OTT Broadcast TV Could Sway Small Op Strategies

Fred Dawson, Editor, ScreenPlays Magazine

Fred Dawson, Editor, ScreenPlays Magazine

The increasing likelihood that Aereo, the over-the-top distributor of broadcast TV, will prevail against litigation aimed at derailing the service adds an important new element to the rethinking of pay TV strategists in lower tier markets.
As previously reported (January, p. 8), mounting costs of programming and capital cost challenges posed by the need to support abundant VOD and HD offerings are squeezing smaller cable and telco operators to the point of driving some out of business and causing others to consider moving to an all-broadband service model that exploits opportunities to offer branded OTT services. While this would cut out the ability to deliver the lion’s share of cable TV channels in real time under current licensing rules, Aereo and potentially other entities pursuing similar strategies open the possibility that local broadcast signals would be available over the broadband links, possibly bundled with the local operator-branded OTT TV navigation system.

It’s too early to say whether such bundling options through deals cut with Aereo or others like it would be an option, but Aereo is known to have been in discussions with major service providers on the possibility of such deals prior to the April 1 federal appeals court ruling upholding a lower court’s refusal to block the service. At the recent paidContent Live conference in New York City Aereo CEO Chet Kanojia shed more light on the company’s strategy, including the possibility of negotiating bundling deals with broadband service providers.

Aereo just announced that Boston is the first metro area beyond New York City that it will target, one of 22 slated for launches this year. The company says that, starting May 15, 4.5 million residents currently served by local broadcast signals will have the opportunity to register for the $12-per-month Aereo retransmission service for access to 29 channels, including all the over-the-air broadcasts as well as certain special interest channels such as The Country Network, PBS Kids, Ion, Qubo, Univision, Telemundo and Bloomberg Television.

Kanojia revealed the one-price-fits-all model employed in New York is not likely to hold going forward. He said there would be a la carte and on-demand elements to the service as well, such as a very low-cost ($.50-$1.00 per month) movie subscription component and perhaps low-tier entry options that offer the more popular broadcast channels as a premium tier. The goal, he said, is to deliver half of the content deemed most valuable by cable subscribers at one tenth the cost.

Aereo is just one player opening new opportunities for broadband providers looking to escape the pay TV trap. On the broadcast side, with the potential to make life miserable for Aereo, is Syncbak, which, as previously reported (March 2012, p. 20), is working with broadcast stations to support broadband distribution of their signals in a way that restricts access to just the people who are in reach of the over-the-air signals. The big difference here is the service is being developed in cooperation with broadcasters, who view it as a multiscreen extension of their TV offerings and a way to enhance advertising revenue.

Now undergoing testing by more than 100 local TV stations in 70 markets, Syncbak has just won minority investment backing from CBS, apparently as a strategic response to efforts to deliver broadcast signals by unauthorized outlets like Aereo. Syncbak also has backing from the National Association of Broadcasters and the Consumer Electronics Association.

Many other efforts, not related to broadcast TV, are in play to facilitate local broadband service provider branding of bundled OTT services, including the turnkey service now on offer from NeuLion and Deluxe Entertainment (see p. 17). With a Deluxe VOD library to tap totaling some 50,000 titles and support for high-quality delivery with some live content mixed in, NeuLion is getting a receptive hearing from small-market operators who want to offer a branded OTT service in lieu of the usual pay TV lineup, says NeuLion executive vice president Chris Wagner.

“We’re finding that enabling broadband service providers to put their own branding on a turnkey service like ours with full navigational support , quality assurance and a package of content has great appeal,” Wagner says. “I think they see the ability to offer a superior quality broadband service is a smarter way to build ROI than they’ve seen with pay TV.”

Given that broadcast retransmission fees have become a big part of the headache for smaller operators, the ability to include live broadcast in the OTT service could be a game changer. After all, retransmission of broadcast in rural markets is what got cable going in the first place.