As over-the-top and non-linear viewing begins to present a real challenge to the linear distribution model, channel providers are weighing their digital options. Andy Fry reports.The numbers tell us people are watching more television than ever. But they don’t watch it like they used to. While there’s still a divide between developed and emerging economies, there’s no question that regions with high levels of broadband, smartphone and tablet penetration are witnessing paradigm shifts in media consumption patterns.In the US, a January 2012 study from research group Nielsen identified significant trends towards tablet/smartphone ownership, social media and online video consumption among 18-34 year-olds, concluding that they are “taking their personal connection – with each other and content – to new levels, new devices and new experiences like no other demo.”The report echoes the findings in Ericsson’s annual TV and Video Consumer Trends Report – which highlighted the move towards on-demand viewing. Anders Erlandsson, who manages the research programme for the report, argues that: “With the advent of user-friendly set-top boxes such as Roku, the Boxee box and Apple TV – coupled with super-simple and affordable streaming services such as Netflix – the popularity and ubiquity of on-demand viewing is increasing rapidly. [Our] research indicates that on-demand viewing continues to grow in popularity, and might eventually surpass broadcast.”Platform-neutral brandsIt’s no surprise, then, that content owners that used to focus their energy on the international rollout of linear pay TV channels are reorganising their businesses around platform-neutral brands. “This isn’t about reducing the role of our linear pay TV channels which continue to play a very significant role in generating revenues from carriage fees and advertising,” says Turner Broadcasting senior vice-president, EMEA, Casey Harwood, “It’s about protecting and diversifying the revenues you generate around brands, whether those are channels like Cartoon Network, CNN and Adult Swim or programme franchises like Ben 10.”In this brand-centric world, there are two broad commercial themes at play, says Harwood: “The first is the way in which digital distribution supports the core channel business. Increasingly, the platforms we work with expect online and on-demand offers that they can provide to their customers.”The second, he says, is developing new lines of business that take advantage of digital without undermining the existing business: “This could be anything from a paid-for mobile app through to a free channel that drives ancillary revenue. It’s like having 1000 buckets all catching raindrops of revenue.”Straddling these two broad areas are activities that have the potential to perform both marketing and revenue-generating roles – while at the same time meeting the editorial needs of the audience. For example, when Turner put free Adult Swim content on Facebook last autumn it was going where the Adult Swim audience hangs out, extending its offering to advertisers and encouraging users to go and try out the pay TV channel.Similar patterns were at work with Cartoon Network show The Amazing World Of Gumball. In that case, 28 videos were distributed via YouTube in the run up to the launch of the TV series. With high-profile activity on Facebook and Xbox, Turner delivered an immersive editorial product while also gathering insights about the character and behaviour of its audience.Most key players are trying to do some or all of the above, says Philip O’Ferrall, senior vice-president of digital for Viacom International Media Networks: “Linear channels are here for a long time to come, because they are still a defining element of brands like MTV, Nickelodeon and Comedy Central. But it’s critical that you are structured so audiences can interact with your channel and programme brands in as many ways as possible,” he says.This is particularly true when considering the channel operator’s relationship with its advertising clients: “If one of our advertisers is interested in Jersey Shore or SpongeBob SquarePants, they want full-integrated brand solutions,” says O’Ferrall. “You look at a property such as MTV Europe’s Music Awards and it is completely set up as a 360 degree ad buy, across TV, online, mobile, in-house media and third party. Whether the audience goes to Facebook, Twitter, Tumblr or Pinterest, we are set up to follow their social media journey.”This brings with it some significant challenges, says O’Ferrall. “The most obvious is that we need to future proof our rights, so that any content assets we work with can be deployed in this way across every relevant device and window.”No less important is balancing the potential for conflict between what channel operators pump out across platforms like Facebook and what their pay TV affiliate partners charge their customers for. “Part of what we are doing is delivering mass reach and brand