The State of OTT 2014

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2013 clearly delivered on the reality, if not quite the hype, of the “cord cutting” trend that has led many a millennial astray in the eyes of the big media conglomerates, away from the living room television as a programmed source of time-sensitive entertainment.

Yet, thanks to over-the-top (OTT) delivery, these same cord-cutting viewers often come right back around to the television as a source of on-demand content.

In this “State of…” we will explore over-the-top (OTT) delivery from a technology, carrier, and multi-channel video programming distributor (MVPD) standpoint. Any conversation around technologies, however, would ring hollow without the acknowledgement that content alone—at least as it applies to the expanding universe of content that is being fragmented into tinier demographies and communities of interest—is a key driving factor in today’s technological and programmatical decision trees.

From MVPD to Virtual MVPD

The acquisition of upLynk by Verizon in late 2013 is an example of a new breed of virtual MVPDs (multichannel video programming distributors), aggregating content from a variety of sources into “channels” that are often parsed out as applications on a set-top box (STB) for live or on-demand consumption.

On the live front, one recurring theme in 2013 around the virtual MVPD was the concept brought to market by Aereo.

“Companies like Aereo have media companies in a tizzy because they make it easier for viewers to watch what they want without cable,” wrote Forbes’ Dorothy Pomerantz, in a December 2013 article. “Cable and content companies seem terrified that the status quo could soon disappear as more people move to cut the cable cord.”

Aereo’s legal challenges are a direct result of the fact that cable and content companies see it as a legitimate virtual MVPD threat.

It turns out, though, despite threats to litigate Aereo, some of the major players have chosen to cut deals with Aereo, which is backed by industry veteran Barry Diller. In December, Viacom and Disney both stated their intent at a UBS media conference to move towards “virtual cable companies” sometime within the next two years.

“We could certainly be happy to license our content to a virtual MVPD,” said Jay Rasulo, Disney Corp’s CFO. “Fom our perspective, [they] have to buy the package of services that we sell, . . . do that with other media companies and put together something that looks very much like the existing MVPD offers.” 

In other words, big media is willing to work with these vMVPDs, as long as the vMVPD buys a package and provides that content as a package to the consumer.

The problem with this scenario, however, is that consumers are cord cutting precisely because they don’t want a package, but true choice: the ability to choose what they pay for, at a very granular level, and choice to consume on any device at any time.

You know, real TV everywhere. Except without the TV. And without the constraints foisted on them by traditional cable companies / MVPDs, the same companies that continue to sell bundles of live-linear channels, at a lower price than a single channel, despite Congress acting to make unbundled, single-channel purchases as part of the Telecommunications Act of 1996.

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