The emergence of over-the-top (OTT) video services from the likes of Netflix, Hulu, and Amazon have puzzled traditional video service providers for some time now. Are these services a real threat to the monthly video subscription business model? Early indications suggest not, but there’s no firm guidance for the future.
In response, video service providers from cable, telcoTV, and DBS have been busily building a TV Everywhere strategy which allows paying subscribers to access video content, both linear and on-demand, on multiple viewing platforms, including mobile and laptop/PC. The hope is, paying customers will see enough value in their monthly video subscriptions and not cut the video cord in favor of less expensive OTT options like Netflix.
But another hedge may be to introduce their own OTT services, that is, provide a model similar to Netflix, and offer it to anyone, inside or outside of their video service footprint. It’s a concept that Verizon is apparently experimenting with. GigaOm reports that Verizon demoed a Roku channel of their FiOS Flex VOD content at a recent press briefing, hinting they are exploring the option. With FiOS Flex View on Roku, Verizon could offer movies and other content, on-demand in an OTT fashion to anyone (provided they have the content rights to do so).
Roku is a third party OTT set-top-box which offers a variety of ‘channels,’ which provide video content from multiple sources including Netflix, Hulu, Amazon, and even NBA basketball games. By experimenting with a Roku channel, Verizon is demonstrating their willingness to potentially join these OTT efforts with one their own. It’s quite an interesting development.
For all of the hype and concern over video cord cutting, in some ways it’s missing the point. The real threat is not from cord cutters (at least not yet), it’s from the youth who never signed up for a video subscription in the first place and so there is nothing to cut.
For them, OTT video experiences from the likes of Roku and YouTube may be just enough, and they never sign up for subscription video, substituting it with their own OTT experience. Many of them don’t even understand the concept of a monthly cable bill. That ‘lost’ revenue opportunity may significantly impact future growth and may cause some real pain in the future, and why it may be important for video service providers like Verizon to have their own OTT presence.
These OTT experiments include more than Verizon. Both Time Warner Cable and Comcast demoed ‘video service as an app’ on select connected TVs at this year’s CES. These are all preliminary experiments to be sure, but they highlight important trends – trends worth watching.
"The real threat is not from cord cutters (at least not yet), it’s from the youth who never signed up for a video subscription in the first place and so there is nothing to cut. … Many of them don’t even understand the concept of a monthly cable bill."
Because their parents paid the bill for them. 😉