Hot Dam!

Television’s evolution into something digital and different officially entered a new phase late last year when the heads of several top media companies issued what amounted to a declaration of independence from Netflix.

Conglomerates like 21st Century Fox, Disney, Comcast/ NBCUniversal and Time Warner had gotten used to the increasing licensing fees Netflix was plunking down for the right to stream their shows.

But as seen on their corporate balance sheets, there was a price to pay. Ratings on these companies' cable channels — particularly for repeats — were taking a huge hit. Rather then surfing the live channels, viewers were opting to binge-watch subscription video-on-demand (SVOD) on their tablets and smart phones,

The top executives at these media giants belatedly came to realize that they had aided and abetted the creation of a formidable opponent. With a market capitalization approaching $50 billion, Netflix is now nearly as big as Time Warner. And, of course, Netflix isn't sharing any data on who's watching what and when.

Enough was enough. Time Warner chief Jeff Bewkes said his company was going to slow down a bit on the deals to SVOD platforms like Netflix, Hulu and Amazon Prime Video and start looking for new ways to stream its shows directly to the consumer itself.

"We're evaluating whether to retain our rights for a longer period of time and forgo or delay certain content licensing," he told investors. "This would effectively push the SVOD window for content on our networks to a multi-year period more consistent with traditional syndication."

Bewkes's comments seemed to crystalize an emerging strategy among TV moguls. No longer were they going to blindly fuel the growth of Netflix and Amazon, and fall increasingly behind as their audiences migrated to new ways of viewing shows. And to address those multi-screen viewing habits, they weren't going to rely on the pay-TV's moribund TV Everywhere initiative, either.

Media companies began to launch their own SVOD platforms and serve their audiences directly.

HBO started the direct-to-consumer revolution: its HBO Now allows streamers — for $15 a month — to access Girls, Real Time with Bill Maher, Game of Thrones and the rest of its premium universe of new and archival series and movies. All offerings are available on demand — and without a cable subscription.

Meanwhile, perhaps just as notably, CBS Corporation debuted CBS All Access, providing — for $5.99 a month — every current CBS program (except NFL football), plus about 5,000 episodes of archival shows, for on-demand streaming. Again, no pay-TV contract or broadcast antenna needed. The network recently announced that its upcoming Star Trek reboot will run exclusively on CBS All Access, as well.

But HBO Now and CBS All Access were merely the first wave of SVOD sites launched by programmers.

Showtime, for example, quickly launched its own direct-to-consumer platform, as did Starz. Viacom launched Noggin, a $5.99 service targeted to kids. And Disney deployed Disney Life, a new SVOD service set to compete against Netflix in the U.K.

CBS and Warner Bros, have been discussing an SVOD site for the CW network that would combine live streams of shows like Arrow and The Flash with on-demand content.

If, say, negotiations with Tribune Media to renew CW affiliate agreements with its major-market broadcast stations were to break down, CBS and Warner could render the network a streaming-only platform. The CW would cease to exist as a broadcaster as we know it.

Meanwhile, as SVOD platforms have proliferated, pay-TV executives have been weighing their possible impact on the network bundles that have made the television business so profitable in recent years. In fact, it was NBCUniversal CEO Steve Burke who openly worried, during an early 2015 earnings presentation for corporate parent Comcast, about HBO Now and CBS All Access "cannibalizing" pay-TV households.

Ironically, Burke and Comcast have led the next wave of direct-to-consumer streaming expansion. In Comcast's very next earnings call, Burke famously lamented that 70 percent of NBCU's late-night audience for the Tonight Show Starring Jimmy Fallon went uncounted and un-monetized as it leaked out in the form of clips all over YouTube,

NBCU responded this past January with Seeso, a $3.99 subscription service that cleverly blends original shows, clips from NBC's vast late-night vault and classic stand-up performances. At launch, Seeso announced 22 original shows — everything from the quirky, YouTube-adapted Cyanide & Happiness to The UCB Show, created by Upright Citizens Brigade founders Amy Poehler, Matt Walsh, Ian Roberts and Matt Besser.

The original content has Seeso standing out among the flurry of SVOD sites being launched by programmers.

Veteran cable executive Evan Shapiro, hired by NBCU as executive vice-president of digital in December 2014, led the development of the platform. And he maintains that even though originals account for only 5 percent of its content, they deliver a third of the audience.

Alan Wolk, a senior analyst for the Diffusion Group, sees the value in originals. "Rather than just repurpose things you can get with your standard pay-TV subscription, they've created a lot of original programming," he says, "This gives people who already have NBC as part of a pay-TV subscription a reason to subscribe as well — it really opens up their potential user base.

And with Nielsen's new Total Audience Measurement system (TAM) now counting streaming as well as linear viewing, "there's no downside to the networks if someone watches on an app," Wolk adds. "The upside for them, of course, is that they get user data and a direct relationship."

Seeking a target audience of "comedy nerds," Shapiro compares Seeso to the narrow-niche channels that formed the backbone of the basic-cable universe, which grew into the mega-profitable pay-TV programming bundle we know today.

