...1.6 million pay TV subscribers dropped their HBO and Cinemax subscriptions in 2010, while Netflix added 8 million subscribers.
Over the top (OTT) video is a reality that is gaining momentum where video consumers are ditching their traditional pay TV channels over the Internet onto their PC, and more importantly, their TV screen.
There's been a lot of talk in the trade press about this "cord cutting" trend, and recent research conducted by The Diffusion Group revealed that 1.6 million pay TV subscribers dropped their HBO and Cinemax subscriptions in 2010, while Netflix (Nasdaq: NFLX) added 8 million subscribers. At the same time, the downfall of video rental giant Blockbuster--and its subsequent purchase by Dish Network (Nasdaq: DISH)--could also open new OTT opportunities.
Colin Dixon, senior partner at TDG said in the study, "The Economics of Over-the-Top TV Delivery: How Television Networks Can Shift to Online Content Delivery" that "with online video usage accelerating we expect the amount of Internet video watched to eclipse the amount of live broadcast TV around 2020." Dixon added that what will make this trend a reality is that "Internet and broadcast delivery of video content will become blended in such a way that consumers will be unaware of which conduit serves which content."
And with many cable operators continuing to lose more of their customer base to hungry telco TV providers and OTT, cable must find ways to entice viewers to its viewing package experience. With over two million video customers leaving cable in 2010, Strategy Analytics argues that cable needs to increase the value of its video offerings.
But the delivery of OTT video by competitive and even traditional incumbent cable providers won't be delivered in a one-size-fits-all fashion. Instead, service providers will likely leverage a mix of either unmanaged OTT or hybrid OTT (including digital satellite or digital terrestrial plus OTT).
These diverse delivery methods will be discussed at TIA when the Diffusion Group presents this multi-element OTT delivery process during a pre-conference workshop on Tuesday, May 17 called "Understanding OTT: The Evolution of Standalone and Hybrid Delivery Models."
Of course, OTT isn't without its issues. Because OTT video will leverage a user's broadband connection, the one issue that could potentially get in the way of a consumer's OTT experience is the ongoing threat of bandwidth caps being set by incumbent telcos and cable operators.
In Canada and the U.S., a number of incumbent telcos, including AT&T, Bell Canada, Frontier Communications and now Telus have all put in place Usage Based Billing (UBB) plans. Under these plans, which they say will only affect a small part of their subscriber base, broadband subscribers will be penalized if they go over a certain bandwidth threshold.
Given consumers' increasing appetite for bandwidth-hungry online video, it will be interesting not only how service providers embrace and deliver OTT services, but how they will adjust their broadband metering methods to accommodate this inevitable trend.