OTT Threat Is Overstated

by , Mar 18, 2011, 1:30 PM
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Some of the OTT "over the top" providers politicize their mission by directly attacking the cable and broadcast industries, supposedly on behalf of abused consumers.   Searching to find truth in these statements I took it upon myself this past year to install several OTT boxes. I wanted to figure out for myself how real this OTT threat is to the TV industry. 

It should be no surprise to anyone that TV manufacturers have increased the amount of HDMI ports on new HDTV sets.  Today, via an expanded HDMI hub, I have nine set top boxes connected to my 55" Samsung Internet-enabled TV.  

Part of the process I went through with my project was to create a master list of all the programs I usually watch. I entered approximately 60 TV shows into the DVR scheduler(s) and also all the playlists of services like Netflix and Hulu.    

What I discovered is that the most important feature for me is that I wanted to store and watch as much first-run content as possible, especially the day it is released.  For the most part I built this first run library by employing three DVRs from the array of boxes. 

As a "work around," I used the Sezmi and TiVo boxes to record the broadcast content from over the air.  The Comcast box was used to record cable content and watch VOD.  My Samsung Internet-enabled TV -- after Roku, Boxee, Apple TV, and Google TV were found redundant to my TV's apps -- filled in the cracks with Netflix, Blockbuster, and Hulu.

When reviewing all my playlists the majority of my content was already available through a patchwork of OTT boxes; although subscription costs varied based on how close to the first availability I wanted to watch the content.  Some of the popular shows like "American Idol," however, weren't available as first run on any of the OTT services.  

 

As you know program content, like "Access Hollywood, is typically licensed exclusively for local markets; or content could be licensed to a major network prior to being moved to ancillary distribution channels (like overseas or DVD). Every so often the agreements are juggled based on viewership trends.  With the introduction of TV Everywhere a few battles are starting to brew between local and national content rights. I don't think OTTs are a "game changer", but rather they are just a lower-tiered addition to the existing licensing ecosystem. 

Today content owners have variable pricing agreements (for new releases and old catalogs), which are already in place across many forms of distribution.  Cable and satellite are rolling out mobile and tablet apps are that fusing the traditional pipes and the Internet which will allow, in my opinion, consumers to eventually customize their subscription packages.   

When you strip away all the hyperbole regarding OTTs' long-tail appeal, and social media features, the OTTs will only survive if they can gain enough subscribers to secure the first run content that people actually want to watch; long tail and second run content selections are no longer product differentiators. OTTs (including Hulu) might slightly influence a la carte pricing, however, TV Everywhere will probably have a much bigger impact on the tightening of the various pricing models.  

Without access to an unlimited supply of desirable content, OTTs have no long-term value. These "dead" boxes just take up an HDMI port and stay plugged in while the consumer waits to see if these companies can deliver on their promises of first run content.  In addition, without content an OTT's social media features are worthless.

In order to survive for the long term OTTs should start rolling out boxes that will let consumers tap into the premium content available from the over the air signals. Logic would dictate that as mobile DTV efforts hit their stride local broadcasters are going to keep going further in implementing this hybrid approach.

Broadcasters are such an obvious source of cross platform content that I am dumbfounded (that in strong digital signal markets) it has not already become part of the strategy for OTTs.   I predict TiVo and Sezmi, especially while they still hold on to their lead(s), will some day partner with broadcasters for consumer box distribution. 

With hybrid mobile and tablet apps -- those that straddle the traditional and Internet pipes  -- starting to become commonplace consumers one day will not care whether video comes from cable, the Internet, or even an antenna.  All consumers will care about is that they can find what they want to watch, that they can afford it, and that they can eventually interact with it.   

After test driving all these boxes, it is clear to me that first-run video content --- not Internet disruption -- is what is really going to be driving tech's growth engine for the next few years.

0 comments on "OTT Threat Is Overstated".

  1. Joe Lorkovic from Network Domain LLC
    commented on: March 18, 2011 at 2:37 p.m.

    OTT Threat Is NOT Overstated, it’s the inevitable future and the opportunity for new companies to claim market share in the new ecosystem is very real. Make no mistake about this fact though; as stated the key is going to come down to interactivity, more specifically the future platform on a hardware and software level must support non disruptive TV interaction such as selecting TV objects in conjunction with a tablet display that provides program guide, TV commerce and internet content. So yes, the future platform is OTT, so is that Threat or an Opportunity, depends on who you are.

  2. Douglas Ferguson from College of Charleston
    commented on: March 18, 2011 at 3:32 p.m.

    The iPad is the looming game-changer, in my opinion. Yesterday my wife had the remote control and was watching her stored shows on TiVo, but I was using our iPad that had the NCAA app running. Whenever an "upset alert" popped on the screen as I was working on other tasks, I would switch to that game and watch the exciting conclusion. Ordinarily, I would have had to leave the room or renegotiate the viewing with her. With the iPad, I could stream whatever I wanted to my own screen, whether it was basketball or a Netflix movie. As tablets diffuse into the population, and everyone has their own screen, the OTT will matter less and the handheld screen will take over. There's not much different between a 9.7" diagonal screen 15 inches away from one's face and a 42-inch screen several feet away, really, except for occasional lag. I wish Comcast had their app as far along as Time-Warner.

  3. Jonathan Mirow from BroadbandVideo, Inc.
    commented on: March 18, 2011 at 4:48 p.m.

    "Today, via an expanded HDMI hub, I have nine set top boxes connected to my 55" Samsung Internet-enabled TV." - talk about your early adopter gadget-freak. Over The Top is just the old dogs fighting over the same, dwindling piece of meat. The future lies in the creation of engaging, interactive niche programming that offers people something they can't get on "American Idol" - even if it is first run.

  4. Sheila Seles from Advertising Research Foundation
    commented on: March 18, 2011 at 5:19 p.m.

    OTT is not a threat…right now, but not because of anything having to do with the capabilities of OTT devices. From the beginning (think TiVo), OTT devices have had better interfaces, more robust search capabilities, and a much better overall UX than anything MSOs offer.

    As this article alludes to, the problem now is all about licensing. If you could get an HD box that allowed you to watch linear network content, Netflix, and access your home network, that would be awesome. But the cable nets aren’t going to make that linear content available OTT until they’re not counting on retrans fees for more than half their revenues. MSOs are the key here. They can either start to integrate with OTT functionality or wait for the day when the networks decide that partnering with Apple, Google, Samsung, or Boxee is a better bet than the current model.

  5. Tracy Hill from Thillgroup
    commented on: March 18, 2011 at 6:30 p.m.

    I completely disagree. The future of these devices is in content such as http://www.redbull.tv I have a Roku box and cable - this channel gets an awful lot of my time. I believe it's the model for the future of global media networks and brands in using direct-to-consumer marketing channels. I mean, which of your TV networks can you watch on your mobile device, OTT box and computer...anywhere in the world? I know one thing, Red Bull isn't gonna raise my rates!

  6. Jamie Duran
    commented on: March 21, 2011 at 12:53 p.m.

    The OTT is more of an option than a threat. For the antenna to work properly, it should be mounted on the outside of the house, pointing towards the nearest TV tower, preferably 20 feet off the ground. We are doing just that for our customers. We install an off air antenna to complement the internet setup. In general, our customers have their systems paid off in less than 1 year, then it's free TV forever. We are based in the SF Bay Area, but hope to be nationwide soon. We need qualified franchisees! Google Goodbye Pay TV for more information.

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