Will Cable Face an OTT Block Party?

1:40 PM -- LAKE BUENA VISTA, Fla. -- The Independent Show -- Has anyone heard of content providers trying to prevent cable operators from installing new equipment (like IP-capable video gateways) that could send OTT video directly to the TV?

That question was posed Monday by Robert Gessner, the president of Massillon Cable TV Inc. , at the opening panel here. If his theory is true, it could open a big can of worms for cable operators that are trying to keep cord-cutting in check by adding over-the-top content to their programming.

Rich Fickle, CEO of the National Cable Television Cooperative Inc. (NCTC) , an organization that negotiates programming contracts on behalf of small and independent cable operators, wouldn't go as far as saying that networks are indeed trying to weave such requirements into contracts, but he did acknowledge that programmers are exploring how to make cable operators pay more for TV Everywhere rights.

If that's something the programmers indeed want, perhaps as leverage as they negotiate new carriage deals, that would certainly throw a wrench into cable's next-gen video plans.

WideOpenWest Holdings LLC (WOW) , for example, has started to spruce up its video product with a hybrid QAM/IP video gateway from Arris Group Inc. (Nasdaq: ARRS). While there's lots of pressure being applied to video service margins, a device like that could help WoW -- a competitive cable overbuilder that crosses swords with cable incumbents -- create some ancillary revenue streams, said Steven Cochran, the company's president and CFO. (See Arris IP Video Gateways Break In at Suddenlink .)

Arris's Moxi gateways can support a range of OTT apps, but the vendor views itself as a "proxy" between the cable operator and the content provider, said President Bruce McClelland, noting that deals between the sides are becoming more complex as additional capabilities are baked into devices that can be leased by cable operators.

Some recent evidence seems to justify Gessner's fears. Some of Netflix Inc. (Nasdaq: NFLX)'s contracts with programmers prevent cable operators from offering the Netflix app in TiVo Inc. (Nasdaq: TIVO) boxes that are leased by cable operators (there's no such restriction on TiVo DVRs sold at retail). The end of Netflix's relationship with Starz Entertainment LLC seemingly removed one of those hurdles, but it's possible that Netflix's current deal with another premium programmer, EPIX, is keeping that barrier up. (See Netflix Gets Hamstrung on Leased TiVos, Suddenlink Blames Netflix Contracts and Netflix's Path Into MSOs Becomes Clearer.)

But some content creators are taking the opposite angle. Larry Levinson, president of Levinson Productions, is helping to head up PixL, a family-friendly commercial-free premium movie channel and TV Everywhere service. Levinson, who has produced about 200 movies and mini-series for cable networks, said his strategy is to strike deals that would keep PixL exclusive to pay-TV operators and out of the hands of their OTT competitors.

PixL may be the exception here, but it will bear watching to see if some other programmers are indeed looking to prevent cable operators from leasing boxes that can deliver their OTT content directly to the TV screen. It's probably a negotiation tactic by the programmers, but it would certainly slow down cable's ability to blend regular TV with OTT.

— Jeff Baumgartner, Site Editor, Light Reading Cable

cnwedit 12/5/2012 | 5:26:58 PM
re: Will Cable Face an OTT Block Party?

So the already heated negotiations between pay-TV providers and content owners just get more complicated.

The cost of content is already pushing many small telcos to abandon IPTV in favor of adding OTT to their broadband package. It's obviously less likely that a small cable player would do that -- or is it?

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