is going to spend over $5 billion this year on original content) they can withhold other content from Netflix making them less attractive. And the programmers clearly have the ability to stop or slow anybody else from putting together meaningful OTT programming packages. They are still in a position to pick the winners and losers in the OTT industry.

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