When Brian Sullivan, President and COO of Fox Networks Digital Consumer Group, took the stage for his keynote at the IBC2017 media, entertainment and technology conference in Amsterdam on Friday, Sept. 15, he explained why the disruption hitting the U.S. television industry is completely natural. During his session, Brian also talked about the viability of video content on social media platforms, the key to surviving the current disruption, and three lessons he’s learned during a career that’s taken him across Europe and back to the U.S.
How we got here
“What we’re experiencing right now is natural in the industry,” Brian told the audience of IBC delegates. “Disruption is something that has always been in the cards because we started with a model where the consumer had the power and that business model kind of got distorted over time. Things have now changed, power is brought back to the consumer and we’re all having to find a way to deal with it.”
During his keynote, titled “Update from Fox Networks Group: In a digital world, the consumer has the power – deal with it,” Brian provided a brief history of the TV industry through the lens of consumer empowerment: TV began as an ad-supported model built for the consumer, but with the advent of cable, on-demand viewing (e.g., VHS, DVD, movies and TV shows for rent or purchase) and PVRs (e.g., TiVo), consumers had more choice and paid more for it. The experience became fractionalized even further with the introduction of nearly 200 TV Everywhere services in the U.S., making content discovery “a bloody nightmare.”
When streaming became commonplace and SVOD services proliferated, consumers gained incredible flexibility and choice. These streaming platforms enabled viewers to watch their favorite shows where, when and how they wanted for about $10 per month. In other words, consumers were given perfect utility for less than the $100-per-month bills they were accustomed to. The $90 difference represented a need for a new path forward.
The old model wasn’t working for consumers, and the new one wasn’t working for businesses, so there are two trends in the U.S., according to Brian: the reaggregation of content and the re-creation of the bundle.
The reaggregation of content in the U.S. can be seen in Fox Networks Group’s recent simplification of its brands, boiling 17 networks down to five (FOX, FX, National Geographic and FOX Sports), along with the new FOX NOW experience, which has been rolling out since April. The experience creates a “single home” where consumers can stream any Fox show they want, marrying the power of apps with the immersive experience of watching TV.
Meanwhile, Hulu’s recent integration of 60 live TV channels representing 80 percent of all viewing in the U.S. in its SVOD service at a $40-per-month price point represents a rebalancing of the system, Brian said. Hulu, in which 21CF holds a 30 percent stake, has 14 million customers.
What it takes to survive and thrive
“It’s painful between point A and point B, and not everybody survives, but eventually things balance out,” Brian told moderator and IBC chairperson Kate Bulkley.
The death of the big bundle and the rise of prominent streaming platforms means everybody will take a temporary hit. However, Brian said he firmly believes “models that are created from the consumer on up are much more sustainable in the long term.”
While some channels and services may not survive the transformation, “Anybody who is in the business of creating great content is going to be absolutely fine,” he said.
“Everybody’s going to eventually have direct-to-consumer offerings in the marketplace,” Brian said when Kate asked about direct-to-consumer aspirations for FOX NOW. “People have been trying to dance around the subject because they’re worried about who they’re going to offend or anything of that nature, but we’re all going to find a new balance.”
However, with 90 million people in the U.S. still consuming traditional cable and satellite bundles, Brian noted that Fox can’t simply turn its back on them and work on only new services going forward. “So we thought we’d start with delivering the best consumer experience we could with our authenticated product. We can’t fix this TV Everywhere world because there’s just too many operators doing too many different things, but we can at least fix it from our perspective.”
Social media as a video consumption platform
Players like Facebook and Twitter are vying to be major destinations for video content, but Brian expressed doubt about their viability. “The reality is the consumption of video content in the social world is much shorter and much less monetizable than it is in the old distribution model, the new distribution models, and it doesn’t work very well for long-form.”
However, Brian said he thinks content creators and social platforms are learning to work alongside each other.
Three key lessons
Prior to his current post, Brian was CEO of Sky Deutschland and spent 14 years at BSkyB. Near the end of his IBC session, he shared three lessons from his international career:
- From his time in the U.K., Brian learned that “if you build a business from the consumer on up, it’s eminently sustainable.” He pointed to Sky as a prime example.
- From his time in Germany, Brian learned that if you don’t sort out the legal and finance sides of your business, you don’t stand a chance, no matter how focused on the consumer you are.
- When he returned to the U.S., Brian said he saw that making content is far more complicated than it seems to anybody not directly involved in the process.