Over-The-Top Executives Expect Cable Operators to Launch National Video Services Soon
SILICON VALLEY -- Pay-TV distributors will soon begin offering video services outside their traditional service areas, executives at digital media companies said Tuesday at OTTCON (http://xrl.us/bmywbh). “There’s a little hesitation to be the first company to go, but I think lots of them are thinking about this and some of them, very seriously,” said Anthony Wood, CEO of Roku. “This doesn’t exist today but I think it’s going to happen and probably this year,” he said.
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Incumbent pay-TV distributors are more likely to introduce such a service than a new entrant, despite recent press reports that Intel is putting together such a service, Wood said. They have “the business deals with the cable networks and the studios. They know how to negotiate the rights and it would be a relatively simple matter as these things go to negotiate these over-the-top rights."
It is only a matter of time before cable operators begin “overbuilding” each other, said Richard Bullwinkle, Rovi chief evangelist and head of corporate strategy. When that happens, tier 2 and tier 3 cable operators will have work with larger operators on those products, he said. “There is no way the tier 3 and tier 2 companies can keep up with the rapid innovation” of companies such as Comcast, he said. “They're going to make an agreement and invite them in."
Google could also jump in, with its Kansas City foothold into the pay-TV market, Bullwinkle said. “Google is going to start delivering well outside their footprint,” he predicted.
Content companies are very busy taking meetings with incumbents and potential new entrants on such questions, said Colin Decker, a senior adviser on media and telecom investments at the Virgin Media group. “I'm interested to see which one of these players is going to ‘go nuclear,’ and completely subsidize and underwrite the content” costs, he said. “We're seeing some big players willing to take some very big body blows to get these services in place."
Whatever happens with the over-the-top video market, it’s doubtful an a la carte model of paying for traditional programming services will take hold, Decker said. “It’s not going to happen,” he said.
Bundles are not going away, Wood said. “The business model for content distribution is based on bundling and in many cases the consumers want bundles,” he said. Netflix and Hulu each bundle programming in their own ways, he said. “It’s intrinsic to the business, and I don’t think it’s going to be changing any time soon.”