LAS VEGAS – With revenues in the traditional subscription TV business trundling along at 1-2% growth – even though subscribers are not cutting or trimming their subscriptions in real numbers yet – expect all the big media companies to jump into the over-the-top pool, if they haven’t already. The potential global growth is too big to ignore.
That was part of the message this morning during a National Association of Broadcasters Super Session panel diving into the burgeoning business that is OTT video.
While the number of people who say they want to cut or trim their subscription TV bill still dramatically outnumber the people actually doing it, the phenomenon is accelerating, said session moderator Alan Breznick of Light Reading. In the U.S. in 2014, 1.4 million U.S. TV homes have either cut the cord or were never tied to it in the first place, he said, and about 4.2% of North American pay-TV subscribers say they plan to drop their TV service within the next six months.
Consumers are starting to realize that while they do still watch a lot of content from their TV provider, they are paying far more for it compared to other OTT options. Customers are spending 55% of their TV time with traditional sources but it consumes 77% of their spending on video. It’s disproportionate, said Parks and Associates director of research Brett Sappington.
As well, one of the challenges which remain for all content producers is to convince millennials to pay for things. They have grown up sharing content and see no reason why that shouldn’t include their Netflix subscription. More than 20% of 18-24 year olds reported using an OTT subscription paid for by someone else, said Sappington.
OTT will become even more of a potent force in the next one to two years, because of the growing universality of broadband, the pervasiveness of smart devices and the willingness of content owners to try new things, said panel member Mark DeBevoise, EVP and GM of entertainment and sports news for CBS Interactive. He recently led and launched CBS All Access, a $5.99/month subscription service that is what it says – an all access pass for CBS content.
The CBS product was announced in the fall just days after HBO Now, which lets consumers buy, for the first time, an HBO subscription without a traditional TV subscription. So now, everyone is getting in (including, in Canada, Bell with CraveTV and Shaw/Rogers with shomi). “As soon as the first dominoes started to fall, everyone realized that if I don’t get in now, there may not be a market for me to get into,” said Sappington.
“Whether consumers actually want that is a different question but… that will show us all the demand for skinny and a-la-carte truly is.” Brett Sappington, Parks Associates
And OTT will be the primary gateway to the international market, or “the wild west,” Vubiquity CEO Darcy Antonellis termed it. “If you’re a content producer and want to distribute internationally. OTT gives you a way to get there where you couldn’t otherwise,” added Sappington.
When it comes to unbundling the traditional cable package in the face of the challenges OTT presents, the panellists said they were looking to the “grand experiment” being undertaking in Canada, where the CRTC is mandating a skinny basic and a-la-carte channel selection.
“Whether consumers actually want that is a different question but… that will show us all the demand for skinny and a-la-carte truly is,” added Sappington.
Despite all of that, media companies have no choice but to dive head first into the OTT wave added NeuLion CEO Kanaan Jemili (whose company provides the functionality driving Rogers NHL Gamecentre Plus) because, while “pay TV revenue growth is 1%, OTT is 26-28%” and companies have no choice but to pursue.
“No one is going to stand for the trajectories of 1-2% growth,” added Antonellis.
