We all know about ‘Over the Top,’ where an online video provider circumvents or disintermediates a pay TV operator (while using the operator’s own network to deliver said video). Then there’s ‘TV Everywhere,’ in which pay TV content providers require users to associate themselves with their pay TV subscriptions or, no play.
Through the Middle
A third online video service model is where a pay TV operator enters into a relationship with an OTT provider or online aggregator and exposes the online service within its pay TV experience. In other words, not OTT or TVE, but “through the middle,” or “TTM.”
At first, it sounds like a gimmick – some kind of desperation move by the pay TV provider to give frustrated subscribers one more reason not to cut the cord. But let’s look a little further…
TTM: A little background
In March 2014, the Danish broadband provider Waoo! introduced Netflix from within its pay TV user interface, through the middle. Here’s a demo video (in Danish).
This is enabled through the integration of software from Netflix, Nordija and Airties, which are Waoo!’s TV middleware and set-top box suppliers, respectively.
DISH embraced TTM too
In December 2014, DISH Network introduced Netflix integration as well. DISH’s implementation is different from Waoo!’s. While Waoo! dedicated a button to Netflix in its main menu, DISH placed Netflix within the electronic program guide, which made Netflix “just another channel.”
So now, I can access Netflix using the same method of access as DISH uses for video on demand.
TTM’s not a gimmick
Again, I thought “it’s a gimmick.” Until I decided to try it. If you own a streaming video player, you’ve probably been through a drill that goes something like this:
- Turn on the TV set (using either the pay TV STB remote or the TV set’s own remote)
- Locate the streaming video player’s remote, press the button to activate it
- Locate your TV set’s remote, and change the input from your pay TV set-top box, to the streaming video player
- Navigate the video player’s menus to the Netflix application, and activate the app
- Navigate the Netflix thumbnails, using up/down/right/left on the streaming player’s remote, or locate the search field and use the text search character matrix.
- Watch videos on Netflix
- Grab the TV’s remote and switch the input back to your pay TV set-top box
- (…At which point, we’ve used at least two different user interfaces – that of your streaming player and Netflix.’ Plus, perhaps, the TV set’s own UI – and as many as three different remote controls)
- (…At which point, my wife asks me to call someone for technical support – but who?)
Compare this classic early-adopter experience with DISH’s TTM experience
- Turn on the TV, using the DISH remote
- Bring up the EPG and navigate to Channel 370
- Press the center button to enter Netflix.
- The Netflix user experience takes over (DISH can’t be held responsible for Netflix’ unusable search and recommendation capabilities)
- Hit Cancel, Cancel, Cancel… to back out of Netflix and return to DISH
- (…at which point we used one remote control and two UIs: that of DISH and that of Netflix)
The first time you access Netflix via the DISH EPG, you must enter your Netflix ID and passcode. Any subsequent use of Netflix goes right from the EPG to Netflix, with no login needed.
Has someone already decided that TTM is too good to be true?
I was initially motivated to write this article because Zatz Not Funny published a report that the YouTube and Amazon apps were being removed from the TiVo Series 2 and Series 3 DVRs, as of April 15. Sure enough, TiVo confirms this. Because the apps reside on the TiVo box, this is really another version of Through the Middle.
I immediately jumped to the conclusion that Amazon and YouTube were starting to get choosy about their distribution channels – and that TTM might just be a fleeting phenomenon as different content providers contend against one another to be the one on top. Or as my wife’s dad used to say: “If it’s any good, they’ll stop making it!”
As it turns out, the moves by Amazon and YouTube are simply because the TiVo 2- and 3-Series are old, and the app developers made the choice not to support them anymore. In fact, video apps from Amazon, YouTube, Hulu Plus, Netflix, Vudu (and others) are all key selling points for TiVo’s current Roamio DVR, and surely these video providers must appreciate having access to TiVo’s subscribers.
Not long ago, an industry friend of mine told me that Netflix had been in a pay TV operator’s EPG, but had pulled out. But the reason that Netflix and the pay TV provider went their separate ways was because Netflix wanted more control over the user experience.
So, these weren’t cases of competitive wrangling or channel conflict at all. One was about discontinuing support for old devices, and the other was about a content provider trying to maintain its look and feel across any device environment.
