News Corp.’s Miller sees channelization

Conglom's chief digital officer speaks at the Variety Entertainment Summit at CES

Consumers are able to watch more video, want more video available, and content companies that fail to create more to give to them are risking decline.

That was the warning sounded by News Corp.’s chief digital officer, Jon Miller, at the Variety Entertainment Summit at CES, in Las Vegas on Wednesday.

“Video consumption is going up,” Miller said. “I know a lot of people think we’ve been through the video age. I think we’re at the beginning of the video age. It’s a combination of bandwidth around the world and devices that display video in a way that makes it enjoyable to consume on small, large and portable screens. All those things mean more video consumption.”

As part of that, Miller predicts 2012 will see the “channelization” of the web. “Essentially, that means programming that is sequential, where you can have a passive, ongoing viewing experience,” he said. “You turn it on and it runs. As opposed to a thee-minute video, where it ends and you have to do something. I think you’re going to see that as an organizing principle.

“That’s all part of ‘more,'” he added. “My point is, if you stand on your existing asset base and just try to move it into new windows, I think you lose. In line with the consumer having the ability to consume more through more different devices and in more times and places, you have to give them more stuff.”

In a keynote conversation on stage with Variety TV editor Andrew Wallenstein, Miller explained that News Corp’s take on “more” includes the deal it recently cut with Microsoft to put four channels on Xbox: Fox, Fox News, IGN and Wall Street Journal. The first two are existing channels, and require authentication — only subscribers to a traditional MSO or MVPDs can view them. Gaming channel IGN and Wall Street Journal are new, and don’t require authentication.

“So in our view we’re both supporting an existing model, the MSO and MVPD world, and we’re expanding, creating new content assets and new distribution channels,” Miller said. Doing both, he said, is essential. “(Traditional satellite and cable) is the master of the financial of the well-being of all U.S. based media companies. At the same time there’s another master you have to serve, the consumer. The consumer is getting stuff in a lot of different ways, and you have to figure out how to walk and chew gum. … You have to do it in a way that doesn’t undermine the heart of your business. If you do that we’re all out of a job in this industry.” He pointed to Hulu as a service that offers both authenticated and unauthenticated experiences.

Asked by Wallenstein about News Corp’s decision not to sell its stake in Hulu, he said that while they received bids in the billions, “People realized a couple of things: It’s still very early days. We were moving too fast to say we did not need to own an asset like this.”

The industry had never succeeded in creating such an asset as Hulu before, and “now that the industry has created one, there’s no need to rush to the exit.” He noted that Hulu now has a free layer, ad supported, and a paid subscription layer. “Dual revenue streams work,” he said.

Companies like News Corp. are facing pressures from new distributors like Apple and Amazon that offer access to hundreds of millions, even billions of homes, instead of the tens of millions a Comcast can offer.

“It used to be Comcast made money the same way we made money,” Miller noted. “There was a video bundle, they got their cut, the suppliers got their cut.” But cablers are now in the broadband business, which has a higher margin than their video business. “Time Warner Cable’s CEO Glenn Britt, said, ‘Our core business is broadband, it is not video,'” cited Miller, “so even our traditional distributors are making money a different way.”

Meanwhile, Apple and Amazon have their own business models, with incentives to provide content more cheaply than might suit News Corp and other content owners.

Asked whether the rumored Apple TV might blow up the existing TV business by offering streaming channels a la carte, Miller conceded that while existing deals may have locked up a lot of rights, “One of the questions is how big the force will be in this calendar year to create over-the-top services that aren’t merely additions to existing large bundles offered by MSOs and MVPDs but are potentially replacements. It’s not something we’re trying to welcome or facilitate overly, but you wonder how much force has been gathered behind that and does somebody crack and allow it to happen. You would imagine Apple has the wherewithal to do that, because they can simply overpay for whatever they’re trying to extract and hope to get it back over time.” Apple is currently sitting on more than $80 billion in cash, and getting more all the time.

Wrapping up, Miller said “I think it’s a great time to be a consumer. There’s great stuff, and it actually works. Consumers can accept these devices, they can integrate them in their lives much more quickly. And that goes to the underlying thing of ‘more.’ They do it more readily, they use it more readily, they consume more stuff. I think that’s the age we’re in.”