MVPDs Need to Start Playing Offense in OTT

Fred Dawson, Editor, ScreenPlays Magazine

Fred Dawson, Editor, ScreenPlays Magazine

Some people think out of the box because existence inside the box has become unbearable. Some think out of the box because new ways of looking at things can bring new opportunity, even when there’s a strong comfort zone inside the box.
MVPDs (multichannel video programming distributors) can be found in both categories when it comes to the need to consider how to make broadband a vehicle for improving their lots as providers of a superior entertainment experience. So far, nearly all the thinking about how to use broadband towards that end has centered on delivering premium content to pay TV subscribers’ IP-connected devices – i.e., TV Everywhere.

But, as reported elsewhere, a new strain of thinking is gaining currency among MVPDs who fall into that first category of out-of-the-box thinkers – ones whose ability to survive in the business of delivering pay TV service is in question owing to the soaring costs of sports programming, the contract bundling imperatives that force subscribers to purchase content they don’t want and the burdens imposed by what many are declaring to be outmoded local broadcast retransmission consent rules. What if, these MVPDs are asking, we simply abandoned or at least eased out of the pay TV business by leveraging opportunities emerging in the OTT realm?

From a regulatory standpoint, there’s plenty of room to maneuver, given the fact that operators can charge different rates for different access speeds as well as for monthly data usage that exceeds caps associated with different tiers of services. It would seem easy enough to either include an operator branded OTT video service tied to navigational convenience and special apps as part of a high-speed tier or to offer such a service at an incremental fee with whatever tier a user subscribes to.

It may be time for MVPDs whose backs aren’t up against these walls to give thought to an alternative OTT entertainment model as well. Even though they have no reason to consider abandoning the traditional pay TV model, there are good reasons from both a monetization and a long-term defensive point of view to take a more proactive stance on the OTT front, notwithstanding apprehension that doing so could cannibalize higher-cost premium service,

Given that cannibalization is happening of its own accord, why not try what might be called “controlled cannibalization?” In other words, create an extraordinary OTT experience with advanced navigational tools enabling personalized recommendation and discovery together with a wide range of social and other apps that draw broadband customers to the operator’s OTT interface.

An operator-branded entertainment playground for its broadband customers would also provide an opportunity to tout what’s available on the premium service side, letting people know that they’re missing a whole lot by not subscribing to the pay TV service. Here, too, are often discussed but seldom executed opportunities for partnerships with some of those OTT outlets where promotional and back-office support for direct tie-ins with the operators’ subscribers could generate additional revenues.

Another part of this OTT service could be cloud-based support for personal media storage, possibly in conjunction with electronic-sell-through components tied to UltraViolet. Advertising implemented in the navigation UI would be part of the opportunity as well.

Operators, of course, have dabbled in this direction without going all the way. Comcast, for example, launched its Streampix service a year ago, which offers connected-device access at no charge for triple-play subscribers and at $4.99 monthly for other video subscribers to a wide range of older TV programs and movies from the likes of ABC-Disney, NBC Universal, Sony Pictures, Warner Bros. and others. Similarly, AT&T just launched Stream Pack as a $5 add-on subscription option for U-verse TV subscribers.

But the point here is not that MVPDs should try to replicate what other OTT providers are offering as a value-add to pay TV subscriber but that they ought to make the OTT entertainment experience across their own and other outlets a far better one for broadband subscribers who aren’t in the pay TV fold. Moreover, totally apart from any monetization benefits, taking an aggressive pro-active stance in the OTT sphere may be a good way to deal with programming suppliers who are playing both sides of the OTT/pay TV game.

Even as programmers explore new ways to make money through online first- and second-screen advertising initiatives, adjust windows on high-value content in ever closer competition with their pay TV operations and devise new niche online channels for live content not seen on pay or broadcast TV, they’re also driving up costs to MVPDs and pay TV subscribers alike through the aforementioned tactics. MVPDs will have greater leverage dealing with their content suppliers if they, too, can show they can generate revenues in the OTT space as an alternative to dependence on pay TV.