TTM is BoBW
Pay TV operators that integrate their services with TiVo can choose whether or not to expose TiVo’s OTT apps through the middle, but that’s also another story. In those cases, the pay TV operator is calling the shots, which brings us full circle back to the debate as to whether OTT is a threat or an opportunity for operators.
In the end, I view ‘Through the Middle’ is BoBW (the Best of Both Worlds) as a consumer retention tool for pay TV. But I think it’s more because of the added convenience, and it’s a tacit admission by pay TV operators that OTT can be a friend and isn’t a threat.
[ Side note: This topic takes us into a whole 'nother discussion about where the pay TV provider's user experience leaves off, and where the OTT (TTM) provider's UEx takes over. I promise an article about this soon. ]
As counter intuitive as it may seem, the emerging range of online video services might give pay TV subscribers little incentive to cut the cord, reunite existing cord-cutters back with pay TV, and even start driving would-be cord-nevers to adopt pay TV.
The conventional wisdom about OTT has been that the cost of online TV would be much lower than for traditional pay TV. Along comes DISH Network’s Sling TV, which only seems to reinforce that point. Comparing Sling TV’s $20/month with the typical entry-level pay TV package at $40/month – excluding monthly service and equipment fees – seems to bear that out.
Or does it?
A reality-check against the conventional wisdom
For the first time, there are enough actual online TV services that it’s becoming possible to make an objective comparison. So, let’s compare:
Basic Pay TV (for about $40 per month)
- Broadcast networks: CBS, NBC, ABC and Fox
- Networks found on pay TV: AMC Networks, CBS, Discovery Communications, The Walt Disney Company, Netwarko Grupo (Latino), Scripps Networks, Time Warner, Viacom and others
Online TV (…for about $40 per month!)
- DISH Sling TV ($20/month): AMC Networks, Disney/ABC, Netwarko Grupo, Scripps Networks, Time Warner
- Sony Playstation Vue (TBD, but let’s say $20/month): CBS, Discovery, Fox, NBC Universal, Scripps, Time Warner, Viacom
- Broadcast networks (live linear): Sony will offer CBS and Fox linear feeds in selected local markets.
- Or in place of Sony, you can opt for a combination of CBS All Access (which offers CBS linear feeds) plus HBO’s upcoming direct-to-consumer online TV service; probably for about the same $20/mo.
You might have noticed that Sling TV’s programming and Sony’s are almost mutually exclusive. They have only Scripps and Time Warner in common. So, an online-only subscriber who wants to come at all close to replicating a traditional MVPD’s line-up would need both DISH and Sony.
Is price the right metric for comparison?
My comparison make it look as if there’s price parity between online and pay TV, but this is not a truly fair comparison. Pay TV’s $40/mo for pay TV excludes monthly equipment rental and service fees; which bring it to about $60-70/month. Not to mention what the price might rise to after the new-subscriber promotional period wears off.
Okay: $60-$70/mo for pay TV, versus $40/mo for online. But unless the online subscriber abandons their Netflix, Hulu and/or Amazon Instant Video (or Prime) accounts – and many online subscribers take two or even all three of those, at about $10 each per month, plus or minus – the price comparison again comes closer to parity. (And let’s also acknowledge that $60-$70 price points are a lot higher than many of us envisioned…)
Both may taste great, but one may be less filling
Purely on the basis of the number of available channels, pay TV wins. Compare the lineups and prices from Comcast, AT&T U-verse and DISH Network (not SlingTV) with those from SlingTV and Sony Playstation Vue. Add all of the local and independent channels, and live local sports programming that you don’t get online.
One might protest that you can fill the local sports gap with online programming from professional sports leagues. But MLB.TV blocks programming for local games, in order to drive people back to local broadcast or pay TV. This may change, but for now, that’s the way it is. Plus, my local MLB games are included with my pay TV subscription, but MLB.TV starts at $19.95 per month. Yikes!
This situation makes me wonder: was it the plan all along to drive people back to pay TV? In the end, there may be very little incentive for pay TV subscribers to cut the cord, and very little reason for cord-nevers not to ultimately adopt the pay TV cord. DISH Network, for one, might be quite pleased with such a turn of events – and maybe this was DISH’s objective all along.
