LAS VEGAS -- NAB Show -- Will OTT video prove to be a much-welcomed bonanza for broadcasters and other TV programmers?
Many broadcast and programming executives are certainly hoping so. In panel sessions, meetings and show floor conversations at the annual National Association of Broadcasters (NAB) convention last week, executives spoke about their ambitions to follow in the footsteps of CBS Corp. (NYSE: CBS) and Home Box Office Inc. (HBO) and take their stations and networks over-the-top. And they were urged on to do so by no less than Federal Communications Commission (FCC) Chairman Tom Wheeler, who exhorted broadcasters to go OTT to broaden their reach as well as stick it to cable operators. (See Wheeler Pitches Net Neutrality, Incentive Auction.)
Speaking on one "Super Session" panel, industry experts expressed confidence that most, if not all, of the major broadcast networks, cable networks and other programmers will use the Internet and broadband lines to introduce direct-to-consumer services over the next year. The big question appears to be who will go OTT when, not whether they will go at all.
"As soon as the first dominoes started to fall, everyone realized that if I don't get in now, there may not be a market for me to get into," said Brett Sappington, director of research for Parks Associates . Due largely to this concern, he and the other three panelists said they expect the OTT market momentum to grow over the next 12 months, as the big media companies scramble to claim their slice of the market.
Marc DeBevoise, EVP & GM of entertainment, news and sports for CBS Interactive, said conventional video content and service providers are plunging into OTT now for several reasons. He cited the rapid spread of broadband connections, the swiftly growing penetration of smart devices and the new-found willingness of content owners to try out new video delivery methods.
CBS represents a prime example of that willingness, having launched its CBS All Access à la carte service over the Internet last fall. Priced at about $6 a month, the new service delivers all of the network's programming directly to consumers through the web, without any need for them to buy a pay-TV subscription. CBS executives spent much of their time at the show pitching the new service to their remaining affiliate stations, after gaining commitments from a dozen station groups covering 55% of the nation's households earlier this month. (See CBS Takes OTT Plunge.)
Other panelists pointed out that investing in OTT makes sense for both content and service providers when the mature pay-TV business is struggling to grow at all. Sappington cited research stats showing that US pay-TV penetration rates have flattened out or declined slightly over the past couple of years while more subscribers have expressed a desire to cut the cord and millennials have shown a strong desire not to pay for any kind of video subscriptions. "No one is going to stand for the trajectories of 1% to 2% growth," noted Vubiquity Inc. CEO Darcy Antonellis.
At the same time, OTT revenues are now growing annually at the rate of 26% to 28%, said NeuLion Inc. CEO Kanaan Jemili. Faced with that choice, he said, media companies have little choice but to pursue OTT.
Describing the international market as "the Wild West," Antonellis argued that OTT also represents the primary way for US programmers to expand overseas. Sappington fully agreed. "If you're a content distributor and want to distribute internationally, OTT gives you a way to get there where you couldn't otherwise," he said.
Despite the threat that these new OTT services could cannibalize traditional pay-TV subscriptions, all this activity doesn't necessarily mean that cable, satellite and telco TV bundles will disappear any time soon. The experts agreed that it's an open question just how many pay-TV customers will end up trading in their full-scale bundles for the new à la carte offerings.
"The bundle is valuable," DeBevoise insisted. "It still has meaning for people." He argued that OTT for most programmers should remain complementary offerings, not their primary thrusts.
— Alan Breznick, Cable/Video Practice Leader, Light Reading