One of the main themes of the NewTeeVee Live Conference in San Francisco last week was that the over-the-top (OTT) video experience is starting to catch up and to exceed cable in several respects.
A number of new options are allowing video distributors to get their content onto multiple screens in a seamless and efficient manner. In the long run, they will allow cable operators to become more of a gateway to video content from any programmer and to any device in the home. For example, ActiveVideo, Motorola, Kyte, Concurrent, Kaltura, Clearleap and Envivio representatives demonstrated their unique strengths in this type of infrastructure.
It’s telling that the main sponsor was Comcast, which has a significant interest in understanding how this convergence is going to affect the cable industry. Despite all of the publicity Internet TV has been getting lately, the balance of revenues still rests with cable operators that provide broadcast video to large TVs, noted Jim Denenny, vice president/GM, Web/Mobile Video Solutions at Concurrent Computer Corporation.
But cable faces some significant competition from these new providers. According to Peter Ansel, vice president/Business Development at Clearleap, dollar for dollar, the entertainment value of cable still is a good deal today. However, he predicted that, during the next five years, two or more supplemental OTT services will go mainstream, two full-service OTT providers will emerge and succeed as cable alternatives, and pay TV operators will find new ways to compete with OTT.
His predictions already are coming true as new video operators learn how to monetize Internet video distribution successfully. For example, Hulu (which claims nearly 30 million viewers) launched an ad-supported TV service in 2007 that could post $240 million in revenues in 2010, up from $108 million in 2009 and only $30 million in 2008. Hulu CEO Jason Kilar attributes this phenomenal growth to the better value Hulu can provide advertisers and consumers. For example, Hulu collects information on all of the shows a user watches, which allows the company to provide more targeted advertisements. The ads pay more than traditional TV spots, and the consumer watches fewer commercials per show.
Mainstream media companies also are starting to monetize video across multiple platforms. BSkyB launched an iPhone subscription service that attracted more than 90,000 subscribers in its first month, each paying $9.60/month to watch eight premium-TV channels. The service began generating net revenues of more than $600,000 in the first month, said Arnaud Perrier, vice president/Solutions at Envivio.
Perrier said one of the most significant ongoing costs for this type of service is the content distribution network (CDN) used to forward packets to consumers. Major CDNs currently charge between $0.06 and $0.25 per gigabyte, which can add up across thousands of consumers. In order to trim these costs, Envivio has developed a platform for shrinking video by 20 percent using existing techniques, with little loss of quality. “That can add up to a lot of money when you talk about bandwidth,” said Perrier.
Sezmi is using the Envivio platform to launch a virtual cable system that blends Internet and broadcast programming. The Sezmi DVR-1000 provides a single menu interface for both broadcast and Internet content. The basic $4.99/month service only provides access to broadcast programming and free Internet content. Sezmi also has launched a premium $19.99/month service in Los Angeles with 23 channels that are encrypted and piggybacked on top of unused broadcast-TV frequencies.