Part 1: What does it take to win in an OTT world?
In this blog trilogy, I will try to shed some light on one of the more intriguing topics in the video industry– OTT video. I will discuss the reality of OTT video, the service provider’s perception of it, the future of the paid video industry and what service providers should do today in order to win in an OTT world.
I just returned from beautiful Budapest. But alas, I was not touring. Instead, I spent a couple of days with a group of smart people from the pay TV industry; service providers, media producers, analysts and technology vendors. We were gathered together to discuss the future of TV.
Over The Top video, or in short OTT, was top of mind in the discussions.
Let’s remind ourselves of what OTT video is.
It’s the delivery of video over an unmanaged network, meaning the Internet, as opposed to managed networks, like pay TV cable.
Over 80% of IP traffic today is video. Practically speaking, this is OTT video. It comprises paid VOD libraries, like the Netflix’s of this world, as well as free video of all kinds, like YouTube. Very little of it is in fact linear video (like TV channels).
What does this mean for the pay TV industry? Is OTT even a concern?
Well, given the fact that OTT dominated most of the discussions, I’d say it’s a big concern.
Attendees were asking:
- “Is it an opportunity or a threat for our business?”
- “What does it mean for us?”
- “How will the future with OTT look?”
It was interesting to note that most of the viewpoints expressed at this conference discussed the short and mid-term implications, rather than the long term impact. That’s because most attendees felt that OTT does not present a risk for the pay TV industry. Here are some of the reasons that they gave:
- “It’s not targeted to our subscribers, nor localized to our market. Our subscribers wish to see the content they like, in their language, and only local SPs can provide it”
- “Our subscribers care first and foremost about linear channels and OTT doesn’t provide them”
- “Subscribers are using OTT as a supplement to SP services, not instead of them”
- “There is no real commercial benefit in moving to OTT… our subscribers will not save much, if at all”
The majority of attendees nonetheless felt that SPs should integrate OTT services into their guide. After all, subscribers do want them. And so it’s better to ensure that they get all they need directly from the service provider, rather than sending them to the Internet.
It was also clear that service providers should offer OTT services, mainly to serve mobile devices, but also home CE devices.
But let’s be clear.
There was no commercial justification or revenue opportunity behind these sentiments. They were about satisfying subscriber demand in order to maintain loyalty and avoid churn. My impression was that service providers were treating OTT more as a necessary evil, the unwanted guest. It seems that they don’t see OTT video as an immediate threat. But they do feel it needs to be addressed.
Are they being too ambivalent with respect to OTT?
I will discuss that in my next blog by examining what we can in fact learn today from OTT video providers and where their business is going.
Stay tuned for my next post, but in the meantime check out this brand new eBook: Transform your video services with a cloud platform
Interesting blog as I was an early adopter of DirectTV Now service. ATT had to launch this to us cord cutters due to the increasing competition from the likes of SlingTV, Sony Vue, and Hulu. I was a 15 year DirectTV subscriber and dropped the service costing over $150/month for a $45/month bill, more choice, and most programs on demand. I think OTT service is becoming a necessity as SP are being forced to charge less for private line MPLS and the new trend toward SD-WAN and NFV is changing how they monetize their offers.
Hi Bill
No doubt that for those that ask only for an on demand services, OTT is a good option.
And as you mentioned, Service providers reacted to that trend by providing OTT services themselves.
But the value is probably in live content, and you can’t get it in OTT, anyhow not in the scale and quality that SP can give with their broadcast networks.
So the interesting question here is how you can successfully combine the two, taking the advantage of the managed network that SP got, with the qualities that OTT provides.
I’ll write more on this in my nest posts.
Yaron
This is a major topic for all SP’s. The belief that great content will bubble to the surface is no longer true. Making Web Video Delivery (currently called OTT, already an off-putting term) a priority is key to content providers as much as SP’s. The technology for local language is also there (Visual and/or Auditory), but are not always locally interesting or the localization effort is off-putting. Also, borders are enforceable as several providers have shown how to block/reduce proxy use to satisfy content owners.
The biggest problem now, if you do not address your content web delivery issues immediately, is the growing piracy issues. It is real, it takes away real subscribers to the tune of billions of dollars annually, and it reduces your chance to advertise or even reach your customers with any message. Also, it is getting easier since content providers aren’t trying hard enough on that problem and have little money to make it happen. Content providers WANT some fragmentation, windowing, lack of true standards, and competition for their material. So, the pirates win again. VHS, DVD, Blu-Ray, and “Digital HD” are functional standards that prioritize content ownership over the channel that provides them and have a simple interface to get it. Until an easy to navigate standard emerges (Sorry, it’s not Netflix, YouTube, Hulu, Vudu, or Amazon… yet) between services or tiers of services, pirates will win.
Hi Chris
Couldn’t agree more, piracy from all kind is direct outcome of the fact that video is no longer delivered in a secured managed pipes. It’s a challenge to protect video in this environment, and the solution is in a multi-layer protection that knows how to handle piracy before, during and after it happens.
This is not the topic of this blog trilogy, but I certainly need to post about it shortly.
Yaron
This is why Settop Box model (in-home linear channel box) is such a difficult space for Service Providers to compete in. STB has presence, infrastructure, and more of a universal appeal for most home consumers. However, the STB model has not yet been able to evolve into more of a compelling business for growth and value. I, like most consumers these days want choice, mobility, and value. OTT offers that and more. Interesting discussion and insight.
Hi John
Service Providers need to find the way to leverage their asset – the managed network, while providing services in the level that OTT does, stay tune for my next posts to learn about my thoughts on how this can happen.
Yaron