Video Execs Warn: Embrace OTT or Die

SAN DIEGO --In a turnabout from cable's long-time pay TV focus, a number of MSO officials, other video executives, content providers and industry analysts are now urging cable operators to shift their prime focus from pay TV packages to broadband and mobile video offerings.

Speaking in three straight general sessions here during The Independent Show this week, industry experts said it's time for cable operators and programmers to acknowledge the power of broadband and accept the ascent of over-the-top (OTT) video. In particular, they called upon cable officials to embrace OTT video and incorporate it into their overall broadband and video bundles, especially as traditional pay TV offerings become too expensive for many consumers to afford and video subscriptions continue to fall.

"OTT is a real trend," said Patrick Knorr, EVP of business solutions and IP technology for Wave Broadband. "That's where the 20-year-olds are going. There's absolutely going to be a long-term trend toward different kinds of video."

Matt Stump, EVP of industry intelligence for One Touch Intelligence, brandished growth charts indicating that U.S. cable operators will soon have more broadband subscribers than video subscribers for the first time in the industry's history. Stump, who moderated one of the three OTT panels, noted that Charter Communications may be the first major MSO to reach that historic tipping point when it reports its second quarter earnings next week.

Stump also noted that the U.S. pay TV industry is on track to suffer an overall loss in video subscribers for the first time ever this year, after netting fewer than 175,000 subscribers last year. At the same time, he said, cable operators alone are adding 2 million broadband subscribers a year.

Knorr said Wave, a midsize West Coast cable operator based in Oregon, is moving toward offering OTT video because customers want access to the product. For similar reasons, he said Wave is embracing the TV Everywhere concept and seeking to expand its video offerings to as many screens as possible.

"I don't see it [OTT] as a real competitive threat," he said. "I see it as a real opportunity." He joked that he was wearing a black shirt to "mourn the death of the terminally ill video product."

Although Cincinnati Bell is still adding video subscribers, it is also embracing OTT video now, according to Michael Morrison, director of video services for the telco. He said Cincinnati Bell is looking to offer Internet video services over its new fiber network, as well as deliver such Web video services as Netflix and YouTube to customers' set-top boxes.

"We want to protect the broadband pipe," he said. "We'd like to offer lower-cost video options to cement our broadband product."

Further, Morrison said, Cincinnati Bell is seeking to stream live video to tablets and other portable devices both inside and outside the home. "Those 20-somethings to 30-somethings want to watch it [video] outside the home," he said.

Stephanie Ruyle, EVP of distribution and affiliate partnerships for Pivot TV, added that cable operators could use a new Internet video network like hers to capture the growing hard-to-reach group of "millennials" not attracted to traditional pay TV fare. "We're at a tipping point now" with OTT providers, she said. "The industry needs to respond."

Ed Lee, VP of content acquisition for Roku, said Roku carries more than 900 content providers on its media streaming set-tops, including Netflix, Hulu, Amazon, Vudu, HBO Go and Epix, and has space for plenty more. "For us, it's nearly infinite," he said. He noted that Roku has now sold more than 5 million streaming boxes in the U.S.

In an earlier session, Laura Martin, managing director of Needham & Company, trotted out top executives from fine different OTT video services that are making a splash on the Web. She implored small and midsize cable operators to create broadband video bundles that would package these networks for relatively low monthly fees.

"The people on this stage can help you solve your programming problem" in reaching the millennials group, Martin said. She noted that each new 20-year-old pay TV customer is worth about $50,000 in revenue over the course of a lifetime because they pay about $1,000 a year in subscription fees for 50 years.

— Alan Breznick, Cable/Video Practice Leader, Light Reading
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