According to research advisory company The Diffusion Group (TDG), Pay TV operators must execute three specific tactics in order to defend against emerging competitors and take full advantage of their unique position in the video value chain. Specifically, TDG argues that Pay TV operators must:
– Push existing cable network TV programmes online;
– Deliver today’s Internet-only content and bonus material directly to the television; and
– Offer broadband TV services without requiring a traditional Pay TV subscription (as a stand-alone service).
By executing these three strategies, Pay TV operators will enhance their defensive position, recapture the attention of the Internet generation, and generate an additional $2 billion in annual revenue by 2013.
Colin Dixon, senior analyst with The Diffusion Group, points to the nascent but emerging threat from OTT video services as the primary reason why Pay TV operators must aggressively pursue online video strategies. “More than half of adult Internet users are interested in an over-the-top broadband TV service,” notes Dixon. “So much that they would consider cancelling their existing Pay TV subscription if the OTT service was priced appropriately.”
According to Dixon, it will not be long before a variety of companies including CE OEMs, web-based aggregators, and pure-play OTT providers look to tap into this interest and compete more directly with Pay TV operators. “As TV-based web connectivity becomes more prominent, and as web-based content providers more fully exploit these new connections, the ‘local cable company’ becomes just one of many conduits serving the TV screen. This means that incumbent TV providers risk becoming just another TV input, even an icon on another company’s interface.”
Dixon notes that this multiplicity of access points has already allowed providers such as Netflix to introduce economically streaming functionality directly to the TV without the burden of proprietary hardware. “Content providers such as Netflix and Amazon are partnering with CE vendors to deliver their content directly to the TV, going ‘over the top’ of incumbent set-top boxes. As this happens, these simple services evolve to something more akin to premium movie services at a far more economical price than current Pay TV offerings.”
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