OTT Services Not Seen As Threat, For Now, to Cable’s Rule of Live TV

The disruption of cable by OTT video has been greatly exaggerated, said panelists at Digital Hollywood’s Media Summit Wednesday in New York. Some OTT services will survive, many won’t, and consumers will likely adopt a multi-format approach to TV viewing in the future, panelists said. While cord-cutting isn’t happening in large numbers, “cord-nevers” coming out of college present a challenge to the pay TV industry, they said.

Despite the successes of OTT content providers Netflix and Roku, 92 percent of U.S. TV viewers watch live TV, said Richard Bullwinkle, Rovi chief evangelist. Of the 41 percent of consumers who own a DVR, 85 percent watch all content within 5 minutes of its airing, Bullwinkle said. The fact that people are not time-shifting “nearly as much as we might think,” puts cable companies “in power,” he said, because they have TV networks locked up in carriage agreements. “If you get 80 percent of your revenue from cable companies, why would you start selling your stuff over the top?” he said, leaving TV networks “absolutely dependent on cable companies.” The OTT content that has commanded much of the next-gen video conversation over the past couple of years “is a tiny portion of consumer video,” he said. Even the 40 percent of prime time network traffic consumed by Netflix streaming is still a “miniscule portion of what people are watching on TV,” Bullwinkle said.

Cable companies’ lock on the sports market precludes startup OTT providers from being successful in that genre, said Jeremy Toeman, chief product office at Dijit Media. “The billions that [providers] like Comcast pay to get sports almost eliminate every startup on the planet from getting into that space,” Toeman said. Roku, for one, can pull in MLB and NBA live action but only for out-of-market games, said Ed Lee, Roku vice president-business development. Consumers still need a TV provider for local channels, and “most Netflix and Roku owners have another service,” Toeman said. Disavowing any relationship with cable companies, Toeman said “cable is a great deal. On a dollar-per-minute-watched basis, it’s unbelievably good,” he said, citing quality of production and “12,000 hours of TV coming into homes every day.” He compared that with “a kid falling off his bike on YouTube. There’s no way they're in the same league,” he said. Rather than looking at how current TV markets will be disrupted by OTT services, Toeman said, “it’s more about how TV is going to get bigger."

Lee, not surprisingly, did see OTT services as disruptive to the traditional MVPD (multi-channel video programming distributor) industry. Roku customers use their devices to view video about 12 hours per week, he said, representing about a third of viewing time for the average Roku household. While linear TV “is not going to go away,” he said, Roku is seeing “tremendous usage for on-demand content.” The shift to OTT services is going to happen “very slowly,” he said, and will be selective during the transition. As more devices come out, “the world can’t support a myriad of devices so there’s definitely going to have to be some sort of consolidation,” he said.

How many OTT services can survive remains to be seen, panelists said, with most forecasting a contraction of services, especially as cable companies like Comcast bring out their own supplemental TV everywhere streaming services for subscribers. Successful OTT providers will offer an add-on opportunity to existing TV service providers, not an alternative, most panelists said. “OTT is opening the flood gates to allow more personalized experience that couldn’t be seen before,” said Gregg Bernard, senior vice president of video-sharing site Vimeo, citing content on Vimeo that was previously exclusive to film festivals.

OTT providers can add a value proposition that cable operators aren’t equipped to do, said Marc Beckwitt, Technicolor vice president-strategic partnerships. From an operator’s perspective, “the invasion of hundreds of millions of connected devices all on different platforms with different quirks” puts an unrealistic burden on the service operator to deploy programming that will work “across everything,” he said. “That’s not likely to happen,” he said. Even Android devices aren’t compatible across the platform, he said. Most service will come from customers’ traditional MVPD, but they'll also want to use connected devices for their additional benefits, he said.

Microsoft has been partnering with large cable and IPTV companies for programming with its Mediaroom platform because no matter how good a company is at enabling the TV experience -- in Microsoft’s case through Xbox -- “we need live content,” said Ben Huang, director of marketing for Mediaroom. “At the end of the day, if you can’t watch the Super Bowl on your primary TV experience, it’s not happening,” he said. Describing the content service market as a “very active, fragmented” space, Huang said, “It’s a mess right now. There’s no one service that gives you the top 90 percent of content that you can access across all the devices that you want to,” he said.

Programming is one thing, capacity is another, said Nick Strauss, director of sales for Verizon Digital Media Services. “The form factor will sort itself out,” he said, “but the underlying issue is the public Internet is not designed to support this kind of throughput.” The crossover between broadcast consumption and IP consumption will happen in 2018-2019, Strauss said. The last mile “continues to be a challenge,” he said. Verizon is trying to build a different network that’s independent of the public IP network, which Strauss said will be able to support “the proliferation of devices, standards, formats, coding specifications and metadata requirements,” without competing for public IP resources.