If we believe the cliché that content is king, what happens to the value of cable if cornerstone premium content is available over the Internet without a subscription? MSOs have been grappling with this issue and leveraging their position as the majority source of revenue to TV content owners. Content owners who wish to offer programming on various devices in real time have done so via the TV Everywhere model — essentially through the cable operator’s online portal.
To access cable TV programs online, consumers must log on to the portal to validate that they own a subscription prior to viewing. The consumption of on-demand content is less of a concern to the cable companies. After the content has aired on cable, video-on-demand (VOD) content is made available for release via Internet distributors such as Hulu, Netflix, Amazon Prime and iTunes, depending on various licensed windows of availability. This could be next day, weekly, by season, etc.
The big news this week is that Google Play quietly announced it is offering HBOGo episodes in its streaming service to Android devices without a cable subscription. HBO has been coyly navigating the over-the-top question for months. In addition to the mountains of revenue at stake, the HBO – cable relationship is legendary. Back in the 1970s, Home Box Office was launched on the early cable system Manhattan Cable, now part of Time Warner. Many point to properties like HBO as the catalyst that drove consumers to pay for TV delivered on cable systems rather than watch broadcast TV over the air for free.
Both content owner and distributors have enjoyed huge revenue success over the years. In 2012, Time Warner reported an in increase in HBO subscription revenues due to higher domestic rates, international growth and an increase in domestic subscribers. However, when you are a franchise player, how can you resist the opportunity to go out in the market and get the money you deserve? With proven Internet ad revenue and subscription commercial models in play, it does not appear to make business sense to forego the OTT opportunity.
One day soon, all premium TV content will be available on every device and will not be under control of the cable operators. But, perhaps all is not lost for cable. Consumers want a place where they can build their own TV line-up from all content available on the Internet. They want to learn about new content that will pique their interest based on their current viewing patterns. Today’s opportunity for cable is to get very good at content curation and continue the lean back experience, a problem that has yet to be solved on the open Internet.
At Level 3 we are prepared for the evolution of TV. Our newly launched Level 3 Video Cloud provides solutions for Content Providers who are looking at both TV Everywhere and OTT distribution models. Our goal is to make Broadcast and Internet Video simplified.
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