Tag Archives: Ott

Broadcast, Broadband, and OTT


Last week the Pew Research Center published its findings on Americans’ broadband consumption. The tectonic plates defining the digital divide have shifted somewhat over the past year.

..home broadband adoption seems to have plateaued. It now stands at 67% of Americans, down slightly from 70% in 2013, a small but statistically significant difference which could represent a blip or might be a more prolonged reality. This change moves home broadband adoption to where it was in 2012.

This trend has accompanied an uptick in Americans whose only broadband access is delivered via smartphone. The Pew article goes on to note pertinent demographic trends as well.

  • People still overwhelmingly prefer to watch video content on a larger screen through a standard in-home broadband connection when possible.
  • A significant proportion of smartphone-only access people cite cost as the major reason they do not have a home broadband connection

This portends several possible outcomes.

  1. Some people will shift viewing from traditional cable and OTT to IP-delivered content over LTE.
  2. These customers will often face data limits imposed by carriers, excepting the T-mobile binge plan.
  3. The LTE-only demographic may be less desirable to advertisers than other OTT viewers, and may cause content distributors to shy from advertising models to paid subscriptions when accessed via LTE.

The study also counts 15% of Americans as “cord cutters.” Not surprisingly, this market segment skews young, so it’s reasonable to assume the cord cutting trend to accelerate as the millennials start their own households. Hold that thought.

Broadcast trends

Some have spoken about the consolidation in the broadcast industry as a parallel to what happened around the turn of of the century in the newspaper business. That’s an over simplification. Broadcasters have one significant business advantage over their print media counterparts. They hold licenses for access to a very valuable and finite resource, spectrum. Local broadcasters have also fared better than print brethren at stemming the tide of disintermediation by the Internet. Broadcast TV, even when delivered via cable, is less expensive to the consumer than streaming services on a per minute basis. Further, broadcasters have done a very good job of maintaining their brands on the Internet, breaking the story online and adding depth (to the extent one can in two minutes thirty seconds or less) on air at 6 PM.

Rather than a pure play for synergies and operational efficiency, broadcast consolidation in the US is mostly a spectrum grab. Now that the FCC is planning the first Incentive Auction permitting channel sharing among broadcasters and wireless Internet providers, that spectrum is only likely to go up in value.

Make no mistake. The broadcast industry is experiencing a sea change. Less emphasis will be placed on traditional broadcast operations with more emphasis on multi-platform distribution. Everyone participating in the value chain will need to adapt.

The irony is that although more bandwidth will be available to consumers for broadband, enabling them to cut the cord, less over the air content will be there for free.


Aereo is not a Betamax moment

But pro wrestling could give us one

vcr-displayAll eyes were on the US Supreme Court this week when arguments were heard in American Broadcasting Companies, Inc. v. Aereo, Inc.  While an interesting legal exercise, it’s hard to imagine any outcome that would upend the broadcast television industry as we know it is highly unlikely. The court that gave us the Citizen’s United ruling is not predisposed to ruling against large business interests. The justices’ questions hinted they were looking for a way to rule against Aereo without affecting other cloud business models, and they appeared to find it. Don’t expect the vote will be close. It might even be unanimous.

In the unlikely event the court were to rule in favor of Aereo, the broadcasters have threatened to power down their transmitters and morph into cable networks. Virtually no one watches television over the air these days, so few prime time viewers would notice. David Carr of the New York Times explains the numbers and the disruption to local broadcasters’ business models. For viewers tuning in to local broadcasters for news, weather, and sports, the TV world will look very different. But no one seems to be concerned about that right now, though they should. Do we really want the large swaths of the populace being informed solely by cable news outlets?

Even assuming Aereo goes away, for broadcast and cable television the status quo remains untenable. The sea change has begun. “Cord cutting” and “binge viewing” are now part of the vernacular. Netflix and Amazon Prime are established players already going at it for top spot in the post cable universe, but unless each becomes a content owner in its own right, they are fighting today’s war with yesterday’s weapons. You either own the content or the infrastructure that delivers it to the end consumer, or you are relegated to a shrinking role.  This is because content owners like Major League Baseball (MLB.tv) and the WWE Network (soon to be launched)  have decided to cut out the middle man and go directly to customer.

After seriously considering launching its own cable network, WWE changed course.

From Forbes April 14, 2014:

[WWE CEO Vince McMahon] roostered onto the stage at Las Vegas’ Consumer Electronics Show in January to announce a bold new venture: the WWE Network. McMahon told the cheering audience that the WWE Network would not be broadcast on cable television, where Monday Night RAW has consistently been a top-rated program each week, nor would it be another pay-per-view (PPV) play. Rather, the WWE network will stream content 24/7 directly to viewers on the Internet or what’s known in the entertainment industry as going over the top. It’s a move that directly endangers both WWE’s PPV revenues ($82.5 million) and its potential new TV deals, a huge gamble that according to some estimates could double the size of the WWE’s business in two years–or fall flat on its face…

WWE estimates it needs a million subscribers at $10/month to reach breakeven. Considering that watching all 12 WWE pay-per-view events each year costs over $600, another $120 per year for the complete WWE archive will seem like a bargain to its rabid fanbase.

An over the top, a la carte future is what consumers have been pining for. Content owners salivate over the opportunity to sell directly to customer, letting the customer pick up the tab for a good portion of the delivery costs through wireless and broadband access fees. What’s not to like? Well, for both the content owner and the consumer it can start with the FCC’s decision to abandon the concept of net neutrality. With so many Americans receiving broadband services from the cable providers, the cable providers will have the pricing power to keep themselves in the game for a while to come. If they have to pony up for access to the Internet’s express lane, the barrier to entry into the new over the top world will be prohibitive to all but the largest content owners. Plus ça change…

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