It's Time to Integrate OTT Video

Just in case there was any doubt left, a fresh research report shows why it's imperative for cable operators and other pay-TV providers to incorporate OTT video services into their video offerings right away.

The report, issued Friday by Leichtman Research Group Inc. (LRG) , found that 57% of US households now subscribe to at least one of the nation's three leading Internet-based subscription video-on-demand (SVOD) services: Netflix, Hulu and Amazon Prime. Further, 30% of US homes subscribe to at least two of these services, and 13% take all three of them.

What's more, the Leichtman Research survey of 1,214 households revealed that nearly half of all US adults, or 48% of the population, now stream at least one of these services on a monthly basis. And more than a third of all adults, or 37%, now stream Netflix alone each week, up markedly from a mere 8% in 2010.

Most ominously for pay-TV providers, some 77% of 18-year-olds to 24-year-olds stream an SVOD service monthly, as opposed to just 23% of those over 55 years old. So the next group of potential pay-TV subscribers is by far the most likely demographic segment to go searching on the Internet for the video content they desire, instead of signing up for a traditional pay-TV bundle.

These numbers jibe with the results of other recent surveys about the still-surging popularity of OTT video services. In its latest research report on the subject, for instance, Parks Associates found that more than 60% of US broadband households now subscribe to at least one Internet streaming video service. In a related study, Parks also reported that US broadband households spent an average of $6.19 per month on the leading OTT video services in 2015, up from an average of $3.71 per month just three years earlier.

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Taken all together, these numbers are more than enough evidence that conventional pay-TV providers are simply missing the boat if they can't find a way to integrate Netflix, Hulu, Amazon Prime and the rest into their existing programming lineups. Even if they introduce their own OTT services, as such pioneers as Dish Network LLC (Nasdaq: DISH), Comcast Corp. (Nasdaq: CMCSA, CMCSK), Charter Communications Inc. and Verizon Communications Inc. (NYSE: VZ) have begun to do, providers still risk losing both existing and potential customers if they don't offer the big SVOD services as well.

But here's even more evidence from the Leichtman study: Contrary to the popular notion that consumers are mainly streaming video to their tablets and mobile phones, the study found that a whopping 83% of Netflix users stream the service to their big TV screens at home.

In other words, consumers are mostly treating OTT video services like any other TV programming. Isn't it time that pay-TV operators did the same?

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

gconnery 2/24/2016 | 4:53:42 PM
Re: Value Remember the TiVo software implementation on Comcast STBs?  Yeah, neither do I.

I suspect you're thinking of a world where the STB implementation of Netflix et al works pretty much like the one on a Roku or Apple TV or something.  But it won't.  Have you checked out the specs on those CPUs in your average cable STB?  Think TiVo speeds for launching apps or WORSE.  Slow app launches.  Slow enough you have to go do something between starting Netflix and coming back to search thru the content for something to watch.  And that's before laggy and occaisionally missed button presses enters the equation.

Are cable companies really going to add Netflix to their Input 1 offerings then? 
inkstainedwretch 2/9/2016 | 11:35:34 AM
Re: Value -- another possible advantage Do not discount the value of having One Guide To Rule Them All. You start flipping through your cable TV guide searching for something to watch. But you want to know what's also available on Amazon and Hulu. That's commonly two more separate searches, and often enough you have to conduct them on some other device.
Mitch Wagner 2/9/2016 | 10:44:02 AM
Re: Value I can think of three advantages: One bill, as you say; possible discount; and the convenience of only having to use one remore for linear TV and streaming, rather than one remote for linear TV and another for your streaming box. 
SeniorDi67973 2/9/2016 | 5:43:53 AM
Once A Month? I'm not sure the "once a month" metric is the most useful when people watch an average of four hours of TV per day. The much more interesting data would be to see to what extent that SVOD viewing is supplanting pay-TV viewing. I suspect it would show that the two are very complementary. People only watching once a month are probably just assuaging their guilt at having paid for it and not used it. 

But indeed, the pay-TV service provider has a HUGE interest in keeping eyballs tuned to their STB on Input 1 as much as possible. Therefore the tight integration of SVOD into pay-TV services is critical, and that's why we're working with our customers to simplify the process of bringing Netflix to the STB and integrating it into the overall pay-TV experience, making it look great, and making it secure. If you can't beat 'em, join 'em.
inkstainedwretch 2/8/2016 | 6:46:17 PM
Re: Value The same convenience as getting HBO and History and Nickelodeon and ESPN all from the same supplier, possibly all on one bill.

The data has shown that most people subscribe to Netflix also have a cable TV subscription. Netflix is an adjunct, albeit one that might cut into VOD revenue.

Some cable companies do in fact treat Netflix as an adjunct service they help enable. But only some.

Mitch Wagner 2/8/2016 | 6:21:48 PM
Value What would be the value to consuemrs of getting OTT and linear TV from a single provider? Why not just sign up for a linear provider and then sign up for OTT providers a la carte, as happens now?
Mitch Wagner 2/8/2016 | 6:20:56 PM
Re: Do not underestimate peoples' loathing for ads Hate ads? On the contrary; the history of media shows that consumers love ads, and they also love to complain about them. 
inkstainedwretch 2/8/2016 | 4:54:57 PM
Do not underestimate peoples' loathing for ads You're correct: Netflix, Hulu, and Amazon are now channels (especially now that they're doing original programming), and it makes sense to give people the content -- the "channels" -- they want.

But there is a very, very important ancillary issue with the OTT companies: advertisements. Some broadcast channels have become virtually unwatchable because of the near non-stop onslaught of ads. Football games, which in game-clock-time run for only 60 minutes take three and a half hours on TV because of the commercials. People hate commercials, yet the people running the show keep stuffing more and more of them down viewers' throats.

Now that everybody else in the business is doing their damnedest to keep their programming away from Netflix, and some of the owners of Hulu are working hard to do the same with Hulu, both services are much less interesting than they used to be. And yet, they're not dying. A good reason for that is that they're both available commercial-free (or largely so).

Comcast has begun adding customers because the bundle does in fact still have a lot of value. Netflix, with limited content, is less a competitor than an adjunct.

That said, if commercial-free option that in all other ways was equivalent to a cable company popped up on Wednesday, cable companies would all be dead by Friday.
-- Brian Santo
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