Could it be that maybe… just maybe… the cable guys were right?
After all, despite months of gloom-and-doom reporting about the potential threat of over-the-top video services and scary third-party set tops, cable execs have largely reacted with a collective yawn. They have argued that authentication—and the tendency of content owners to favor self preservation over “coolness” in the eyes of Internet video junkies—would conspire to gradually turn OTT into DOA, at least in respect to highly valued premium content. And they have largely dismissed cord cutting as a mass phenomenon, noting a few disconnects from economically stressed households (and those that, uh… are no longer households because of foreclosures) but no organized exodus to OTT alternatives among TV fans.
This week appears to have confirmed some of cable’s recent skepticism about the threat of OTT and cord cutting. First, there’s the delay of several Google TV-enabled TVs that were supposed to launch at CES next month. Google apparently needs more time to tweak its software and presumably create a more compelling content proposition. And just as that news was breaking, it seems that scrappy “cable killer” Sezmi decided to discontinue its cable-like $20 “Select Plus” package in favor of a much cheaper—and presumably less profitable—$5 tier that essentially cobbles together a some VOD and a few local broadcast stations. Double yawn. Meanwhile, the Wall St Journal now reports that Hulu may delay its planned IPO as it tries to, well… figure out its overall strategy in a world of TV Everywhere, Netflix and a seemingly endless supply on online video of every stripe.
So far, this has been a good week for OTT skeptics. And it’s only Tues. So does all of this mean that the cable industry will once again dodge a bullet, defeat the defeatists and put that snarky digerati—which has been predicting the death of traditional media since at least the mid-90s—in its place? Perhaps. But cable should avoid the mistake that other industries have made during these inflection points. After all, the music industry cheered after it sued Napster out of existence and scared the bejesus out of everyone else by suing teenagers and grandmas. But the industry still faces enormous challenges and can hardly feel very good about itself.
Cable, of course, is quite different. Cable nets have favored streaming over downloads—and they have been stingy about making brand new content available. Some, like Discovery, have avoided putting any full-length episodes on the free Web. That gives video content owners lots of flexibility and greater control over their assets. In fact, the very decision by content owners (mostly broadcasters) to put content “out there” on platforms like Hulu and Netflix did serve one vital purpose: It lit a fire under the collective keisters of traditional distributors like cable and satellite. The result was authentication, which is already giving people less reason to cut the cord and content owners less reason to make content available outside authenticated environments. At the end of the day, OTT depends on the media industry’s cooperation, and both sides of the business seem adverse to suicide. The news this week from Google and Sezmi suggests that many consumers aren’t following through on threats to fire their cable, telco or satellite provider. At least not yet. And this comes just as the FCC mulls a net neutrality compromise that, if implemented, would open the door for wired distributors to institute usage-based billing—a power that will ultimately make it less attractive (and more expensive) for consumers to stream IP video from third parties like Netflix and Hulu.
OTT has seen better days. It’s not out, but it’s certainly down. And it will take some new thinking by OTT proponents to figure out business models that entice both consumers and content owners to play ball.
(Michael Grebb is executive editor of CableFAX).

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