Over-the-Top: An Overview of the New World of Content Distribution
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1 Over-the-Top: An Overview of the New World of Content Distribution Brad Ruskin Sean Alford Andrew Nightingale
2 Over-the-Top The Basics What does Over-the-Top (OTT) mean? - OTT means the delivery of audio visual content (films, TV programs, sports, etc.) via the internet in a manner unconnected to a cable or satellite service provider. What does OTT look like? - SVOD (Subscription VOD) - Traditional Netflix, Amazon Prime, Hulu (on demand) - Live Hulu, Sling TV, Playstation Vue, FuboTV - TVOD (Transactional VOD) e.g, itunes store, Amazon - AVOD (Advertising VOD) e.g., YouTube - Niche e.g., MLB.TV 2
3 Trends Behind the Rise Of OTT For decades, TV programmers and cable/satellite providers took a more is more approach - More channels FOMO with respect to the full suite of channel offerings higher subscription rates - All fed by the continued growth of cable/satellite subscriptions The Rise of Cord-Cutting Pay-TV growth dipped below household formation for the first time - In the past five years, nearly 8 million households have become cord-cutters or cord-nevers - (MoffettNathanson in As Streaming Services Amp Up, Not all TV Channels Make the Cut, WSJ, May 14, 2017) 3
4 Trends Behind the Rise Of OTT (Cont d) Opinions Vary on the impact of OTT services on pay TV - Michael Wolf/WSJ Tech & Media Outlook
5 Trends Behind the Rise Of OTT (Cont d) Seventy percent of survey respondents predict that viewership of OTT services will overtake traditional television within the next five (5) years OTT Video Services Study by Level 3 Communications Inc. Regardless of the ultimate scale of the cord-cutting/cordnever trend, media companies are racing to position themselves to be the leading alternative to traditional pay TV 5
6 Key Players - Live OTT Sling; Playstation Vue; DirectNow; YouTube TV; Hulu 6 - The New Hulu Looks a Lot Like the Future of TV WSJ, May 10, 2017
7 The Future of Sports on Live OTT Services You can t talk about the next 10 years of TV and video experience without talking about live. Live TV isn t going away. Ben Smith, Hulu - How Hulu Reinvented Itself for Live TV, The Verge, May 3, 2017 As with the broader cable/satellite bundles, sports (and the live programming they provide) continue to be viewed as an integral component of any skinnybundle service ESPN is featured on all five currently operational live OTT streaming services 7
8 Challenges for Sports and OTT Live sports are fragmented across broadcast TV, national cable/satellite TV and regional TV - Michael Wolf/WSJ Tech & Media Outlook
9 Challenges for Sports and OTT (cont d) Due to the number of RSNs, the fees that they can charge and complicated league restrictions, negotiating deals with the entire RSN universe to ensure sports coverage is a daunting proposition Broadcast networks - Broadcast networks still host many of the crown jewel sporting events - Live SVOD providers only offers feeds of the broadcast networks in certain large markets - As a result, some live SVOD subscribers in smaller markets currently in the dark with respect to live sports on broadcast networks 9
10 Basic Anatomy of an OTT Content License 10
11 Basic Outline of an OTT Content License Grant of Rights Content Description Carriage and Packaging User Interface / User Experience Transmission and Delivery Payments and Reporting Data and Analytics Miscellaneous 11
12 Grant of Rights SAMPLE LINEAR GRANT OF RIGHTS [Licensor] hereby grants to [OTT] the non-exclusive right and license during the Term to: (i) receive any and all signal(s) of the video programming services identified and described on Schedule 1 (collectively, the Licensor Services ); (ii) digitize, compress, modify, buffer and otherwise technologically manipulate such signals in accordance with the terms of this Agreement; and (iii) transmit, distribute[, subdistribute] and exhibit the Licensor Services on a linear basis in the Territory, to each subscriber of the OTT Service (as defined below) (each an OTT Subscriber ) via the OTT Service. OTT Service means [a subscription video programming distribution service that is owned or managed by [OTT] and includes any linear video programming service (including any linear variant or on-demand variant thereof) // the Internet-delivered linear multi-channel subscription video programming distribution service offering owned and managed by [OTT]. Additional Terms - Video-on-Demand Rights - Start-Over and Look-Back Rights - Content Scrape Common Points of Contention - Conditional grant of rights - Embedded obligations - Subdistribution - Platform definition 12 Title of Presentation FileSite Number
13 Content Description Service Description - Minimum Games / Rebates - Service in its Entirety Anti-Nesting / Anti-Incubation Blackouts Surcharges SAMPLE REBATE FORMULA: (Rates Paid) x (Applicable Team %) x [(Game Shortfall) / (Minimum Games)] 13 Title of Presentation FileSite Number
14 Payment and Reporting SAMPLE PAYMENT TERMS On or before thirty (30) days following the last day of each calendar month throughout the Term, [OTT] shall pay to Licensor the relevant monthly rate for the Licensor Services specified in Schedule A based upon the Average number of [OTT] Subscribers receiving the applicable Licensor Service for the immediately preceding calendar. The Average number of [OTT] Subscribers for a given calendar month shall be calculated by dividing the sum of the number of [OTT] Subscribers receiving the applicable Licensor Service for each day in such calendar month by the number of days of that calendar month (or, in the case of the final calendar month of the Term if the last day of the Term does not occur on the last day of the calendar month, the number of days during such calendar month prior to termination or expiration). SAMPLE GRATIS EXCLUSIONS [OTT] may exclude from the number of [OTT] Subscribers (for the purpose of calculating License Fees): : (i) employees of [OTT] or any of its affiliates who are not charged for the package containing the Licensor Service(s) (or that receive an employee credit for the package containing the Licensor Service(s)); (ii) public officials, administrative personnel or government buildings that are not charged for the Licensor Service(s) (or that receive an applicable credit); (iii) retail outlets that sell [OTT] s products and receive the Licensor Service(s) without charge solely for promotional exhibition purposes; (iv) any site used by [OTT] for testing or for a marketing display without charge (or that receive an applicable credit); and (v) any [OTT] Subscriber who has not paid its monthly bill to [OTT] for that month and is subsequently denied access to the applicable Licensor Service; provided, however, that the total number of [OTT] Subscribers excluded from payment pursuant to clauses (i)-(v) above for a given month will not exceed one and one-half percent (1.5%) of the aggregate number of the applicable Licensor Service s [OTT] Subscribers for such month. 14 Title of Presentation FileSite Number
15 Miscellaneous Additional Terms - Representations & Warranties - Music Performance - OTT Technology - Sufficiency of Licensor Rights - Indemnity - Cessation of Service Common Points of Contention - Limitation of Liability - Assignment and Change of Control - Most Favored Nations - Audit Rights - Unlicensed Use - Confidentiality - Force Majeure - Survival 15 Title of Presentation FileSite Number
16 Questions? Bradley I. Ruskin Member, Executive Committee; Co-Chair, Sports Group Sean W.L. Alford Associate Sports Group Andrew C. Nightingale Associate Sports Group Title of Presentation FileSite Number
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