Apr 29, 2015, 7:05 PM ETPanel, Conference Presentation

Going Over the Top: New Currents in the Digital Stream

Content-to-Pipeline Convergence: Tom Beers (Fremantle Media) asserts that content alone is insufficient; success requires owning the distribution pipeline, likening content to "sugar" and distribution to the "straw" needed to consume it.
Legacy vs. New Content Migration: Traditional IP is migrating to OTT platforms, evidenced by Seinfeld securing an $80 million licensing deal with Hulu and Vice transitioning from pure OTT to a traditional linear channel partnership with H2.
Viewer Fragmentation: 70% of domestic and global viewership for Machinima occurs on mobile devices, indicating a decisive shift from traditional television sets to screen-agnostic consumption.
The "Curator" as King: Panelists agree that in an environment of infinite content, the primary business value shifts to curation; without a credible, authentic brand, standalone content cannot sustain a direct-to-consumer network.

Production Cost Disparity:
- Traditional scripted TV costs range from $3–$5 million per episode (e.g., Deadliest Catch).
- YouTube/social video production costs approximately $1,500 per minute (approx. $44,000 per hour), allowing for significantly higher volume.
- High-end streaming originals (e.g., Game of Thrones) can reach $15 million per hour, a target Machinima aims to achieve within a decade by combining influencers with professional production.
Monetization Diversification:
- Transactional Integration: Gameshow Network generates 50% of its revenue from casual gaming apps, while Machinima utilizes "transactional entertainment" where viewers click through content to purchase physical merchandise (e.g., Deadliest Catch sold $400,000 in crab merchandise in one hour).
- Micro-Subscription Models: Independent creators (e.g., radio personalities) are launching direct-to-consumer platforms charging $5.99/month, retaining ~$5.00 of the revenue per subscriber.
- Influencer Economics: The top 5 YouTubers command viewership equivalent to the top 20 TV actors, proving the monetizable power of personal brand loyalty over traditional star power.

Regulatory Arbitrage: Unlike traditional broadcast networks, OTT providers are not subject to FCC content regulations (e.g., safe harbor, indecency laws), though they face active FTC scrutiny regarding content disclosure and advertising integration.
Telecom Competition: Major telecoms (e.g., in India) view OTT apps like WhatsApp and Skype as threats and attempt to block them, while US telcos face potential competition from Google and Facebook delivering broadband and content directly, bypassing traditional cable infrastructure.
Platform Ownership Risk: Building brands solely on third-party platforms (Facebook, YouTube, Twitter) carries risk; experts advise creators to migrate audiences to owned digital networks to establish direct, monetizable consumer relationships.

Augmented Reality Integration: Chad Gutstein (Machinima) predicts a shift to 3D and augmented reality (AR) content within five years, where virtual audiences and immersive experiences become standard.
App-Based Channel Discovery: The concept of linear channels (e.g., "Channel 27") will be replaced by app-based discovery (e.g., "The Tastemade app"), functioning similarly to the iTunes store with search-driven navigation.
Personalized Recommendation Engines: The primary competitive advantage in the next five years will be advanced data science and algorithms capable of predicting user preferences, effectively acting as the new "on-air promo" for content discovery.
Media Consolidation: Tom Beers anticipates significant M&A activity, projecting the sale of his new production company for over $200 million within five years as the market consolidates around entities that control both IP and distribution.

Epic's Strategy: Created as a joint venture between Lionsgate, Paramount, and MGM; launched a digital offering featuring 3,000 library titles and originals across Xbox, PS3/4, Roku, and Android; plans to compete directly with HBO and Showtime on the set-top box market.
Machinima's Expansion: Aggregates content from 30,000+ programmers to generate 33,000 hours of original content monthly; actively repurposing legacy IP (e.g., Battlestar Galactica, Street Fighter) for social video audiences.
Revolt Network's Hybrid Model: Launched by Sean "Diddy" Combs and Andy Schoen as a "social media age" cable channel, leveraging traditional distribution while building a massive social following to bridge the gap between industrial and digital eras.
Buzzard Network: Fremantle Media is launching a dedicated Game Show Network (GSN) brand called "Buzzard" to leverage existing game show IP into interactive, monetizable channels distinct from the legacy GSN linear feed.