Light Reading

Boxee, Roku Predict Pay TV's Transformation

Light Reading
LR Cable News Analysis
Light Reading
4/26/2011
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NEW YORK -- Cable Next-Gen Video Strategies -- Internet video could transform the pay-TV industry, as cable MSOs could use the Web to market programming to subscribers outside the geographic reach of their networks, say the CEOs of Boxee and Roku Inc.

We don't know which cable company will be the first to market Internet video programming to non-subscribers outside their territories, but Roku CEO Anthony Wood said it is inevitable that pay-TV providers will expand into OTT video. "Within 12 to 24 months we will see a traditional cable company go over the top," Wood tells LRTV:



Boxee CEO Avner Ronen told cable executives in the audience that it would be a mistake not to take advantage of Internet video to reach new subscribers:



Other noteworthy tidbits from Ronen and Wood:

  • Roku is conducting trials with smaller cable operators that are testing its platform as an IP video solution.

  • Wood claims that about 40 percent of viewers who have purchased Roku's OTT set-top this year have cut the cord on cable subscriptions, up from 30 percent last year.

  • Ronen predicts that four years from now, there will be an Internet-based TV show or experience that is going to be bigger than the biggest TV franchise today. [Ed. note: There already is. It's called pornography.]

  • Major programming networks will be available on Boxee and other OTT platforms once contracts with existing distributors expire, and content owners are able to sell rights to new entrants, Ronen said.

  • Boxee now counts 1.7 million users, many of whom spend two hours at a time watching online video. (See Boxee Launches Cord-Cutting Box .)


— Steve Donohue, Special to Light Reading Cable

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JGHilde
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JGHilde,
User Rank: Lightning
12/5/2012 | 5:06:40 PM
re: Boxee, Roku Predict Pay TV's Transformation


I was predicting cable going "over the top" and competing with other cable companies back in 2004.  It's clearly going to happen.  If the larger MSOs don't do it first, the overbuilders or telcos certainly will!!

tomdaily
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tomdaily,
User Rank: Light Beer
12/5/2012 | 5:06:34 PM
re: Boxee, Roku Predict Pay TV's Transformation


It is smart move for Roku to aim to be a technology provider to MSOs. It seems like that is a prudent way for them to be successful long term. Also, sounds like Roku wants to be the provider for a small cable company to go OTT in the next 12 months. Aren't there content rights issues for a "virtual MSO?"


Interesting interview.

Cooper10
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Cooper10,
User Rank: Light Beer
12/5/2012 | 5:06:33 PM
re: Boxee, Roku Predict Pay TV's Transformation


With the perspectives of both Anthony Wood and Avner Ronen.  In particular, Ronen's comments that TV Everywhere solely as a defensive strategy to maintain current pay TV revenue streams (and bundles) is, in the long term, bound to fail.  Netflix has demonstrated that an OTT provider can scale to rival the largest pay TV providers, and with that comes the ability to write bigger and bigger checks to secure content - and without that scale, "regional" service providers are increasingly disadvantaged relative to national/international scale of OTT. 


It is inevitable that MSOs and telcos will extend services beyond their footprint via OTT - however, another logical conclusion will be further consolidation among service providers.  Today, there are 4 or 5 national wireless providers (and really only two big ones) - 5 years from now, there may be 4 or 5 national providers of video and ISP services, and a regional MSO or telco will be a thing of the past.

Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 5:06:32 PM
re: Boxee, Roku Predict Pay TV's Transformation


Then the next questions are who's going to go off net first and when?  All the top MSOs are candidates, but would put TW Cable and Comcast among the first to pull the trigger.  When?   I think we're still several years out. Any guesses on that one?
JB

DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 5:06:31 PM
re: Boxee, Roku Predict Pay TV's Transformation


Dear Policy Guy,


Isn't "when" and "who" part of the "what"? If no, then I predict some team will win the Super Bowl in 2012. Or thereabouts.


So what did you really predict?