engagement for advertisers,” says O’Ferrall. “But the key is to create content and activities that can drive audiences back in the direction of the linear channels with duplicating what those channels set out to achieve.” A point echoed by Turner’s Harwood who says CNN’s mobile app is not designed to replicate its cable channel. [icitspot id=”22890″ template=”box-story”]Catherine Powell, senior vice-president, media distribution, The Walt Disney Company EMEA agrees: “Kids and families are increasingly looking for flexibility in when and where they enjoy entertainment, and we need to be where they are. But our linear Disney Channels are at the heart of everything we do. All non-linear activity is designed to complement and enrich the Disney Channels experience across linear and non-linear, and drive viewers towards the Disney Channels. The linear experience still offers appointment television, while the digital offerings make this experience immersive and sticky.”The Netflix challengeOf course, the aspects of the digital distribution puzzle that companies prioritise depend, to a large extent, on the maturity of their channel business, the profile of their audience and the landscape of the territory they operate in.Turner and VIMN are well-established EMEA businesses that cater for the fluid, connected audiences Nielsen and Ericsson refer to above. But compare their activity with the launch of Turner’s sister brand HBO (both are part of Time Warner) on the Ziggo cable platform in the Netherlands. Here, the focus is not on supporting advertisers, but achieving the best pay-windowing arrangements for HBO’s premium TV content.Two issues are worth noting about the HBO Ziggo deal. The first, reflecting earlier observations, is that HBO – as a new entrant to the market – has given its cable partner all the bells and whistles required to satisfy digital-savvy Dutch customers. In addition to three ad-free linear HD HBO channels, customers who sign up also get online video destination HBO GO and VOD service HBO On Demand. Furthermore, the HBO services are available across PC, Mac, iPad, iPhone, iPod touch and some Android devices (and also TV). All of this is available for ?14.95 a month. So to incentivise Ziggo to promote the package, HBO has so far only done one platform deal in the Netherlands.The second issue is not about carriage negotiations, but about the way HBO’s Dutch launch encapsulates Time Warner’s wider concerns about VOD players like Netflix. In the US, HBO and Time Warner have made it clear that they view Netflix as a long-term risk to their own brands. As a result, they have developed products such as HBO Go and TV Everywhere as mechanisms to try and challenge the company’s rapid expansion.This agenda has now started to surface in EMEA too. In the case of HBO Netherlands, it is illustrated by the way that the company is trying and occupy the premium space that services like Netflix populate. For example, Dutch customers will now see new episodes of series like Boardwalk Empire, Games of Thrones, Luck, Veep and Girls “as early as one day after the HBO US Debut”. In addition, there will be first-run theatrical films from studios such as Sony Pictures and Warner Brothers.Look more widely across Europe and you can see how HBO and Warner are both trying to seal off the gaps that Netflix is trying to occupy. In the UK, for example, HBO has signed a long-term programme distribution deal with Sky, while in central Europe it has moved into original programming. In parallel, Warner Brothers has signed movie distribution deals with Amazon LoveFilm in the UK and Sky Deutschland in Germany, the latter giving the platform exclusive pay and on-demand rights.This overall pattern highlights that a lot of media owner effort in EMEA is focused on how to respond to the arrival of new aggregators including Netflix, which are exploiting the gaps that has opened up between classic programme distribution, the sale of physical DVDs and linear broadcasting.It’s not an easy problem to unravel, because the channel operators are also content owners. In other words, they want to protect channel brands and monetise content, goals which are not always compatible. It’s interesting to note, for example, that Disney has not, so far, responded to the rise of Netflix by launching ABC-branded pay TV channels to house its adult content. Instead, “what has made the most business sense for us has been to launch ABC TV On Demand SVOD services with our partners across EMEA,” says Powell. “These services offer full seasons of ABC Studios series in a second chance window, shortly after their local first broadcast window.” Having debuted on BT Vision’s IPTV/DTT platform in the UK, it expanded to Zon’s cable platform in Portugal and Vodafone’s IPTV service in Germany before joining forces with Amazon-owned Lovefilm – which is now streaming the service into the UK market. As such, it is taking advantage of new content distribution, but