The success of True Blood seems to somewhat of a systemic cable summer boon, seen at both HBO and Showtime where primetime ratings are above 20% year to year, and at ad-supported cable whose shows are driving an all-time high for TV viewing. In comparison, TV viewing at the broadcast networks is faltering, perhaps indicating that stronger development should be allocated towards next summer.

An interesting shift occurred in 2008, the report said. For the first time, consumers spent more time with media they paid for, like books or cable television, than with primarily ad-supported media, like newspapers and magazines.

The VSS report also forecast internet media and subscription television to be sectors of strong growth during the next four years. These trends echoes the results mentioned in another report released a few weeks ago by Strategic Analytics (SA), which forecast that the global paid online video segment will surpass the ad-based online video segment in 2009. The SA report also forecast stronger growth for the paid segment during the next four years.

Both studies partly attribute the shift in balance towards paid content to the recession, which has stifled advertising budgets in both traditional and online media. In any case it is still surprising is to hear that paid video content will be a bigger moneymaker than ad-based content. While some companies like Apple and Netflix have made headway in the paid video segment a lot of studies have indicated that consumers prefer ad-supported models; an IBM study in November 2008 indicated that 70% of consumers prefer ad-supported models over consumer-paid models. Another study by Deloitte yielded similar results, indicating that 67% of US consumers aged between 25 and 34 would “be willing to be exposed to online ads in exchange for free content.

Although the majority of consumers would opt for ad-based video models, perhaps the smaller pay-to-watch segment is willing to outspend advertisers as a whole, in return for the following benefits:

• Zero or less advertising
• Access to a wider range of content (recent movies, old TV episodes, etc.)
• Ownership of the material or a longer viewing window
• Option to watch across more types of hardware (computers, DVR, mobile, etc.)
• Higher viewing quality

Given these trends in these reports during next two years the online community will see an expansion in paid video content. The ‘TV Everywhere’ partnership was recently launched by Time Warner and Comcast, allowing Comcast subscribers to view video online from TBS, TNT, CBS and HBO. I am also wondering if ad-based sites like Hulu will add paid content options; perhaps a subscription service similar to Netflix for accessing all the episodes for a series. Will hybrid sites emerge, offering both ad-based and pay-to-watch options? It is probably to early to guess which models will win (Hulu was launched only 17 months ago; see graphic above) but it is probable that a greater variety of options will emerge, resulting in a more choices and a very dynamic market.

So just how much does Showtime stand to lose? Looking at the shares of box office revenues by movie studio can provide one perspective. Since I had to use two sources for this information I decided to divide the data into two respective categories: “classics” (movies released between 1970 and 1999) and “recent hits” (movies released between 2000 and 2009).

Combined, Paramount, MGM/UA and Lionsgate took about 17% of the box office revenue between 2000 and 2009, and about 22% between 1970 and 1999, even though Lionsgate didn’t exist then. The group’s strength in the “classic” category is due to the strong libraries of Paramount and MGM, and it will be interesting to see how this is leveraged at Epix.

Notably, Warner Bros. emerged as the leader in both categories, which is a major reason why HBO can be considered to have the strongest movie library of any premium cable channel. Consolidating the current contracts by cable channels indicates just how strong HBO is in this respect (40% share of “classics” and 50% share of recent hits). This chart also demonstrates just how much Showtime has lost to Epix.

It’s unclear whether HBO will retain rights for movies from DreamWorks, since that studio is now owned by Paramount, but for now I am leaving this library under HBO’s roof. A major caveat in this analysis is that I am assuming that each of these channels have contracted the rights of the entire movie library of these respective studios, and contracts are normally issued only with certain titles and with very specific timing windows or transmission rights.

Also, as any fan of Dexter, Weeds, or True Blood can tell you, this comparison of premium movie channels doesn’t account for in-house productions movies which are becoming more important, if not the reason to subscribe to any of these services. I’m sure that this depends greatly on the individual subscriber’s preferences.

In any case I believe this is a beneficial approximate indication of why CBS’ shares dropped so much today, and a good gauge of Epix’ potential in the marketplace. It is obvious that Showtime will have to somehow make up for the loss of these movie libraries, perhaps through contracts with smaller studios, as well as original productions. It will also be interesting to see how Epix develops its value proposition based on its movie library.

Outstanding Drama: Big Love, Breaking Bad, Damages, Dexter, House, Lost, Mad Men

Outstanding Comedy: Entourage, Family Guy, Flight of the Conchords, How I Met Your Mother, The Office, 30 Rock, Weeds

Cable has steadily been growing its share of the nominations during the past ten years. At first only HBO used to have a regular stake but during the past two years new players have emerged and this year AMC has two drama nominations, the same as HBO. Cable networks, especially premium cable networks like HBO and Showtime, don’t have to limit or censor their productions like broadcast networks, allowing their dramas to push the envelope further and have a more sophisticated appeal. It also helps that the production budgets for cable productions have grown greatly over the past few years. Not coincidentally, many pundits in the broadcast industry argue that stations and networks need to reclaim their position by consolidating bigger budgets (perhaps through retransmission fees) and investing in better programming.

The broadcast networks have managed to maintain their control over the nominations for Outstanding Comedy, although I do believe that this category is merely lagging and cable will soon also take the majority of the nominations.

This might also be an incomplete picture since comedies fall into other categories. For example The Daily Show and The Colbert Report were nominated in the Outstanding Variety, Music Or Comedy Series category, and South Park was nominated for Outstanding Animated Program,

It’s difficult to get much audience information on HBO, but I did manage to compile the following list. Nielsen adjusted its ratings measurements of HBO after 2004, so its hard to compare audience levels before that point.

The second season premiere of True Blood is 157% above the first season’s premiere of 1.44 million in 2008. It may be that the HBO series was partly helped by popularity of the Twilight series. It might also be a sign that HBO has the first series hit since the days of Tony Soprano.