nScreenMedia OTT multiscreen media analysis

Netflix is wrong. Linear TV will survive, thrive online

Crackle up next

Netflix doesn’t think linear TV will survive the transition to web delivery. Sony doesn’t agree, as the company recently added linear channels to its AVOD Crackle channel. Who’s right?

Speaking at Vanity Fair’s New Establishment Summit in San Francisco about the evolution of television viewing, Netflix’ head of content Ted Sarandos  said:

In 10 years…it will be entirely delivered on the Internet. It will be a series of apps that’s closer to what you see on smart TV. I don’t think it will be delivered on cable, and I don’t think it will be linear.”

Other OTT native video services clearly don’t agree with him. Earlier this year, Crackle brought linear television to its advertising supported VOD channel. When the Crackle app runs on Roku 3, the user is immediately greeted by a scheduled show in progress. The viewer can continue to watch the “channel” as it plays, restart the show currently in progress, switch to another programmed channel, or pick an individual program from the many on offer in the service.

Crackle is not alone in this linear approach. Pluto.TV also provides a traditional linear experience, with lots of channels to choose from, and each with its own programmed schedule. The company just announced 20 new channels from content providers such as IGN, The Onion, Legendary Digital Networks, Newsy and World Poker Tour.

So is Netflix right or Sony and Pluto.TV?

Live TV viewing USThe truth is Americans still watch a lot of traditional linear television. In the US, the average person watches nearly 27 hours of live television a week. However, that has started to change. Time spent watching live TV fell 4% year-over-year in the second quarter of 2015, which follows a 5.7% decline in the previous quarter. Viewers are not transferring live viewing to recordings on their DVR. The increase in DVR viewing between Q2 2014 and Q2 2015 was just 3 minutes a week, while the decrease in live TV viewing over the same period was 1 hour and 6 mins.

At the moment, much of the viewing is transferring to subscription sites that deliver content on-demand. For example, Netflix users spend 40 minutes a day using the service.

SVOD sites are perfect for when viewers want to catch the next episode of a favorite show and can completely focus on it, but what about when they just want the TV on in the background? Is Netflix really such a good solution while they get ready for work, cook dinner, or just want something to distract them at the end of a long day? This is when the linear approach really scores.

Tom Ryan, Pluto’s CEO, embraces the idea of his service being in the background, filling that need for noise while people go about their daily life. Crackle also understands the power of linear programmed channels to help capture a viewer’s attention. Even Facebook is getting into the act, with autoplay video turning a feed into a video channel programmed by a user’s friends.

Ironically, Netflix understands the value of the linear too. By automatically playing the next episode of a show at the conclusion of the previous one the company has, in effect, created a custom linear channel for the viewer.

So, Mr. Sarandos is wrong about linear TV going away. Though the way channels are programmed is changing online, the format itself remains strong and will be a key part of the online TV experience.

Why it matters

Netflix thinks that linear television will not survive the transition to online.

Services like Crackle and Pluto.TV disagree and are using the linear approach to help grow their service.

The linear approach to video delivery fulfills a need which OTT providers will continue leverage in their services.

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