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The Coming OTT Bundle Horse Race: Which Will Consumers Choose?

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Well, that happened quickly. There are so many premium streaming video services now that it’s hard to keep track of them all. There are the subscription video-on-demand (SVOD) services, such as Netflix, Amazon Prime, and Hulu; the single-channel offerings, such as CBS All Access and HBO Now; and the OTT bundles, such as Sling TV and PlayStation Vue. And then there are all manner of niche streaming services and transactional services.

It’s the launches of Sling TV and PlayStation Vue, however, that’s pushed our industry into the mainstream like never before. These services include live linear streaming and are designed to attract cord-cutters or cord-nevers, which until now have been small groups. But as the profile of these services grow, and as competitors launch, living without cable or satellite will become common.

Mainstream success, however, is going to bring on the mainstream press. I’m almost looking forward to seeing the media cover the emergence of OTT bundled services as if it were a horse race, the way it does presidential elections. The coverage will root for the underdog, because that makes the race more interesting.

How big will cord-cutting get? Experian Marketing Services said that 6.5 percent of U.S. households have cut the cord already. The consultants at CG42 found that 53 percent of current cable customers would leave their provider if they found a satisfactory alternative. Young adults are driving the trend; a survey by Frank N. Magid Associates found that cord-cutters and cord-nevers are overwhelmingly between the ages of 18 and 34.

I had a talk about this new world of premium video streaming with Ross Rubin, principle analyst at Reticle Research. Some people looked forward to streaming TV because they thought it would finally bring à la carte channel selection, something Big Cable never wanted to provide. But what they got was something different.

“People are creating their own ad hoc bundles,” Rubin says. “Now that the live broadcasting piece is starting to fall into place, they can start doing the calculations, saying, ‘If I want to recreate much of the pay TV cable experience I would need a bundle such as the core Sling TV bundle. I might want an add-on package to expand the number of channels available. I may want HBO Now. I may want Netflix.’ We’re still not really at cable à la carte; we’re at cable à la chunk.”

As long as those chunks are a good fit for the viewer’s taste, and as long as OTT services offer a value over traditional options, they’ll find eager customers. Cable providers are some of the most hated companies in the nation. Their prices are high, they’re seen as monopolies in many areas, and they don’t let subscribers customize their plans. It’s easy to cheer for the disrupters in that kind of market.

But as we’re cheering, we need to look at what we’re cheering for. Cable and satellite companies are too smart to be shut out of this ecosystem. Sling TV was created by Dish Networks, after all. We need big data pipelines to deliver all our streamed content, and many of those internet connections are run by the cable companies. If those companies decide they’re not getting enough of a cut of the streaming entertainment market, they can always implement data caps or create their own OTT offerings.

“The underlying technical architecture may change, but it’s conceivable down the line that the pay TV operators may offer more of their own over-the-top bundles,” Rubin says. “Some of them have been somewhat aggressive in that space. They haven’t really yet made a strong bid nationally and at the price point that Dish has with Sling TV.”

When that happens, will consumers still be winners? If they’re getting more convenience, value, and flexibility, the answer is yes. But the question about which OTT bundles will come out on top is a nonstory from the start. When the horse race coverage begins and news sources root for the underdogs, remember that the same few tycoons own all the horses.

This article appears in the May/June 2015 issue of Streaming Media as "The Coming OTT Bundle Horse Race.”

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