keeping open the option of a linear channel.Pay TV fights backThe channel operators aren’t the only ones that have to decide what to do about the likes of Netflix, Amazon and Google-YouTube. Over the last couple of years, analysts have also been asking whether traditional pay TV platforms will survive once open access internet content distribution is the norm.Evidence from the US isn’t encouraging: a report from TDG has shown that pay TV firms are struggling to keep up with the likes of Netflix, whose US subscribers watched 80% more streaming video hours in the fourth quarter than were viewed on all US pay TV VOD. It doesn’t have to be this way though. In its own study of OTT, Nokia Siemens Networks (NSN) argues that platforms can play a lead role in the OTT market if they “promote themselves as value-added orchestrators of services that simplify the digital life of the user. Bundling attractive packages of content, services and billing effectively turns them into a value-added mall that focuses on what the customer wants and offers tailored packages, involving partnerships with OTT players.”NSN also cites the importance of quality, arguing that it is a USP of the established service providers. This is backed up by the Ericsson report referred to earlier, which picks out quality, no commercials, time-shifting and movie releases direct to TV as the things consumers are most happy to pay for currently.Fortunately, European pay TV platforms had time to prepare for the arrival of Netflix and are now getting into gear. In January, Sky in the UK announced plans for a new service that would allow all non-Sky customers to access tranches of its content via broadband-connected devices. Launching in the first half of 2012, the service will offer movies, sport and entertainment across all devices with no minimum contract. Running in parallel with the Sky subscriber bonus service Sky Go, customers will be to pay monthly for unlimited access to Sky Movies or rent a single movie on a pay-as-you-go basis. It is, says Sky CEO Jeremy Darroch, “a new way for us to reach out to consumers who love great content, but may not want the full Sky service. It will allow us to make our expertise and investment work even harder, extending our options.”Modern Times Group CEO Hans Holger Albrecht is also aware of the threat, which he summarises in his regular blog: “With Netflix, iTunes, YouView, Lovefilm and games consoles offering everything from popular player and catch-up services to movie streaming rentals, it’s safe to say the future is here; and is forcing companies to hurry on with the move from being satellite, cable or even IPTV companies, to being ‘anytime anywhere’ content providers, before players like Apple TV and Google’s YouTube decide to shake things up even further.” Albrecht, though, has long argued that pay TV platforms will have a key role in the OTT space by offering a content aggregation model that is legal, flexible and easy-to-use. His company’s internet pay service Viaplay (available via PCs, smart phones, tablets, set-top boxes and connected Samsung TVs) was launched in 2006 and is seen as a significant part of MTG’s strategy. “The fiercely competitive TV broadcasting landscape and high broadband penetration in Scandinavia created an environment in which we had to adapt to compete and grow,” he says. “This allowed us to launch Viaplay and I believe our multi-tiered subscription offering is the right one. Viaplay’s content library feeds from our integrated free-TV and pay-TV business structure, and the strength of the service lies in offering exclusive and library TV, as well as premium sports in one place, together with both our own and competing catch-up services.” [icitspot id=”22899″ template=”box-story”]It’s important to note that the threat to pay TV platforms may actually come from the broadcasters that operators thought they had left behind in the world of free-to-air terrestrial TV – because they now have the capacity to bypass operators with their own OTT alliances. Pan-European broadcasting powerhouse RTL is exploring this option at the moment. In January, it announced that its French channel M6 had teamed up with Sync TV to develop an OTT service for the Microsoft Xbox 360 console. “Apart from being one of the best-selling gaming consoles in the world, the Microsoft Xbox 360 is on a trajectory to become a dominant OTT platform for streaming content,” says Christian Bombrun, deputy managing director of M6 Web. M6’s partnership with SyncTV will enable it to offer a range of content to all Xbox 360 users in France. Adam Gee, head of cross-platform commissioning at Channel 4 UK, similarly says that digital activity around series like Embarrassing Bodies works at a number of levels, not least “the strategic value in the data we gather”.There’s evidence from across Europe that free broadcasters are starting to realise that there’s more to digital extensions than immersive entertainment.