Commentary

Over The Top Services Outpace Pay TV

According to a recent Parks Associates survey, reported by Joseph Palenchar, a total of 57% of U.S. broadband households subscribe to an over-the-top (OTT) video service (streaming of video content over the Internet without the involvement of a multiple-system operator.) And, 7% of broadband households, or 8.4 million, subscribe to at least one OTT video service but not to a pay TV service, the survey found.

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The 7% includes consumers who discontinued pay TV service and those who never subscribed to pay TV, says the report. In other Western nations, the figure is 4% or less. Although pay TV operators are introducing their own OTT services to appeal to consumers who don’t subscribe to pay TV, “… the OTT video-services marketplace continues its rapid rate of change, impacting the video ecosystem across world markets… " said research director Brett Sappington. 

Just a couple of years ago, says the report, over-the-top (OTT) service was being called “an attractive new gateway to reach TV viewers.” But, today, it seems that almost everyone is using OTT services, either to supplement traditional cable TV services or sometimes as a total replacement for pay TV. 

This demographic includes both “cord cutters,” former pay TV subscribers who have opted for OTT streaming services instead, and “cord nevers.” Cord nevers are the younger college generation raised on social media and Netflix, who are used to any content, any time, on any device. Viewers in this generation often decide not to sign up for pricey cable packages when they move into their first apartment. When OTT supplements traditional pay TV, subscribers are likely to cut back on existing pay TV services as they evaluate their entertainment options, notes the report. 

At the NAB conference earlier this year, says the report, SeaChange CEO Jay Samit told audiences that the cable industry has already reached a “tipping point,” which he defined as cable companies making more money by delivering video through broadband rather than through their traditional systems. He stated that Comcast was just reaching this point of making more money from its broadband Internet services than it does on video.

As the industry reaches this tipping point where streaming OTT content has become the norm, new approaches are needed to deliver the huge volumes of Internet video and other OTT content demanded by consumers. When OTT content has to be delivered across the Internet from the original source each time a user requests access, this is no longer an effective approach, says the report, even when aided by a global CDN. This model causes network congestion, which interrupts video delivery.

 The Conviva 2015 viewer experience report demonstrates that 28.8% of all Internet streams in 2014 experienced buffering while 58.4% suffered from degraded video resolution, with both metrics deteriorating as compared with 2013. A local approach to content delivery offloads the network to ensure little or no buffering and support for high video resolution, and significant costs savings for the network operator.

Concluding, the report says that consumers gain an improved viewing experience with a local content delivery model, which translates to increased consumer satisfaction with the broadband service provider.

 For more information from Parks Associates, please visit here

 

 

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