Adapting Pay TV Delivery To Win - Not Just Survive - In The Coming Days Of Everyone-OTT
September 29, 2019 | Staff
Broadband's top story of 2019, like in other recent years, is the acceleration of entrants into the OTT space from both content aggregators to content providers. The ability to provide key user features on open platforms like Android, Apple, Amazon, and Roku is driving the demand for capabilities like voice input, search across multiple services, multiple device access, time-shifting, place-shifting, and so on.
To compete on these platforms, Pay TV (video services delivered by a multichannel video programming distributor, or MVPD, on a subscription basis) is evolving to claim their shelf space and consumption through an application approach. In contrast to the often-reported death of Pay TV due to cord cutting, there are still over 98 million Pay TV subscribers in the U.S. It should also be noted that Pay TV providers are delivering solid margins of 38%. Compare that to Netflix's sometimes questionable profit strategy. But, Pay TV providers recognize the need to provide a better user experience than a legacy Set Top Box, as converts to OTT services often report their move is due to finding a better user experience.
As the OTT space gains more entrants and becomes even more crowded with either similar channel lineups or niche offerings, these services can’t continue to operate at a net monthly loss per subscriber. Subscriber acquisition, and even more importantly, subscriber attention, will become larger issues in 2019. Subscribers who are cobbling together a bundle of OTT services will eventually reach price or complexity fatigue and may realize that a Pay TV bundle is a better value. Perhaps the cord cutting pendulum will swing the other way.
Pay TV and OTT services will co-exist within the Pay TV environment, complementing one another to provide the full content portfolio desired by the consumer. Both Comcast and Charter are pursuing a “supermarket” approach within their Pay TV ecosystem and Pay TV operators launching an app-based approach participate in this blended environment, as well.
It should also be noted that Pay TV providers are delivering solid margins of 38%. Compare that to Netflix's sometimes questionable profit strategy.
One trend is clear, all video service delivery will continue to shift towards unicast IP delivery (aka streaming). Even traditional Hybrid Fiber/Coax networks already support popular unicast applications like Netflix, YouTube, Amazon Prime, et. al.
How will Pay TV operators meet the challenge of the acceleration of OTT service options and overall customer demand? First, they must invest to support streaming and meet their subscribers on the devices they want to use. Capital expenditures on network infrastructure will pay long-term dividends rather than spending to support legacy Pay TV infrastructure. The Pay TV operator will need to reduce delivery costs materially as alternate content sources grow in customer importance. The importance of content providers working with Pay TV operators navigate this change cannot be understated in issues ranging from skinny bundles to retransmission costs for broadcast channels.
“Pay TV operators are positioned to not only survive these challenges but grow and win as a result,” notes Bill Routt, President and COO of MOBITV. “There are new monetization opportunities in this changing ecosystem: concurrent streams, recording hours, managed Wi-Fi and bundling Pay TV with broadband to reduce churn and sell faster connections to their subscribers.”
Can a Pay TV provider offer a compelling streaming service to their customers, so they don’t cut the cord? Yes. Examples in the market exist of two approaches to this question. The first is to deploy an on-premise solution by upgrading an existing headend and providing all the computer, network, and storage infrastructure to deliver a streaming TV service. The second approach is to find a SaaS-based partner and leverage a cloud-based, multitenant headend with full cable channel lineup transport and infrastructure leaving the Pay TV operator with only a secure connection to the outsourced headend required to deliver a streaming service to their subscribers.
“Streaming IP delivery of video has long been a contentious battle between technologists and content providers,” comments Charley Nooney, CEO of MOBITV. “The pressures to adopt Pay TV to consumer demands may finally create new opportunities between the content owners and distributors to expand the overall video market powered by the efficiency and features of IP delivery. Innovations in advertising delivery, better TV, and recommendation intelligence are just a few of the exciting challenges ahead.”