Once ‘barbarians at the gate,’ OTT now an opportunity for pay-TV operators

By Jim O'Neill on Jul 21 2014 at 5:30 AM
A new study says OTT is more friend than foe for pay-tv operators

Over-the-top video services like Netflix, Hulu and a growing array of others have long been seen as a threat, or at least a bother, to pay-TV providers worried about the cannibalization of their revenue streams. It wasn’t very long ago that one of the most popular panels at any trade show generally was title, “OTT: Friend or Foe.”

But a new study posits that operators and OTT players now are “striking an unusual friendship” as consumers continue to adopt OTT in many forms.

Researcher Heavy Reading, in its “Cable & OTT: New Opportunities for Convergence” report said that, increasingly, cable MSOs and OTT providers are finding mutual ground to work together, pointing to Comcast's interconnection deal with Netflix as an example of how cable can become a distribution partner for OTT video streaming services, generating incremental revenue from the service.

Time Warner Cable, in it partnership with Roku, was one of the first major MSOs to provide customers with apps that allow cable TV access through that streaming set-top box. Now, the report said, more MSO are likely to do the same for Roku and other connected devices like Xbox, Apple TV, smart TVs and other devices.

Creating a new relation whip with OTT services is being facilitated, too, by the introduction of new cloud-based IPGs that offer a cable portal for OTT apps and social media. And, the report notes, TV Everywhere solutions also can support OTT apps.

Another source of incremental revenues for operators is the bounties that some OTT content and device providers are willing to pay for help in expanding their customer base.

The Heavy Reading report says the ongoing rollout of Ultra HD – specifically by Netflix as it converts more content to 4K – is one area that remains a potential flashpoint between the two technologies. The push to offer the bandwidth-hogging content could strain provider resources in the near term.

Nonetheless, both sides continue to parlay consumers demand for content into a relationship that has the potential for mutual success.

"As OTT video streaming services and devices began to attract consumers, they appeared like barbarians at the gate, ready to disrupt traditional media and topple the longstanding empires of cable and other television establishments," said analyst Craig Leddy. "Disruption indeed has occurred and will continue to occur, but the once-combative stances of cable and OTT players has taken a unique twist as both sides have come to realize that they can profit by utilizing each other's strengths."

Leddy said a number of challenges remain, including technical integration, territorial rights issues and monetization to provide a return on investment for all players.

“Cable's continued adoption of IP video technology and its renewed focus on improving TV Everywhere are providing the delivery infrastructure and management solutions that can support OTT video,” Leddy said.

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