"The SVOD ecosystem today is very similar to the TV landscape, circa 1978," Shapiro observes. "A very small pool of mature players was trying to serve every viewing demographic and genre at once. Then cable came along, offering niche programming for the passionate viewer.

Now cable accounts for 60 to 70 percent of linear TV viewing. We feel that OTT [over-the-top, or streaming] hasn't peaked, but rather that the disruption has matured. New disruption is on the way, and that big niche will have a place in that world."

NBCU is now developing no fewer than six other niche-targeted SVOD sites. In so doing, it is bypassing TV Everywhere, the initiative started by its corporate parent, Comcast, and the rest of the pay-TV industry back in 2009 to migrate viewing to mobile devices. TV Everywhere was supposed to allow network operators like NBCU to compete with platforms like Netflix in on-demand streaming and mobile viewing.

Since TV Everywhere requires users to have a cable or satellite TV subscription, it would keep the profitable pay-TV ecosystem intact.

But consumers have gotten used to watching shows on smart phones and tablets and via living-room streaming devices like Roku and Apple TV. Few have made a habit of using the TV Everywhere apps from cable companies and networks. According to a recent PricewaterhouseCoopers survey, 78 percent of U.S. homes now subscribe to at least one SVOD service, while only about one in five homes uses TV Everywhere to stream shows.

"The best thing for us," Discovery Networks CEO David Zaslav told investors last year, "would be full deployment of TV Everywhere" — that is, streaming to only cable and satellite customers. "From our perspective, that should have happened four years ago."

But his company's SVOD platforms in Europe have garnered around 200,000 subscribers. "If we can get to 1 million [subscribers] at $6 to $8 a month," he surmised, "we could generate close to $100 million in revenue."

The explosion of niche-targeted SVOD sites from programmers has only begun, Wolk believes. But getting to that magic million-subscriber mark won't be easy for any of them.

"We will see a lot more of them," the analyst predicts. "But it's not an easy win. They are all starting at zero and need to build an audience from scratch. That's a lot of marketing dollars — and skills — few of them have." While TV Everywhere may have been a bust, don't count out the cable guys. Not only do they have the skills Wolk is alluding to — distributing and building content brands — they control the broadband pipes to more than half of American homes.

Savvy cable operators are looking to bundle SVOD services with their broadband products in very much the same way they package cable TV. In New York, for example, Cablevision markets HBO Now and Hulu Plus along with its Optimum Internet service.

"What is happening already," Wolk points out, "is that these stand-alone direct-to-consumer platforms are being sold through the cable companies, who have the money and resources to market them."

Virtually every pay-TV company is now experimenting with a virtualized, streaming version of its television service.

Comcast, for example, is slowly rolling out Xfinity Stream TV, which lets users of the cable company's internet network stream the major broadcast networks as well as HBO. And Dish's Sling TV offers live streaming, and some on-demand content, for major cable channels including ESPN, TNT and AMC for $20 a month.

For its part, Amazon is seeking to become exactly the kind of next-generation program bundler that Wolk is talking about. In December, the electronic retail giant announced an extension to its Amazon Prime Video SVOD service, whereby it will also package third-party direct-to-consumer platforms like Showtime Anytime, AMC's horror-themed Shudder, the nature-film-focused Curiosity Stream and Starz's new SVOD platform.

Subscribers will pay only one bill to Amazon, be able to access all their programming in one interface and get a slight price break on individual streaming sites.

So the old pay-TV bundle is changing, but it doesn't look like it's going away.

Still, not every programmer wants to see it change. Disney's ESPN remains one of the most powerful revenue forces in the pay-TV universe. It has deals with cable and satellite operators that force these companies to include it in their top programming tiers. So even viewers who don't watch sports get ESPN service — and have to pay nearly $7 a month extra in their cable bill.

But ESPN is losing that iron grip.

Through cord-cutting and other forms of attrition, the network lost nearly 7 million subscribers from 2013 to 2015. Analysts believe the lost subscriber money, combined with reduced ad reach, has already cost Disney around $1 billion. Things look to get worse. A recent survey conducted by research firm Civic Science found that 56 percent of pay-TV subscribers would ditch ESPN if it saved them $8 on their monthly bill,

The easy answer would appear to be the direct-to-consumer route. But Civic Science also found that only 6 percent of pay-TV customers would pay $20 a month just for ESPN.

So, clearly, a direct-to-consumer world isn't for everybody, and programmers like ESPN have a vested interest in sustaining the current pay-TV model. But whether the traditionalists like it or not, the industry is changing fast. Shapiro's description of the forces that shaped Seeso suggests just how different the television industry will be in, say, another five years,

To create Seeso, he says, "We did more than 11,000 interviews of video consumers — who we call Viewsers. [If you log on to watch TV, or watch with another device in your hands or lap, you are a Viewser.]

"We tested numerous genres of niche SVOD, but comedy was by far the most desired and popular, across all demos. Which is why we don't program for a demographic, we program for a psychographic. Seeso has been developed for the comedy nerd psychographic. We are putting all our weight behind this niche, which 90 percent of those surveyed said was their number-one genre."

In other words, get psyched. Who knows what — or how — we'll be watching next?