Chasing cord-nevers

Following up on my Weekly Update regarding Sony’s move into the virtual pay-TV space, much is being made elsewhere of the fact that Sony’s preliminary carriage deal with Viacom marks the first time a major pay-TV network owner has made its linear channels available on an over-the-top service. That’s certainly a significant development, but if anyone was going to be first it was going to be Viacom.
More than its peers, Viacom has proved to be vulnerable to the secular changes currently roiling the pay-TV business. It saw huge ratings drops last year at its two cash-cows: MTV (down 30 percent) and Nickelodeon (down 17 percent) as many of the networks’ tent-pole shows either ended (Jersey Shore) or ran out of gas (Sponge-Bob Square Pants). While the ratings slide has stabilized somewhat in 2013, Viacom’s core MTV/Comedy Central audience overlaps closely with the growing cord-never demographic, while the Nickelodeon audience increasingly is migrating to on-demand platforms, posing a significant long-term strategic challenge to Viacom.
Since its corporate separation from CBS, Viacom also lacks a broadcast channel to give it retransmission-consent leverage with pay-TV operators. Nor does it have any live-sports programming to speak of, leaving it without an entry in the one programming category still reliably holding onto its real-time, linear audience.
Those weaknesses came home to roost last year when Viacom was forced to accept a smaller than expected increase in carriage fees from DirecTV after a nine-day blackout pummeled its ratings.
Viacom, in other words, needs to cultivate over-the-top distribution platforms because its position with traditional pay-TV distributors is growing weaker. It particularly needs to cultivate OTT viewers among the cord-nevers that comprise a disproportionate share of the MTV audience.
As it happens, a Venn diagram of that audience would likely also show a significant amount of overlap with the PlayStation audience. If Viacom is ever going  to take the plunge into linear OTT distribution, taking it with Sony is probably its best shot.