How will OTT affect traditional pay-TV providers?
Rapid advancements in technology coupled with growing consumer demand and expectation are driving intense competition between new entrants and traditional TV platforms as they battle for the consumer's wallet.
Already this year we are seeing the start of the battle of the OTT (over-the-top) services with Netflix, Amazon's LoveFilm and Tesco's Blinkbox going head-to-head with Virgin Media's FilmFlex service and Sky Movies, not to mention Apple.
With such significant investment from these heavily-backed parties, groundbreaking content deals being struck and an ever-improving user experience on offer, it is sensible to assume OTT providers will have made significant in-roads in the UK market by 2020.
However, this ever-growing range of offerings is making the pay-TV market all the more complex and the possibilities are seemingly endless. So, what will the impact of OTT services be on the incumbent TV platforms and particularly the pay-TV market?
We are already seeing traditional pay-TV operators looking to partner with OTT providers as they look to respond to growing consumer demand for flexible, on-demand services.
Virgin Media's CEO Neil Berkett has made it clear' that the UK cable network would welcome both Netflix and LoveFilm as part of its Tivo-based next generation TV platform.
According to Reuters, Netflix's chief executive Reed Hastings has reportedly met with US cable companies in recent weeks to negotiate the addition of Netflix to cable offerings' through set-top boxes. Such a partnership would see a cable operator offer Netflix as an additional option to rival premium networks like Time Warner's HBO.
BSkyB has responded by ramping up its own OTT services and announcing the imminent launch of its own subscription or pay-per-view option. The service will build on the Sky Go service and be independent of having a satellite subscription with the aim of attracting non-Sky homes to start watching some pay TV programmes and movies. Early details indicate that the service will offer a variety of pricing options which will include pay-as-you-go for a single movie or monthly payments for unlimited access to Sky Movies.
But is this happy marriage between pay TV and OTT operators set to last? Or will changing consumer behaviour require the industry to re-examine itself once again and adopt a completely different approach? Will the likes of Apple bypass the existing pay-TV market altogether and create a totally new way to reach consumers directly through an IP-enabled TV set?
Add emerging platforms such as Xbox, that is scooping up viewers and advertisers, the yet-to-be-realised potential of Google TV, and the soon-to-launch YouView to name but a few, and the competition for the consumer's wallet and eyeballs looks set to be fierce.
What is clear is that the growth of new, low-cost offerings will boost the penetration of pay services as viewers become accustomed to regularly renting or subscribing to content. This competition will put intense price competition on incumbents as they battle it out for differentiation and market share. The race is most definitely on to find models that can deliver revenues and satisfy consumers by providing content in the format and at the price that users want. The question is: who will win?
Let me know what you think: @stellamedStella Medlicott, Chief Marketing Officer