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Pay-TV Model Must Be 'Blown Up'

Jeff Baumgartner
3/15/2019
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DENVER -- CNG2019 -- The pay-TV model doesn't need small tweaks and fixes. The whole thing needs to be overhauled, from the way that programming is packaged, to the adoption of cheaper streaming devices, and down to the way video services are being managed and delivered on the network.

"We've got to blow up the model … and look at it completely differently" if operators are to have any success with improving the returns they get from pay-TV, Tom Williams, VP of engineering and technology for Indiana-based service provider Schurz Communications, said here Wednesday on a panel about "The New Video Playbook."

Williams also has some bones to pick with the cord-cutting term. "Cord-cutting isn't happening," he said. "Maybe they [consumers] aren't taking video service, but I'm still selling the broadband cord. I still have those relationships and those customers. To me, the cords are still there … we've just lost the video subscriber."

In addition to creating new packages and ways to deliver services to a wide array of new age streaming devices, traditional pay-TV providers are also challenged by the immense choice of subscription VoD services to virtual MVPDs services that are available today.

"There's a lot more choice today in terms of the packages that work for different consumers," said Mitch Weinraub, director of advanced video products at AirTV, now a unit of Sling TV that has created a device and user experience that integrates free over-the-air TV with OTT-delivered video services. "Americans used to have just two choices [for pay-TV] -- cable and satellite."

Cable operators are also smart to embrace OTT video services and integrate them on the set-top box, explained Jeff Templeton, sales engineering director at Netscout, referencing Comcast's X1 platform, which now ties in access to popular services such as Netflix and Amazon Prime Video. The next big step, he added, is for those pay-TV providers to gain more rights that allow customers to access all channels when they are outside the home. (See Amazon Prime Video to Stream to Comcast's X1 Boxes.)

Cable operators also need to be mindful to avoid being too tethered to their own set-top boxes, said Brent Smith, chief strategy officer at Evolution Digital, a company that's been focused on helping Tier 2/3 operators migrate to IP-based video and support a wide range of retail streaming devices as well as MSO-managed streaming devices that, for example, run Android TV.

"We see this [adoption of less expensive streaming devices] as an important aspect to help the operator expand the reach and access to content," whether that's on an iPad, Roku device or Android TV box. "That is a critical part to obtain the customer and the stickiness of [pay-TV] services."

Traditional set-tops won't become completely extinct anytime soon, because some customers will want a full-featured device, but that segment of the market is definitely shrinking, Weinraub said.

And getting out of the legacy box business, or reducing the reliance on those relatively pricey devices, does have a financial impact, as it will cut into MSO monthly lease revenues.

Cable operators will be able reclaim some of those revenues through the operational and capital expenditure they'll save by supporting retail devices and cheaper streaming devices that the MSO can deploy, Williams said, noting that he'll want to have at least one box in a customer's home that Schurz can control and extract data from.

To underpin this, it's likewise critical for operators to migrate to IP video distribution. "Significant players in the Tier 2 space" are in the process of making that transition, Evolution's Smith said. That will likewise allow cable operators to break free of rigid, legacy headend platforms going back to the days of Motorola and Scientific-Atlanta and move to multi-tenant, open back-office environments that are more flexible and easier to innovate on, he added.

That transition is also poised to see a scaling up of other services that have set-top box-related implications, including cloud DVR services that can be supported by relatively inexpensive streaming devices, Colin Howlett, VP of architecture at Vecima, said.

Panelists were also asked to weigh in on Cable One's strategy to pull back on legacy pay-TV and not to invest more on video and instead focus on its higher-margin broadband business. (See Cable One 'Happy' to See Broadband Subs Go With OTT-TV and Cable One Gets Credit for Putting Pipes Ahead of Programming.)

Williams said he has "respect" for Cable One's decision and the positive results that strategy has had on its business. However, that strategy might not work for all US MSOs. "But what we have determined is that we have to evolve [our video business]," he said.

— Jeff Baumgartner, Senior Editor, Light Reading

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