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Will OTT be assimilated into existing Pay TV business models, or destroy them?

I know this might sound trite, but 2014 could be the year of "Over-the-Top." Perhaps not the year it became so mainstream that it rivaled the decades-old Pay TV business model, but at least the year when seeds where planted, some with roots that might break concrete.

Consider the recent announcements by HBO, CBS, Univision and others. It used to be that these content players had too much to risk to upset the Pay TV apple cart, with its bundled content and "closed gardens." Now that seems to be changing. Some may argue that this is all incremental revenues and classic marketing-- that is, finding and exploiting new channels for your existing content in addition to the revenue streams you already capture.

I would argue that something more fundamental is happening. Verizon seems to be pointing at this in the chatter around their recent earnings call--- millennials are increasingly "cord-nevers" not just "cord cutters." Meaning they don't know what they are missing from the $150 a month triple play bundles most of us have gotten used to. That's a problem.

Despite this, the Verizons of the world are still doing quite well-- they are growing broadband revenues, and doing OK in mobile. In fact, triple play pricing has been steadily rising over the years. So yes, from Verizon's perspective, the millenial market is not a lost one, but truly a new opportunity-- found money. The thing is, we've all been paying more for mobile data and broadband to make up for these lost subscribers-- but we never really noticed or complained. Now, OTT-- via broadband and mobile-- is a way to get them back into the fold.

The question is: can you keep this genie in a bottle, or once the OTT options offered to the millenials get out, will that somehow infect the rest of the highly profitable, and perhaps complacent, market segments? I personally think it will be difficult to control this cave troll once it is unchained.

But... I keep going back to one thing... a protection that maybe only mobile broadband can threaten--- OTT must go "over the top" of something-- and MVPDs can always charge more for this pipe even if more folks become cord nevers/cutters/shavers. Would that make me feel comfortable if I was Verizon or Comcast? Not sure. There are still many opportunities to innovate with Pay TV, OTT, or hybrid services and business models. And the incumbents still control some of the softer variables such as billing, installation/support (kind of), and content relationships-- and enough "big data" about us to know us better than we know ourselves. So I think they will figure out ways to profit besides just raising broadband rates and risk raising the ire of the FCC and the public.

Maybe we won't notice that either.

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