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Boxee CEO: MSOs Should 'Go Over-the-Top'

NEW YORK -- Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC), and other major cable operators should abandon their decades-old strategy of only offering video services within their own footprints, and market competitive video products delivered via the Internet nationwide, Boxee CEO Avner Ronen said here at a broadband video event Monday night.

“They need to go-over-the top themselves. That’s what they should do. They should offer [Comcast’s] Fancast [Xfinity TV] and whatever is going to be the brand… to anybody who has a broadband connection,” Ronen said at panel session featuring cable and Internet video executives hosted by VideoNuze.

“They shouldn’t be afraid of cord-cutting. They should encourage it,” Ronen added, suggesting that selling tiers of faster broadband Internet connections could become the core business for many cable operators. (See Indie MSOs Plug ‘Dumb Pipe’ Video Model.)

Turner Broadcasting System Inc. SVP of business development Jeremy Legg said his company would be open to supplying its programs to what he described as a “virtual MVPD" (multichannel video program distributor) and pointed out that Apple Inc. (Nasdaq: AAPL) or Microsoft Corp. (Nasdaq: MSFT) could also try to take the lead in delivering over-the-top (OTT) video.

“We’re agnostic from a distribution standpoint as long as the business model delivers what you want to deliver,” Legg said.

But Legg emphasized that he believes charging viewers subscription fees for long-form online video is the best strategy, and he teed off on top Internet video site Hulu LLC for offering hit TV series and movies for free.

“I personally don’t think it’s been good for the industry. It’s taught consumers that you can access content for free with virtually no ads in it.”

The Turner executive also suggested that the reason Hulu is now looking at ways to charge for content is because the company, which is backed by NBC Universal , News Corp. (NYSE: NWS), and Walt Disney Co. (NYSE: DIS), has failed to make money under its current, ad-supported business model. (See Hulu Plans Paid Subscriptions.)

“We think there’s a reason that they only report video streams and not revenue,” he noted. “When the models really change, people will start touting that they’re making money, and they [Hulu] don’t.”

Teeing up 'TV Everywhere'
Much of the panel session, moderated by Broadband Directions founder Will Richmond, also featured executives from ESPN and VEVO, and centered the debate on distributing subscription- or advertising-supported Internet video, and the potential of cable-backed TV Everywhere sites such Comcast’s Fancast Xfinity TV. (See Comcast's 'Xfinity' Goes Live .)

Legg said two factors affecting the cable industry’s rollout of TV Everywhere sites, which allow viewers to access content from their cable subscriptions, are Hulu’s broad offering of free ad-supported content and NBC Universal’s pending merger with Comcast. (See Comcast to Take Control of NBC Universal.)

“The TV Everywhere rollout has been complicated by the presence of Hulu and how Hulu is going to evolve. The Comcast-NBCU merger also becomes an input into this, given that the largest distributor will also own part of Hulu,” he said.

But he added that Turner and parent Time Warner Inc. (NYSE: TWX) will continue to hit the accelerator on their own TV Everywhere plans. “Irrespective of that, we are going to charge forward. We believe at the end of the day someone needs to lead this initiative.”

Another topic of debate was gauging how many consumers may be willing to cut the cord on their cable TV subscriptions and rely on Internet video delivered via a broadband connection for home entertainment programming.

Yankee Group Research Inc. CEO Emily Nagle Green shared results from a Yankee survey that found 7 percent of consumers have considered cord-cutting but haven’t yet canceled cable subscriptions, and that 2 percent have already cut the cord.

Green also said 47 percent of consumers said they haven’t thought about cord-cutting -- which, she observed, means more than 50 percent have. And she said 21 percent of consumers that Yankee surveyed said they would never cut the cord on cable.

“We start to see this phenomenon take root over the next five years in certain demographics,” Green noted, adding that consumers that own gaming consoles and other broadband-connected CE devices would be the first to cut the cord.

Another issue that could influence the future of Internet video are rules governing network neutrality. Legg said Turner supports network neutrality, and is opposed to distributors charging consumers “by the bit” or “any situation where content is being gated or turned down or throttled down.” (See Net Neutrality Ruling: FCC Loses, Comcast Wins.)

— Steve Donohue, Special to Light Reading Cable

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njguy 12/5/2012 | 4:38:03 PM
re: Boxee CEO: MSOs Should 'Go Over-the-Top'

Going OTT would legitimize OTT TV with the masses. And it would mean competing with other MSOs, Hulus and individual channel providers.  Sure MSO1 would love to go OTT in MSO2's area, but would hate the opposite.


