Integrating more OTT into Pay TV: Best practice and how far operators will go

Pay TV operators are starting to make greater use of streaming video within the home, but not just for multi-screen TV. There are plenty of examples of Pay TV operators delivering their own online video into their set-top boxes, often satellite providers making VOD available. A big question now is whether they will start allowing third-party online video (from ‘traditional’ OTT services) to be presented to their customers via their STB and user interface.

Joshua Danovitz, VP and GM International at TiVo, whose middleware platform is the basis for next-generation cable services at Virgin Media and soon at Com Hem, thinks platform operators will open up. He notes a dramatic softening in the attitude of cable operators towards services that compete for either attention or money, for example. “YouTube was previously viewed as a rival for eyeballs but is now considered a benefit for the overall user experience,” he offers as an example.

Ed Barton, Director Digital Media Strategies, Digital Consumer Practice at the research and consulting firm Strategy Analytics, backs this view. “With the most popular OTT services it is a simple proposition: if you don’t package and offer them through your service then the audience will find ways to access them that disintermediates you. If the operator does not cater to this demand, someone else will.”

When it comes to harnessing OTT/online video to the STB, candidate services include catch-up TV, subscription and transactional VOD, and niche content services (including from international content partners targeting expat populations). “That is a real opportunity and there is real money to be made from foreign language channels in the operator content line-up,” Danovitz suggests.

He thinks we are about to start a second wave of OTT integration. “The first wave was just to provide some point to point video, whether it was BBC iPlayer or YouTube. The second wave is about how you make this a unified experience that is integrated into the entire operator branded Pay TV experience.”

Virgin Media provides an example of how this is being achieved in practice. The company has a backwards facing EPG that gives access to catch-up TV content, some of which is delivered as online video. YouTube is now available in the EPG as Channel 198, while content partner apps, like the Nat Geo app, are like an additional TV channel.

Ian Mecklenburgh, Director of Consumer Platforms & Devices at Virgin Media, points to the Harry Potter app as an example of IP streamed content that extended content choice. This app was created to coincide with the launch of the final Harry Potter film and among other things featured a live feed from the red carpet opening of the movie.

“There is no way anyone would ‘wind up’ a normal broadcast channel for something like this, which has a relatively low viewer base and is fairly transitory in nature. That is an early example of what was really a linear channel delivered via IP,” he explains. “Some of the things we are doing with the BBC on their Connected Red Button is closer to a channel than an app model, as well. Live sports is delivered via IP but, once again, the customer does not know where it is coming from.”

Would Virgin Media go further and open its TiVo platform to Netflix, for example? Mecklenburgh’s view is that if OTT providers can get good exclusive content, as Netflix did with House of Cards, you need to start thinking about how you get hold of it. He does not rule out doing some business at some point. “Previously the OTT services were just archive libraries but they have started to commission original content and create their own channels and so are becoming like traditional content owners. That is interesting,” he says.

Liberty Global, the pan-European cable operator group, would be happy to work with them or battle with them, based on recent comments. Last October Bob Greene, Managing Director of Online Entertainment, said the company looks upon Netflix as another channel, the same as HBO, and could work with them if everyone gets paid. Discussing the threat of cord cutting in January, President and CEO Mike Fries pointed to his new Horizon platform (unified cable/multi-screen/OTT service) and declared: “Nobody is going to get their OTT services from Netflix when we’re done.”

Cable operators, like all Pay TV platforms, used to worry about this kind of OTT provider. They are still wary but are now confident they will see off the threat of cord cutting. That is because they spent the last three years cementing their relationship with early adopters through good and usually free multi-screen offers, and more recently added next-gen platforms with better graphics, navigation and content discovery.

Paul Berriman, Group Chief Technology Officer at PCCW-HKT, the Hong Kong quad-play provider and IPTV pioneer, is convinced that OTT providers will need to work with Pay TV operators if they want to succeed in local markets. His company provides a limited amount of OTT content through the STB today, citing cross-border content rights complications as the reason for not offering more. One notable OTT service received via the STB is MUTV, Manchester United Football Club’s own TV channel.

Berriman says OTT providers need to work with, rather than bypass, Pay TV operators. “The local Pay TV operator adds huge value to the OTT provider. They lack some key elements of the Pay TV ecosystem that are far more prevalent and powerful in a local setting. To name a few, these include marketing, promotion, sales channels, dubbing and local language subtitling, installation, maintenance and support.”

He thinks there could be a place for operators to act as the local agent for OTT providers, giving local support as they do for other content providers… but only for a fair return.

The new breed of Pay TV platforms are making it possible to blend the OTT and traditional video services seamlessly, in terms of their presentation but also at a deeper, functional level. One of the advantages Pay TV operators can exploit is the ability to provide unified search and recommendation across all content, whether it is coming from third-party services over broadband or in traditional forms.

Without being complacent, Virgin Media is quietly satisfied with the way it dealt with the emergence of OTT services, having taken an early decision to embrace the consumer desire to get more content from more places. “We said from the outset that we are a platform that is open but not an open platform,” Ian Mecklenburgh explains. “The strategy has played out well. The important thing is that the customer sees the value we provide, including the simplicity, and then they will stay with us.”

Paul Berriman at PCCW is confident that Pay TV will win the battle for customer loyalty. “Who better to deliver the quad-play, multi-screen service than an integrated operator that can also bill for content across fixed and mobile platforms?” he asks.

He adds: “If an OTT operator is selling content OTT then what is he but a lightweight Pay TV operator? We should be able to beat them on a level playing field where they pay the same price for content. I believe that over time content providers will be looking for the same or better returns from OTT providers than their existing Pay TV operators. It will be interesting to see whether OTT providers can make a place for themselves then.”

Related content

This story is an excerpt from the new Videonet report, The Hybrid Platform Operator, which investigates how Pay TV is making greater use of its own streaming video and third-party OTT, among other things. It looks at the market implications of the hybrid broadcast/OTT platform operator and considers the challenges in creating what should be a unified service through multiple networks and devices. Other issues addressed include matching broadcast QoE on streaming services, the user experience, the role of adaptive bit rate STBs, and streaming versus broadcast.

The report includes original input from Com Hem, Virgin Media, PCCW-HKT, Ziggo, TiVo, Strategy Analytics, Verimatrix, RGB Networks, Alcatel-Lucent, IHS (IMS Research), Ericsson, Broadpeak and IHS Screen Digest.

The 8,500 word report is free. Download it here.