Call it a collective science experiment. Pay-TV providers are testing multiple combinations of broadband, traditional television and over-the-top (OTT) video services to see which variations deliver the highest returns. Most of these trials are still relatively new, but a few have started to produce results.
At the Light Reading Cable Next-Gen Technologies and Strategies conference this week, executives from several US cable operators relayed their experiences with OTT video so far, along with some of the numbers that are lining their stat sheets.
"For Time Warner Cable, OTT video, or what we call TWC TV, is real," said Tom Gonder, a chief architect at Time Warner Cable Inc. (NYSE: TWC). He was referring to his company's efforts to put the entire pay-TV experience on as many connected devices as possible. Unlike other cable operators that have limited their TV Everywhere outreach to smartphones and tablets, Time Warner Cable has created full-blown apps for the Roku platform, smart TVs, game consoles and more. (See TWC's Mike Angus Unplugged.)
Gonder said visits to TWC's online platform have jumped about 50% from a year ago. Unique visits and return frequency are measuring at significant levels as well. Of the customers who use TWC TV, 70% come back within 24 hours, and 85% return within three days. In a recent week, Time Warner Cable counted 6 million times that a subscriber tuned to one of its OTT streams.
WideOpenWest Holdings LLC (WOW) Director of Product Management John Childress also had OTT results to share, but they stemmed from an entirely different service model. The cable over-builder recently started offering Netflix right alongside its own TV content on leased set-tops from Arris Group Inc. (Nasdaq: ARRS). The company has about a month of user data so far, but, while Childress couldn't share specifics, he did say that a substantial number of users are accessing Netflix from their set-tops. And that's good for business.
"The more these subscriptions take off, the more of a case you have for a higher-quality, higher-speed bandwidth connection into the home," said Childress.
Then there's Block Communications Inc. Months before Home Box Office Inc. (HBO) partnered with Apple Inc. (Nasdaq: AAPL) to deliver HBO Now, the Ohio-based cable company teamed up with the consumer electronics giant to create a hybrid service offering called Buckeye1. Buckeye1, which was announced in September, combines a 50Mbit/s Internet tier with an Apple iPad Mini, a digital subscription to the Toledo Blade and regional content on the iPad, including local sports video networks and apps from local businesses. The whole package sells for $80 per month with a $250 activation charge.
So far, Block CTO Joe Jensen said the company has seen about 4% of its broadband-only customers sign up for the service. "The flagship product is high-speed data," said Jensen, who sees Block building more products around that core service in the future.
Andrew Ferrone, VP of Pay TV at Roku Inc. , offered research to support that strategy. He noted that subscribers who access a pay-TV service on their Roku -- i.e. over the Internet -- are "less likely to churn, more likely to upgrade to premium services, more likely to transact through VoD." Roku's experience comes from its partnerships with Time Warner Cable, British Sky Broadcasting Group plc in the UK and Sky Deutschland Fernsehen GmbH & Co. KG . Roku also supports the new Sling TV service from Dish Network LLC (Nasdaq: DISH). (See Roku Pursues Pay-TV Providers.)
In a note of caution, however, the pay-TV providers on the panel acknowledged that offering their own OTT services can put them in direct competition with their programming partners, many of whom also want to reach consumers over the web. TWC's Gonder remained unconcerned, pointing out that cable companies still provide the delivery pipe for video.
Jensen, on the other hand, had a different perspective. He suggested that cable could once again prove its value as an aggregator when consumers find themselves facing a multitude of individually priced content options in the future. But he also expressed some anxiety about programmers launching their own à la carte OTT services.
"My concern is as this disintermediation occurs, I think the cost and the value of these are going to change, and I think it's going to be much more difficult to introduce new programming in that environment," said Jensen. "The cross-promotion and the opportunities that we present the programmers today on the traditional package does have some value. And I think, I hope that there's at least some recognition of that as consumers evaluate their alternatives in the future."
— Mari Silbey, special to Light Reading