It comes down to priorities. Would you be satisfied enough with the limited lineups of online TV, and okay with filling the gaps with services from individual networks? Many people are. Many people are not.
Is TV having a dialectical moment?
In the discipline of philosophy, there is a method of resolving disagreements, called the dialectic process, which consists of a thesis, an antithesis, and a synthesis. Here, the thesis has been that OTT would drive people from pay TV. The antithesis has been the empire striking back, that pay TV would have sufficient value stem cord-cutting.
But this also can take an entirely different direction. The synthesis might be the emergence of the “hybrid subscriber,” in which one might take pay TV for local news and live sports, plus whatever else they get with the lowest cost basic subscription, and then get his or her premium content online from Hulu and perhaps HBO. In any of these scenarios, the alternatives might add up pretty close: a cord-never might end up paying the same as a pay TV subscriber would pay.
During baseball’s off-season, only the true baseball fanatics and baseball insiders watch what’s going on with the sport. Otherwise, most people limit their attention to the players being signed by their local teams or perhaps players that their rival teams are signing, but mostly are just waiting for the regular season or spring training to begin.
So an article last week in Forbes flew a bit under my radar. During the regular baseball season, consumers are blocked from watching local games online. But a possible deal between Fox Sports and Major League Baseball Advanced Media (MLBAM) might alleviate this situation and make local MLB games available online to about 40% of local markets, where games are broadcast on regional sports networks owned by Fox and carried on pay TV. Access by consumers would still be closely controlled: Fox would require ‘TV Everywhere’ authentication through local pay TV operators before granting access to the programming.
Access to live programming from the TV networks over the Internet is already gated. For example, if I want to watch a live feed from my local ABC affiliate, I am asked for my location and then told that my local feed is (or is not) available, based upon the streaming arrangements in local markets. (And of course because of the Aereo decision, there is no such thing as a local online aggregator, which is why DISH’s new Sling TV doesn’t include local).
Tying user authentication to pay TV operators could also give Fox greater leverage in negotiating carriage deals with those operators. For example, “Dear (local pay TV operator), we demand a higher retransmission fee (per-subscriber-per-month) this year, and we’ll yank our programming not only from TV, but also shut down your subscribers’ access to the authenticated streams if you don’t accept our terms.”
This has already happened with Fox in other cases.
Aereo, the Barry Diller startup that was delivering local over-the-air TV programming to online and mobile app users, has been deemed illegal by the United States Supreme Court. The Court’s majority opinion was that Aereo is similar to cable TV, and is therefore subject to the same copyright obligations. We should have seen it coming: Chief Justice John Roberts had earlier said that Aereo’s entire model was to circumvent copyright law.
- TV broadcast networks
- Local TV stations owned and operated by the TV broadcast networks
- Local independent broadcast stations
- Consumers, who now lose the option to access local programming online unless they subscribe to an operator, or receive programming over the air
- Aereo, which would have to pay retransmission fees and presumably pass the cost on to consumers, be shut down, or devise some other work-around that keeps it in service
Aereo rents dedicated over-the-air TV antennas to each end user, and converts the live TV signal from each antenna to IP video for unicast (which, Aereo argued, constitutes ‘private performance’ that is not subject to copyright rules). Aereo also hosts a cloud-DVR service that stores recorded programming for later unicast access by subscribers.
If Aereo had won this case, the power of content owner to charge retransmission fees would have diminished, reducing pressure on operators to raise prices to the consumer. Aereo would have continued its expansion toward national coverage. With this decision, retransmission fees are likely to increase, supplementing existing revenue streams from TV advertising.
Aereo’s loss also opens the door for Dyle.tv, a joint venture of NBC, Fox, Pearl Mobile DTV and Ion; which currently offers over-the-air receivers to mobile device owners. Dyle’s Web site states that the company intends to offer “…encrypted broadcasts … to authenticated MVPD (pay TV) subscribers through a variety of apps, possibly those developed by TV networks, stations or cable/satellite companies.”