Then the consumer has to choose between multiple, national OTT TV providers and compare channel bundles vs. pricing!  Don't forget combining packages from multiple OTT providers! The competition would probably lead to a la carte pricing, which would cause a large percentage of channels to go dark.


MSOs actually volume negotiate against content providers.  If their volumes get split among more MSOs, that'll stop working, raising the cost to the consumer and causing more channels to go dark.

Jeff Baumgartner 12/5/2012 | 4:38:10 PM
re: Boxee CEO: MSOs Should 'Go Over-the-Top' The big guys -- namely Comcast and Time Warner Cable -- are building CDNs that will enable OTT as a byproduct, but I agree that customers will call their ISPs if they have trouble accessing/streaming content. This may end up putting Comcast and TWC on both sides of the net neutrality debate. JB
scottseab 12/5/2012 | 4:38:14 PM
re: Boxee CEO: MSOs Should 'Go Over-the-Top'

For OTT service issues, you'd call the FatPipe - currently, you do not call HBO or ESPN or your local affiliate if your signal is bad - you call your pay-tv provider.  Your video content provider takes it from there. 

comtech3 12/5/2012 | 4:38:15 PM
re: Boxee CEO: MSOs Should 'Go Over-the-Top'

This is in deed the most absurd suggestion so far for 2010.The internet is getting slower with current traffic as it is,IPV4 is at it's limit, how is this going to be possible? Are these video service going to be using TCP/IP, or UDP to address them.If  TCP/IP is used we can expect an even slower Internet caused retransmission when packets are not received.So, in essence,UDP may very well be the choice.


Another problem arise when customers experience a service related issues.Who should they call? The ISP whose "pipe" the signal flows,or the content provider(the distant cable company)?

Jeff Baumgartner 12/5/2012 | 4:38:16 PM
re: Boxee CEO: MSOs Should 'Go Over-the-Top' An MSO's franchise fees would take a hit where it tried OTT, but I think that part of the market could be viewed as gravy since it represents an entirely new source of revenue, so it might be worth that risk.




But there's still a question on how cable might actually go over the top outside its franchise areas... would they offer a broadband-replicated version of their subscription linear fare, or offer access to premium TV shows, movies, and other content that's only available on-demand? That question might be just as important in the early stages. JB

shygye75 12/5/2012 | 4:38:17 PM
re: Boxee CEO: MSOs Should 'Go Over-the-Top' Our Heavy Reading research surveys show that consumers aren't eager to change when it comes to video service providers. Incumbency has been a huge advantage -- kind of like the U.S. political system. OTT plays will no doubt nibble at the edges of conventional video service delivery, and those nibbles could be painful in terms of lost revenue and shrunken margins. But even in emerging markets, incumbents will maintain a significant chunk of their market share for some time.
DCITDave 12/5/2012 | 4:38:17 PM
re: Boxee CEO: MSOs Should 'Go Over-the-Top'

Great point. The consumer survey Adi talked about at TelcoTV last year gave a nice summary of why bundling works so well: 


http://www.lightreading.com/video.asp?doc_id=184433


Most people, even if unsatisfied with one service, don't want to deal with the misery of undoing a bundle.

DCITDave 12/5/2012 | 4:38:18 PM
re: Boxee CEO: MSOs Should 'Go Over-the-Top'

A little less predictable is the social barrier to unplugging cable. We've had the tech in our home to go without live TV for years. But did we? No. We still wanted it available (even most everything we consume are recorded programs).


So I think unplugging is less likely than the cable guys losing an account here and there to something like Sezmi, which combines some basic over-the-air TV with some Internet TV features. A nice bundle with no monthly fees attached.

scottseab 12/5/2012 | 4:38:20 PM
re: Boxee CEO: MSOs Should 'Go Over-the-Top'

Other fallouts - quite a bit of lost franchise fees for cable franchising authorities and lost traditional ad revenues (and jobs) to networks, death to the set top box makers when the TVs are finally all internet-ready....

canadian 12/5/2012 | 4:38:22 PM
re: Boxee CEO: MSOs Should 'Go Over-the-Top' Jeff, there's no incentive for the big guys to think about the small guys. The guy with the big stick has the power. The small guys are not going to be happy about this AT ALL. They are suffering already.

What do you think the ACA or OPASTCO think about this?
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