 

Policy Guy
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Policy Guy,
User Rank: Light Beer
12/5/2012 | 5:06:31 PM
re: Boxee, Roku Predict Pay TV's Transformation


While I didn't call it "OTT" at the time, for the Telecommunications Act of 1996 (started out as 1995, but took until 1996 to pass), I provided Commerce and representatives a briefing of how the equivalent of Title III Cable Services could be provided over Title I Telecommunications Services via emerging IP video technology and how this would in time cause a conflicting regulatory regime.  Also argued for stronger equivalency in quality of service to address what is now the network neutrality issue.  Of course, I and we thought this would come to pass a while age and that it would be via IP video over an ATM network, but it goes to show you that--while not easy--it is not so terribly difficult to predict *what* will happen.  It is, though, difficult to predict *when* and who the specific players will eventually be.

paolo.franzoi
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paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 5:06:30 PM
re: Boxee, Roku Predict Pay TV's Transformation


 


Okay, I will be the one who says this....OTT off net is going to be a really bad idea.


First, you will validate bypassing the cable companies and the media companies will profit here.  Lots more Hulu.  The cable companies would be an aggregator of content.  They are really not built for that in their content deals.  iTunes allows discrete buys.  Netflix has limitations on what can be done.  Cable guys now have to run a 500 channel lineup OTT.


Now, you say they will change the model and go a la carte.  SOOOO, you really think Disney is going for that?  Really?


Ask yourself this.  Why does AT&T not do this today?  U-verse should be able to do it over cable right?  I think you will find that the pricing will add up badly for the subscriber.  They have to get a naked Internet service of a pretty good rate.  Next they will have to get a broad content package that is completely unbundled (so must be priced on its own).  Third, you are going to have to deal with the bunches of calls about quality issues on networks you do not control.  Fine and dandy for Youtube (price of Youtube = 0).  Not fine and dandy for $100/month video service.


Now, move to real streaming...no HD, small screen and again the cable guys will be at a cost disadvantage to the media companies themselves.


Now, if they want to go make a premium streaming service with limited content - MAYBE when their content deals are up for renewal.  But WHY would a media company do that?  Unless they are getting MORE MONEY from the cable guys for this, it undercuts their streaming websites.


Do I think there will be lots of change here?  Yes, but what I think will happen is the elimination of the cable companies in the content distribution business.  Just like the telcos.  Once you have direct streaming, the media companies will do it themselves unless there is more money (or less cost at the same money) to have intermediaries.


seven


 

Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 5:06:19 PM
re: Boxee, Roku Predict Pay TV's Transformation


But aren't most cable operators big aggregators already? However, I agree that we probably won't see them go a la carte. Maybe some more granular tiers.


I do see the problem you point out: if they go OTT they lose control of the access network and therefore the QoS, and many (not all) networks are going to want  QoS provisions before they'll let someone offer their linear channels OTT (Wealth TV's Roku deal notwithstanding, and whoever else jumps in with Roku in the months ahead)


I am similarly skeptical about the ability to go OTT and do real HD to big screens. When this out of network idea was being bounced around I asked some cable friends if what was being considered was more akin to an out of market Netflix-esque VoD streaming sort of thing. And they said, no, that the major MSOs (Comcast , TWC etc) are thinking about offering everything OTT, linear, on-demand, the whole smash, using adaptive bit rate. Perhaps that's just the  long-term goal, if the technology and biz arrangements will allow for it.


It's coming up alot because MSOs are losing thier video sub bases and they may have to go out of market to find growth, even if that means taking customers away from other MSOs. It won't happen overnight, though.  But the hints are growing more frequent.


Also, in a lunch panel at the SeaChange event in NYC on Wed., analyst Craig Moffett agreed that an out of network strategy isn't sensible for cable MSOs because he thinks it would lower margins for the whole industry, create a pricing war and a stalemate. JB


 


 


 

Policy Guy
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Policy Guy,
User Rank: Light Beer
12/5/2012 | 5:06:18 PM
re: Boxee, Roku Predict Pay TV's Transformation
Post was mostly in response to 2004 prediction in "Old News" post. That's why I added "but so what". Now that said, to be accurate, a structural prediction of what is still a prediction with some useful--though limited--value, while "someone" winning the superbowl is effectively a non prediction. That said, I agree that when and who is also necessary... as that was my primary point. Even then, I could have been nicer about it.
DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 5:06:17 PM
re: Boxee, Roku Predict Pay TV's Transformation


Based on this reply alone I'd hire you to be my attorney. :)


You're right, though. The overall trend has been a long time in the making. Now we'll see what shakes out as this business model discussion that's also happening on this thread gets rolling.

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