Online TV certainly isn’t going away. Earlier this month, Leightman Research Group said that almost half of U.S. households already subscribe to an online premium video service, such as Hulu, Netflix or Amazon Prime. The TV networks simply want to boost revenue by participating in the same opportunity. Adding to what they already make from advertising.
Also, the range of available TV programming continues to expand on all the major streaming video device platforms. No question that the content world sees online video as a viable channel of distribution. It just has to be on its terms, and subject to copyright law (agree or not about the Aereo decision).
We all know by now that Google is up to something, perhaps big, with the launch of its Chromecast dongle-style screen-sharing device, but there is also a lot of confusion around the device capabilities, Google’s strategy and whether this is a truly disruptive device.
To find out more about the Chromcast strategy, Videonet‘s Justin Lebbon spoke with two digital entertainment industry experts, Analyst Steve Hawley and Consultant Mark Donnigan, who works with Dune HD on their set-top box business. Read the article on Videonet!
In recent months, lots of buzz has been building across the business and industry press about Intel Corporation’s work-in-progress toward an OTT TV service. A recent Reuters report said that Intel does plan to introduce a consumer service this year, but is struggling to close content deals, even though it is offering a premium for the programming.
So, what if Intel fails to achieve its content goals and the service never launches? Perhaps this Intel OTT strategy might actually be the “nice to have” layer on top of Intel’s true intent, which follows a proven Intel formula. Read the rest of this article on Telecompetitor Plus (Premium Content)
This is the first of two posts about the 2012 International Broadcasting Convention (IBC) in Amsterdam. As an analyst, I’m just as interested in the macro-level trends as I am the individual vendors and products. So let’s look at a couple of those trends. If OTT and 3D television were the big news a couple of years ago, then this year it was multi-screen TV…
Everything seemed so tidy and settled six months ago. A growing new conventional wisdom acknowledged that pay TV is, in fact, not only moving to Internet protocol, but also, that the titans of pay TV had all but won the day over ‘Web video.’ This sense of complacency was disrupted when Google made a trio of noteworthy announcements at its annual Google I/O developer conference last week…
It’s a common ritual: analysts, industry observers and other hangers-on always like to compare notes about what they see at conferences. Sometimes, it’s part of being social. Often, it’s part of the process of formulating your own opinions. Exhibiting vendors want to know how they are succeeding in new areas, and how they are doing against their competitors. All of this was very much the case at the 2011 International Broadcasting Convention (IBC) in Amsterdam.
This year was at once evolutionary, revolutionary, and anticlimactic. A lot of people that I spoke with thought there was nothing “big” at this IBC. I beg to differ: multi-screen TV is real, it’s here, and it has moved through the science project, trial, and first deployment stages – into mainstream deployments and refinement – in less than a year.
Sure, we saw the beginnings of it a few years ago with all the buzz about video content delivered ‘over the top’ (OTT) via the open Internet – as something separate, experimental, a vague threat to pay TV, something to monitor from a distance. In fact, just nine months ago, I was involved in a project with an industry organization that was trying to encapsulate for its membership whether OTT represented a threat to pay TV operators or an opportunity.
Yet now, OTT and multi-screen delivery are simply two ingredients of ‘this complete pay TV breakfast.’ In my book, this rapid transition from ‘what is it?’ to ‘it’s table stakes!’ has been pretty revolutionary. As a result, virtually every TV middleware, encoder, and video security company had something ‘multiscreen’ to show at this year’s IBC. And the primary driver has not so much been the maturation of the enabling technologies – it has been social media. Vendors were sorted into two camps: those using IBC to announce pending or actual commercial multiscreen deployments, and those who were still talking about product roadmaps.
What was evolutionary? Although the first multi-format video encoders started showing up nearly a decade ago, their time has finally come with the multiscreen opportunity. It’s actually a very active area, as vendors race to support adaptive-rate streaming, multiple screen formats and aspect ratios, and to improve video quality – all while reducing energy consumption. In some American political circles, it still may not be cool to talk about ‘green’ technology, but if a company can cut thousands or even millions of dollars from its power bill, the ‘let the marketplace decide’ crowd should sit up and listen.
