Many pay TV providers have adopted TV Everywhere (TVE) as a strategy to help retain pay TV subscribers. I suspect in only a few cases (maybe very few) have pay TV service providers been able to increase ARPU with TVE. And I certainly don't see any data that shows subscribers are sticking with their pay TV subscriptions due in any significant part to their TVE service. For MSOs and Telco, TVE might be used as an indirect strategy to motivate broadband subscribers to buy more bandwidth. However, studies are showing that broadband consumers are using their bandwidth more for OTT services, such as Netflix, Hulu and Amazon Video, than they are using it for TV Everywhere provided by their pay TV provider. In the end, TV Everywhere is being used mostly as a defensive strategy by pay TV providers - they do it because they think they have to. This defensive posture has resulted in poor promotion of TVE by service providers and therefore poor awareness and uptake by subscribers. Digitalsmiths' recent study, "Video Trends Report" (Q4 2013), concluded that over half (52.4%) of pay TV subscribers don't even know if their cable/satellite provider offers a TV Everywhere app. Moreover, only 21.6% of surveyed subscribers have downloaded their provider's TVE app and 60% of those who have downloaded it use it less than once per week.
Also according to the survey, 45.3% of respondents use OTT subscription services and 28.8% use third party pay-per-rental services. Based the on the millions of pay TV subscribers in the market, this makes up an enormous audience who needs to be presented with new offers to increase the value of their current pay TV services.
So what's my point? TV Everywhere may simply be the wrong strategy for pay TV providers if they are seeking to increase revenue, expand their subscriber base, give people what they want and address "cord nevers", "cord cutters" and "cord cheaters". A more innovative strategy for providers to seriously consider might be to develop premium OTT video service models that can help accomplish these goals. Here's a couple reasons why OTT is a better opportunity for providers than TVE...
1. OTT is a better strategy for increasing subscriber revenue.
OTT video services can be used to expand subscribers and revenue, in addition to being used as a tool to motivate more bandwidth consumption. We are seeing network service providers beginning to package OTT-TV as a starter service for broadband subscribers not also subscribing to traditional pay TV services. OTT can even be used as an "on ramp" for cord nevers, giving the service provider an open door to up sell pay TV services in the future vs. losing touch with the next generation of TV consumers. In any event, OTT can represent a lower cost revenue generator on its own, but also create more demand for bandwidth, opening the opportunity to up sell broadband services.
2. OTT addresses "cord cutting" better than TVE.
Some operators may consider this one a bit scary, but OTT video services can also be positioned as an "off ramp" for cord cheaters and cord cutters. There are defensive strategies to fight the consumer trends we all know are real - forced bundling, long commitments, network throttling, TV Everywhere, etc. - but perhaps beginning to adopt and integrate OTT into an overall pay TV strategy could be much more forward-thinking and represent offensive positioning to address cord cutting.
3. OTT can reach beyond fixed network subscribers, TVE does not.
OTT can reach beyond the pay TV footprint and on-net subscriber base. The opportunity for a "virtual pay TV" operator is evolving quickly. Pulling together a service that includes programming, such as linear TV, nDVR, on-demand, community TV and OTT content providers - all packaged in a lower cost subscription, or a la carte, under a local, trusted service provider brand - can represent an attractive product in today's "anywhere, any time" consumer TV market. Service providers can leverage competitive advantages such as consolidated billing, customer service, brand awareness, and additional services to attract customers.
4. OTT is a better business model for the future of TV.
OTT is a more cost effective TV distribution model compared to traditional pay TV +TVE networks, while also serving as a "future proof" strategy longer term, if you believe current consumer viewing trends will continue. Many, including myself, expect TV to ultimately be delivered over the Internet. Cloud TV will eventually replace fixed TV networks. The good news is the cost of working into an OTT-TV strategy now - even in the midst of complex TV programming rights battles that are occurring - is relatively low and can adjust with the success of the service. Technically speaking, "cloud" TV infrastructure is inherently much more flexible and "future proof" compared to inflexible pay TV and TVE network infrastructure. Therefore, making some smaller investments now to create an appropriately positioned OTT service, of course being careful not to cannibalize existing traditional pay TV revenue, simply makes a lot of sense and will get service providers strategically positioned to better maneuver in a quickly evolving TV business.
Like they say in the stock market, "don't fight the tape". Fact is, consumers are spending more time watching video over the top. Fact is, TV content rights models are being disrupted and the universe of high-quality content being produced outside of the traditional broadcast networks is growing rapidly. Pay TV providers must begin thinking outside the box if they are to survive in the long term. Some, such as DISH Networks are beginning to do just that. DISH recently signed a highly-publicised deal with Disney to secure OTT rights. Charlie Ergen, head of DISH Network, said, "We’re losing a whole generation of individuals who aren’t going to buy into that model because they only want one particular show or they want to watch the show wherever they can or they want to watch it on their schedule and so that generation is not signing up to satellite or cable or phone video today."
That's how I see it too. What are your thoughts?
Paul D Hamm