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Entone and VUDU: Pay TV Meets Over-the-Top Video

With more and more discussion about consumers "cutting the cord" from their television service in favor of over-the-top online video, it's long been a foregone conclusion that cable, satellite, and telco operators are in competition with online content aggregators like Hulu and YouTube, as well as with content delivered via set-top boxes such as Roku, VUDU, and the recently announce ZillionTV. But an announcement today from IPTV set-top box manufacturer Entone and VUDU is perhaps a harbinger of an era marked by partnerships rather than competition between operators and over-the-top (OTT)video services.

Entone, which has agreements with 50 telco operators in the U.S. (including Consolidated Communications and FairPoint Communications) and is second only to Motorola in penetration of IPTV set-top boxes, will begin delivering content from VUDU's library of more than 14,000 movies and TV shows, 1,500 of them in HD. The goal, according to an Entone executive, is to improve Entone's value proposition by bringing together the best of what operators and OTT services have to offer—the multichannel browsing, DVR, and electronic program guide features of the former and the on-demand selection of the latter. "Operators and the OTT providers can't create more value without each other," says CEO Steve McKay. "Most consumers say they aren't willing to give up all the convenience and features of their television service, but they're also accessing more and more OTT content every day."

The Entone-VUDU partnership is one more step towards uniting the different methods of content delivery in a single device. As McKay points out, for most consumers, the Input 1 of their TV is dedicated to some sort of pay TV service, while Input 2 might be a Roku box or Apple TV and the Input 3 might be a DVD or Blu-ray player. "It's all about getting as much content as possible into Input 1," McKay says. The Entone Hydra IP Video Gateway also supports multiple video streams from a single device, meaning that consumers won't have to install a set-top box on each of their televisions.

The value proposition for operators, as Entone sees it, is that they can now offer an expanded VOD library with VUDU, while consumers will gain access to more content without having to buy additional devices. "There's this myth that OTT content is free, but if I have to buy an Apple TV to get it to my TV, a Roku or a VUDU box to get movies, and a Slingbox to place-shift, then it's an expensive proposition," McKay says.

McKay also cited a Frank N. Magid Associates study from late 2008 that found that the number of first-time HDTV buyers who don't subscribe to an HD service is growing faster than the number of first-time HDTV buyers who do subscribe to an HD service. In addition to access to VUDU's HD library, the Hydra box also allows users to easily view their photo and video libraries on their HDTV sets, automatically detecting libraries on the home network.

Entone is under no illusion that this announcement is a game-changer in and of itself. "This is really just the beginning of a trend," says McKay. "Entone will certainly make more announcements, and I'm betting VUDU will too. Ultimately, it comes down to who can deliver the most and best content at the best price, and so companies like ours are going to do whatever we can to present the best value proposition to operators."

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