CBS was an early mover into the market for SVOD services, with CBS All Access and Showtime. Here are four ways the venerable broadcaster says it is benefiting now cord-cutting is picking up steam.
One: People will pay to avoid ads
Hulu has maintained that only a small percentage of subscribers have elected to pay $4 more to avoid ads. Joseph R. Ianniello, CBS’s Chief Operating Officer, says that a third of subscribers to CBS All Access are paying $4 more for a reduced ad load.
With so many subscribers paying to avoid ads, CBS is starting to think about revenue generation differently. Normally, most of CBS revenue comes indirectly from the consumer via advertisers. However, if a large proportion of viewers pay CBS directly rather than watching those ads, Mr. Ianniello says the dynamics of the ad negotiations change:
When the consumer is making the choice and electing to pay $10 a month, that speaks volumes. And that gives us a lot of strength when we go into those negotiations because we know the consumer has knowingly elected to pay that.”
Two: Growing in the era of cord-cutting
Les Moonves, CEO of CBS, says the company is benefiting from cord-cutting, not suffering at all. Firstly, he says the online offerings of Showtime and CBS are helping the company grow subscribers, while other broadcasters lose them as pay TV declines.
In an era where others are concerned about losing subscribers caused by cord cutting and other matters, CBS Corporation is growing its subscribers. That’s right. When you combine all of our paying subscribers across traditional MVPDs, virtual MVPDs and our direct-to-consumer services, our overall sub base is growing at both CBS and Showtime.”
What’s more, online subscribers end up paying more for CBS than as part of the traditional pay TV bundle. In other words, Mr. Moonves believes CBS subscribers and revenue will increase as cord-cutting picks up speed.
Three: Upselling, the future of TV
CBS is looking to lean on the old saw that says a company’s best new customers are the ones they already have. CBS has created ad-supported services, such as CBSN and CBS Sports HQ. It has added these to CBS All Access. Mr. Ianniello says this gives the company an opportunity to upsell the free customers to a subscription:
What they’re doing is we’re getting them used to the consumption outside the home and on-demand with product that’s timely. For news or sports or now entertainment news, and that’s going to be a subset of All Access. So, you like the product and we’re going to upsell you to a paid subscription service.”
The success of the $4 a month reduced-ad tier in CBS All Access certainly suggests the approach has some merit.
Four: Originals are key to maximizing sub lifetime value
Maximizing subscriber lifetime value (SLV) is a critical task for online services. It is very easy for a subscriber to leave a service, so finding ways to keep them paying that monthly bill is important. Mr. Moonves says that a steady flow of original programming is key to reducing churn and maximizing SLV.
There’s no question that more original programming creates much less churn… All Access, as you know, we’ve only had like two and a half shows on. That’s going to be increased to seven or eight. We expect the churn to go way down on that and we’re going to continue to do originals.”
Why it matters
Broadcasters are vulnerable as cord-cutting accelerates and TV audiences decline
CBS believes it is immune to this trend because of its online products.
The company enumerated four ways it is growing subscribers and revenue while others shrink both.