For years, over-the-top video options have been gaining ground on traditional cable packages. A 2015 survey from Nielsen found that the share of U.S. households with TV and/or broadband access that also subscribed to at least one OTT service rose from 36 percent in 2013 to 40 percent in 2015. While the top nine cable operators in the country lost 1.2 million subscriptions in 2014, the number of broadband Internet subscribers who did not pay for TV surpassed 10 million in the third quarter of that same year. That figure is still short of the more than 95 million people who had cable TV, but it shows how the gap between the two continues to narrow.
Competition versus integration
Responding to the surge in OTT viewership is a dilemma for cable companies everywhere. Many of them provide the very broadband infrastructure over which OTT services such as Netflix are actually delivered to homes. At the same time, their pay TV offerings often do not match up favorably with what a lot of OTT providers bring to the table in terms of the user interface and experience. Intuitive, cross-device access is baked right into many OTT platforms, but is missing from the unwieldy interfaces of legacy cable set-top boxes.
Playing catch-up with OTT providers (i.e., directly competing with them) has been the most common strategy for dealing with the ongoing change in media consumption habits. However, a smarter plan of attack may be to embrace OTT content and become, in effect, an aggregator of viewing options for your end users. Here are three reasons to consider this approach:
1) Provide the widest set of options
Many of the same broadcast and cable channels seemingly threatened by the rise of Netflix et al. are also among the biggest sellers of content to these OTT providers. For example, an early 2015 list compiled by the website Decider found that 42 past and present NBC shows were available on Netflix. This suggests that the OTT market is so large and lucrative that even the giants of traditional TV know that it is worth getting a slice of.
For cable operators, it makes sense, in a similar way, to deeply incorporate OTT into their ecosystems alongside their existing products. Hybrid STBs/media hubs can provide both regular TV service and OTT options, providing customers with a vast set of possibilities spanning linear as well as on-demand programming. This complete package sets forward-looking cable operators apart.
2) Save money and grow revenue
By adding in OTT alongside standard TV, cable providers can begin the gradual migration away from legacy STBs. These devices make up a large chunk of operators’ CAPEX on customer premises equipment. Plus, they are usually only equipped to transmit via Quadrature Amplitude Modulation and have rigid, clunky user interfaces, which do make them very future-proof in a world in which end users have come to expect OTT-like experiences.
“Cable providers can begin the migration away from legacy STBs.”
Hybrid IP STBs feature a QAM tuner alongside an IP port, allowing for cable and OTT services to exist side by side. Added benefits of this setup include reduced churn, superior user experience/interface and the ability to lower CPE-related costs such as maintenance and extensive development cycles – all of which are good for the bottom line.
3) Create viable path to eventual all-IP delivery
The entire cable industry is currently in the process of shifting from legacy delivery models build on QAM etc. to more modern ones that utilize the versatile Internet protocol suite. There are numerous advantages to switching to IP, including the ability to target a variety of desktop and mobile devices, use software-based network controls and provide a better interface on hybrid STBs.
Moreover, IP is what OTT video services and many other popular applications (e.g., ones for VoIP telephony and instant messaging) already use to ensure the fastest and most efficient distribution of their content. Acting as an aggregator of cable TV and OTT enables cablecos to keep pushing their IP transition initiatives forward, with the hybrid STB a crucial step en route to all-IP distribution down the road.