These are challenging times for pay TV operators. Though some customers may be leaving to fend for themselves on the Internet, they still want the TV content they’ve come to know and love. Rather than standing idly by as web competitors capture the attention, some operators are putting in place plans to capture the cord cutters with new innovative OTT services.
In the free webinar Capturing the Cord Cutters, I showed how escalating costs are driving some consumers to look for cheaper options outside of the pay TV bundle. Though these cord cutters still love television, they have decided to seek out cheaper options online. Michael Morrison, Director of Fioptics Service at Cincinnati Bell, said that this situation is challenging for smaller pay TV operators. However, salvation could be at hand as the company can leverage its investment in broadband and in pay TV service. Mr. Morrison said, “We are absolutely looking at putting a subscription-based model into an over-the-top device, locked down inside the home, and staying within the <content> rights we have.”
According to Eric Freund, Vice President of Product at Minerva, OTT TV solutions offer a number of key advantages over traditional TV. Since the service is able to leverage broadband and consumer electronic devices there is no need for a truck roll to install it. Keeping the focus on live and linear TV is aligned with the consumer’s desire to continue to enjoy the latest TV episodes, and with the pay TV operators existing rights with TV content providers.
Mr. Morrison said another big advantage is the speed with which the service can be updated. He said the web approach allows channels to launch within 24 to 48 hours, a big change from the months or years required in traditional pay TV systems. The OTT approach also helps solve another problem. Cincinnati Bell has fiber, cable and DSL broadband topologies in its network. Launching OTT TV services allows it to launch the identical service across all of them.
Data is becoming increasingly important in the delivery of video online. Marc Williams, Senior Product Manager at Minerva, said the company captures a wealth of critical viewing data including: what channels are watched, when they’re watched, what programs are popular, and even what users are searching for. This data is critical as web competitors are using it to improve every aspect of their service. For example, Hulu’s Tim Connolly and Sling TV’s Roger Lynch both recently commented how they regard it as critical part of their business, and something they’re just beginning to understand how to leverage.
There are a few deployment considerations that operators should be thinking about before they jump into OTT service. Mr. Freund said that clarifying content rights with rights holders is critical. The in-home linear rights are usually pretty clear, but on-demand and out-of-home rights are often difficult. Content will need to be transcoded into an appropriate format, though Mr. Freund said those costs were falling sharply due to cloud transcoding services. Finally, how an operator positions an OTT service against a traditional pay TV service is critical. No operator would be pleased to cannibalize higher margin traditional pay TV subscribers with lower margin OTT ones.
Why it matters
Pay TV operators are battling to retain the pay TV subscribers they have against cord cutting and online competitor services.
Creating a broadband TV service, focused around the linear experience, which can be bundled with broadband could be a great way to recapture those customers that have decided to forgo pay TV services.