CBS sees original content as key to consumers’ hearts… and subscriptions

2019 CBS Corporation

CBS Corp. President and Acting CEO Joe Ianniello told an audience at the Credit Suisse Annual Communications Conference earlier this month, “Every time we drop an original, we see spikes in subscribers.” And, that is a very good thing – especially if you’re a content creator.

While headlines out of his appearance tended to focus on a statement he made that CBS All Access users watch twice as much content at do users, the real story is the content express CBS is on as it attempts to rapidly grow its digital properties.

Already in 2019, for example, the company has 80 shows in production… just a few years ago, that number was 35. And, while 30 of those in-production shows are on CBS (“the big tent,” as they call it), 25 more are split between Showtime (14) and CBS All Access (11), the direct-to-consumer play that will turn five-years-old later this year. The other 25? Titles that CBS will take to the marketplace.

D2C is a huge opportunity

Ianniello says the Eye Network believes its best opportunity in the future is going direct to consumers, especially on a global level because, although he believes CBS has a very good shot at developing a US subscriber base of 25 million by 2022, the global audience “is the biggest opportunity we have.”

Its FBI series, for example, is licensed in more than 200 territories, and the network is sitting on a mountain of yet-to-be licensed content, some 800 episodes.

“Some of our peers are pulling back their content (from streaming services),” he says. “We don’t have one edict that says we’re never going to license content outside the walls of CBS. We have a whole bunch of beachfront property we haven’t licensed yet – stay tuned.”

Owning that content relationship globally is crucial, he points out, and it’s part of the company’s long-standing strategy.

“Our strategy hasn’t changed – it’s always centered around producing and creating premium content and distributing it around the world,” Ianniello says.

Adapting strategy to changing consumer desires

How that content is distributed has changed, though, and it’s changed quickly. When CBS All Access launched in October 2014, it did so with zero original programs. Now, new programs are rolled out regularly both to attract new subscribers and also to keep them.

“The best return on investment we can make is putting hit shows on, driving the subscription-based business we have,” Ianniello said. “We’re in the very early innings of where we see peak content. The (consumer) appetite is there. As long as we continue to see proof points, and we’re driving subscribers, which, in turn, drives revenue, we’re going to continue to feed the pipeline.”

That’s something Netflix and Amazon – both with multi-billion-dollar content budgets – obviously agree with. And, it’s a point of view that has attracted other followers.

Just this week, for instance, Sky – Comcast’s newest acquisition – announced it literally is doubling down on more original content, too, investing twice as much cash in its new Sky Studios and taking a pan-European approach to original content creation.

Growing subscribers and revenue

Yes, subscribers are up at CBS, they’re also up at its premium play, Showtime. In fact, the company in 2016 forecast it would have 8 million subs by 2020. That happened two years early, and it’s convinced, as more consumers – and competitors – are moving into the OTT ecosystem, that reaching 25 million could happen quickly.

In addition to CBS All Access and Showtime, the company is making sure it’s in all of the most popular skinny bundles. It’s on both YouTube TV and Hulu, and has said it’ll be ready to launch of Apple’s play as soon as the company debuts it.

“Quarter-over-quarter, year-over-year, our subs are up,” Ianniello says. “Consumers are choosing how they want to get (content). We’re fine with that.”

No doubt. ARPU on D2C subscribers and other OTTs plays is higher than for customers it has through pay-TV. In fact, Ianniello says the eventual $2.5 billion it expects to collect in retransmission fees could be seen as a discount from the fees it collects for OTT customers.

Still, the global audience is the largest opportunity CBS sees down the road, where it can go D2C or take licensing fees as it does today.

Leveraging continued original content growth is key.

“We have to spend (on content) in order to get the subs,” he says. “If you get the subs you get the revenue. Worldwide is the largest opportunity we have sitting in front of us.”

The bottom line

Original content is like catnip to consumers. Investing in a continuous flow if difficult, but critical to engaging your customers and keeping them from churning. Just as critical: Letting your subscribers know that new content is on the way. Subscribers come, and subscribers go. Having a release schedule will help manage churn by making the inevitable pauses that consumers take in a service as brief as possible.

“You have to try and create a programming schedule that keeps (subscribers) through the year,” Ianniello says. Broadening out the pipeline of content has helped both CBS All Access and Showtime succeed so far, he says.

Something else that Ianniello has learned – and that is knowledge well-shared? Even with the release of a brand new original, something that’s been advertised and well positioned to succeed, “The gratification isn’t immediate,” he says. “All the subs don’t come Day One. That wasn’t intuitive to me.”

Meanwhile, as to noise that the US market has reach SVOD saturation, CBS execs beg to differ.

The average US OTT consumer currently has about three OTT subscriptions, but CBS executives believe that number hasn’t even begun to top out. In May, Marc DeBevoise, president and chief operating officer at CBS Interactive, told Ad Age CBS expects consumers to take about 10 OTT services, as more players – like Apple and Disney – jump into the OTT space.

“We think it is going to deliver a lot more users to the platforms we are already on…. It’s going to do more priming of the pump of people diving into the OTT space,” he says, since few of the services are delivering exactly the same thing.

Stay tuned.

Jim O’Neill is Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn