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ThE MaStEr

For those seeking a steer on the future of broadcasting and pay-TV in particular, it's been an absorbing week, a cluster of reports and launches reinforcing the promise of OTT content delivery.

US pay-TV blinks first as new generation of television takes shape

Context for this comes in the shape of output from In-Stat, which reports a decrease in the number of pay-TV subscription households in the US for the first time in "recent memory".

Pay-TV subscriptions fell by 167,000 in the Q2 of 2010. According to In-Stat, this is not due to cord-cutting in favour of OTT, but rather the decline of the US economy.

"While growing availability of over-the-top Internet video is spurring talk of mass 'cord-cutting,' this decline is not about cancelling pay-TV in favor of Internet video. The main driver of these subscriber declines is the struggling US economy and high unemployment" says Mike Paxton, Principal Analyst.

However, this view should be considered in the light of Credit Suisse's decision earlier this month to downgrade Disney, Viacom, News Corp and Time Warner stocks, while at the same time raising its price targets for Netflix shares from $90 to $140.

Credit Suisse believes audiences, particularly young people, will indeed cut the cord of their traditional pay-TV providers, favouring OTT services like Netflix. A Credit Suisse survey of Netflix subscribers found nearly 30 percent of those aged between 25 and 34 now watched Netflix instead of cable or satellite, while another 30 percent or so aged between 18 and 24 have totally dumped traditional services, preferring OTT content.

"Netflix's low cost, subscription streaming service is our biggest worry and could become 'good enough' for consumers with moderate income," said Credit Suisse.

It is no worry for NBC, which this week announced an expanded license deal through which Netflix members can watch NBC series and for the first time, content from some of NBC Universal's popular cable channels.

The deal gives Netflix subscribers access to shows such as Saturday Night Live, 30 Rock, The Office and one of the seemingly endless series of Law and Order, as well as all the previous NBC content already available to them.

Clearly, NBC knows which way the wind is blowing, or which cord is being cut.

Meanwhile, five technology providers, BeeSmart, Edgeware, NetView, Zenterio and Verimatrix, have inked a partnership deal to offer a new Web TV service, an OTT system "ideal for TV service providers with an ambition to offer rich TV and on-demand services over unmanaged broadband networks".

"The most important advantage of the WebTV solution is creating an immense business opportunity for every service provider, who wishes to enter or to expand its share of the TV market. There are no limitations from the infrastructure perspective," says Jo?e Pirečnik, Business Development Director at BeeSmart,

"Finally the technology allows an elegant separation of network and service providers. The WebTV solution is able to adapt the streaming capacity to actual network conditions, thus allowing a convenient TV consumption under almost any network condition."

The futuristic five claim they're shaping the next TV revolution, another "sayonara" to traditional pay-TV models and putting the boot into Telco ambitions to imprison their users in restricted content silos.

Unsurprisingly the pay-TV sector rejects the dinosaur label and refuses to freeze in an OTT Ice Age. According to Futuresource Consulting, the pay-TV "majors" are trying to reach out to their users and protect their numbers.

"Established pay-TV majors are focusing on the bigger picture, providing a bundle of benefits to attract various subscriber segments," says Carl Hibbert, Head of Broadcast Research at Futuresource.

"Depth of content, added value in the guise of HD, DVR, Free VoD and multi-room, and multi-platform distribution, including online & mobile are some of the strategies being rolled out. Cable and IPTV operators are focusing on broadband pipes, Triple or Quad Play, On-Demand and HD content. We're also seeing increasing Telco investment in sports and movie VoD rights."

"Pay-TV providers see IP as a way to enhance and complement their existing subscriber proposition, as well as reaching into markets with ad-funded and paid-for content on both PCs and Connected CE devices," says Hibbert, "and broadcasters are evaluating IP delivery as a way to tap into the growth of online advertising with catch-up TV and additional programming, as well as selective development of Pay-TV opportunities."

According to Futursource, more than 600 million homes across the globe are connected to cable, satellite or IPTV subscription networks, with nearly 200 million set top boxes shipped last year alone, more than 60 percent of which were pay-TV boxes.

On the face of it, that certainly doesn't look like the end game for pay-TV. However, take up in Asia distorts the reality of the market and those US figures don't lie.

As we reported last week, worldwide broadband subscriptions passed the 500 million milestone in July. The next half billion won't be so difficult to achieve and genuine broadband speeds are increasing all the time.

With that, a form of consumer-driven hybridity is inevitable. OTT will win if Pay-TV providers choose to fight a pitched battle. They will have to recognize the only survivable future lies in living with OTT services and becoming much more flexible in their own offerings.

Mobile TV is of course another serious player in the future of broadcasting. comScore this week reported a near doubling, a 99 percent increase, in the number of people who watched on-demand video or TV programming on their mobiles.

"The era of 'video-on-the-go' has finally arrived," says comScore European VP Mobile, Jeremy Copp. "We've seen major developments throughout the mobile space – in networks, in devices and in software and applications – and now we're seeing the result: a rapidly growing audience of consumers accessing video on their mobiles, be it broadcast, on-demand or side loaded."

comScore reckons the increase in demand is being driven by smartphone uptake, with two out of every three people watching on devices like iPhones and Android devices.

And the mobile phone wasn't the only small device to take a step forward this week. FourthWall Media announced a TV buy button, in partnership with PayPal.

The partnership makes it possible for cable operators to allow consumers to access their "digital wallet" via the remote control to make T-commerce payments.

This is the sort of thing cable pay-TV operators need as part of that offer of "new things" to their subscribers interested and stop them cutting their cords altogether to move into a solely OTT world.

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