Competitive wins were another evolutionary phenomenon. One of the biggest was the announcement by Ericsson that it had won the IPTV business of Chunghwa Telecom, the Taiwanese incumbent Telco, which has nearly a million IPTV subscribers in service. For some years to come, Ericsson will operate alongside Alcatel-Lucent, where ALU was the sole incumbent vendor previously. As the TV world transitions from the living room to multi-screen, and as service providers outgrow their first-generation IPTV platforms, we will continue to see this from service providers of all sizes, worldwide.
Another evolutionary area is the now-mainstream recognition that the semiconductors residing in consumer devices – particularly in set-top boxes – are a key part of the end-to-end pay TV ecosystem. This stems from that fact that video security now resides on shipping chip-sets and that these ‘security blocks’ are now integrated with TV middleware and CAS systems, to control access to content and for output control. This situation stands to reduce costs for operators that can move from card-based to software-based video security.
Another IBC highlight was the inaugural ConnectedWorld.TV Awards, which were given in association with IBC, and for which I was one of the judges. We evaluated well more than 100 substantial entrants across 19 categories, and it was not merely a popularity contest. James Cameron and Vincent Pace (The Cameron Pace Group) were given a special award for their contribution to the broadcast industry.
Yet at the same time, 3D – a technology inextricably linked with James Cameron through his movies Avatar and soon, a 3D version of Titanic – seemed a bit anticlimactic. For the past few years, there has been at least one 3D feature on the bill at every movie multiplex. Cable, satellite and Telco (IPTV) providers alike trumpeted 3D sporting events. Set-top companies announced 3D software updates and published lengthy white papers. The past two IBC (and NAB) shows were full of companies demonstrating 3D video technologies.
But as I compared notes with others – both at the Awards dinner, and at IBC at-large – there was some irony in the fact that none of us seemed to notice 3D quite so much this time at IBC. Even the circular glass projected 3D TV demonstration that’s between Halls 1 and 7 every year was missing. (Did you see it? I didn’t). You would get a flash of recognition from most people – ‘Wow, I hadn’t really thought of that, but it’s true!’ – when mentioning the lower profile of 3D this year. Yet Mr Cameron insists that the best years of 3D are yet to come. I hope he’s right because I, for one, enjoy it – and the industry has put a lot of time, effort and money into placing 3D into the mainstream. Maybe it’s that 3D is now so commonplace that we don’t notice it as much anymore.
So, what’s going to be big next year? In my opinion, it will be home gateways. Although service providers have talked about establishing a ‘beach-head’ in the home for many years, the compelling reason is finally emerging: the need to transcode commercial and home media content for consumption across multiple device environments while maintaining content protection for the commercial side. Multi-screen may be the catalyst, but it remains to be seen whether consumers will accept such a camel’s nose in their home tents.
The 2011 OTTCON (Over the Top) conference was a good opportunity to hear some of the current thinking and see some state of the art solutions that bring video programming to consumers via the Internet. While the comment that customers want their content on “any device, anywhere, at any time, over any access” has been overused, it is indeed true. Service providers who do the best job staying in front of consumers as they move to other screens – while preserving existing business models and establishing new ones – will gain competitive advantage.
No longer are people asking whether OTT will replace pay TV. Instead, they are asking how one can complement the other for mutual benefit. But it’s still somewhat unsettled as to how OTT content will be monetized to a sufficient degree that OTT ad revenue streams would offset the loss of traditional TV ad revenue.
OTTCON also posed a fundamental question: “what is a service provider in the age of OTT?” Three Internet-enabled provider categories have clearly emerged. The first are the traditional pay TV companies, which are now striving to complement their managed services by delivering Internet-sourced content, both to their managed devices, and to outside devices over the Internet.
The second category is the delivery of content to connected consumer electronics devices – via the open Internet – either directly from content owners like the TV networks, from portal providers like Netflix that aggregate movie and TV content – and/or from Hulu which is both. The consumer accesses this content through apps that reside on the device.
The third type of service provider approach is ecosystem-based, in which a single provider builds a closed content delivery service platform using an interdependent range of devices and software, combined with a content and apps marketplace. In this approach, the provider can offer increasingly common set of user experiences within the home, online and across multiple devices while providing a compelling channel to market for content providers – and even other service providers.
The next few postings will look at these in turn and identify some opportunities.