How Close are We to an OTT Video Inflection Point?

October 17, 2014
By: Gary Kim

The launch of HBO's over the top streaming service was followed within days by the CBS All Access over the top streaming service.

Starz likewise is launching an OTT video streaming service for Asia, Africa, the Middle East and Latin America.

It seems only a matter of time before other channels and networks also decide it is time to launch their own OTT services as well.

Likely early to move are the remaining “premium” services (Showtime, for example) or networks with dual revenue streams (other TV broadcasters make money from advertising and carriage fees) that do not benefit from direct subscriber revenues.

Whether we are near a tipping point, or inflection point, nevertheless is unclear. One might argue that the major TV broadcast networks and premium “cable channels” could offer OTT streaming without being followed in close order by the other leading ad-supported networks and channels.

There are several reasons. For one thing, many video entertainment distributors offer a substantial amount of over the top streaming access for their linear video subscribers. If convenience is the primary concern, many consumers can get the advantages of streaming access by purchasing a traditional linear video subscription.

Since such access is on a “sell through” basis, consumers have to buy the linear subscription first, to get the “no incremental cost” streaming feature.

For most “ad-supported cable networks,” a move to streaming access, if accompanied by a dropping of the linear services by distributors, would devastate ad revenue, probably without a commensurate increase in direct subscriber revenues.

What does seem clear is that the pricing of the new OTT services might save money for light viewers who only want to pay for, and watch, a few channels. If CBS costs $6 a month, while HBO costs perhaps $15 to $20 a month, then light TV viewers might spend less if they watch two broadcast TV channels, plus HBO and Netflix, for example, for a total monthly spend of perhaps $40 a month.

Perhaps the new Dish Network streaming services will be priced at about that range, and feature local TV channels plus selected “cable” network channels.

But the point is that moderate to heavy viewers, and especially families and multiple-person households, almost certainly will find the traditional linear video package offers far better value.

So the ability to choose “skinnier” programming packages and create custom packages is about to grow. Whether that leads to an inflection point for OTT video entertainment access on a widespread basis remains to be seen.

A full test of end user demand will not happen until most channels currently available in a linear video “expanded basic” tier are also available as stand-alone OTT offers as well.

Only then will consumers have to make concrete choices about what to buy, and how much to spend. 




Edited by Maurice Nagle