What's the future of the fragmented video market: will apps overcome cable?

Friday 23 September 2016 | 12:10 CET | Background
Who will win the video wars? The TV operators, with their wide range of channels and multi-play subscriptions, or the streaming providers, with the unique content and on-demand offering? Or in other words: is it the traditional provider of managed services or the OTT provider with an online offering? 


Internet companies free the viewer from the traditional broadcast schedule and the bundled sale of hundreds of TV channels that few watch, offering instead video 'anytime, anywhere, any screen'. But the operators are not sitting still and are developing their own 'TV Everywhere' offers, working with OTT providers and producing their own unique content, from series to sport. At the same time the OTT market is becoming fragmented, with a growing number and variety of services from operators, aggregators, broadcasters and content producers.

The cable industry is well-positioned, while the streaming market is fragmented. If the operators make their offerings available as apps, they could see a major breakthrough.


There is no easy answer to who the winner will be. In the short term, everything is complementary, and in the long term - well, we're all dead, as Keynes said. Vevo CEO Erik Huggers said recently about the growing number of streaming services: "The most logical thing to happen next is that someone’s going to bundle it all back together again. The question is who will be the winner in that rebundling process."

Huggers made his name at the BBC, helping develop the iPlayer, and then moved to Intel, where he worked on the OnCue service. Intel eventually abandoned the OTT project and sold OnCue to Verizon, where it became the basis for the latter's mobile video service Go90. Huggers didn't follow and later became head of Vevo, the provider of music videos on its own site and YouTube. His observation hits the nail on the head: the ever-growing number of streaming services is not making life any easier; we've gone from hundreds of cable channels to hundreds of OTT services. In contrast to the music market, where a complete catalogue is the starting point (exceptions aside), the video segment is focused on unique ('original') content. The question is clearly who can best take on the role of aggregator. 

Cable operators have traditionally had this role, and more recently IPTV providers assumed the same. Amazon is moving in a similar direction by acting as a marketplace where it not only offers its own Prime Video service but also competing services. Its Streaming Partners Program in the US allows customers to subscribe to other services such as Showtime or Starz. Netflix doesn't share this ambition and see itself more as an essential add-on. There are also the OTT providers offering linear TV, such as Play van KPN, and Knippr from T-Mobile in the Netherlands and in other countries, PlayStation Vue from Sony, Dish's Sling TV and the European providers Zattoo, Magine and Molotov. Not to mention YouTube.


At the end of the day, cable is not going to allow itself to be eliminated from the value chain, even with its position on the broadband market. Nevertheless, in terms of video, there is definitely life after (without) cable. In the US, this can mean significant cost savings. Liberty Global is using sport to make itself irreplaceable for consumers, while IPTV operators are focusing on the aggregator role, for example by integrating Netflix in their set-top boxes. The OTT providers are going direct to the consumer, allowing customers to save on distribution costs, but the OTT content offering is still limited.

In the US, the debate is taking an interesting turn with the FCC's proposals on set-top boxes. The regulator wants consumers to stop having to pay for the cable box, which carries high monthly fees. Its latest proposal is to require cable operators to offer their services in the form of apps. Ziggo has done something similar, by providing French and Italian channels in the form of apps. If the FCC's proposal is approved, the operators would have to provide apps compatible with the major distribution platforms iOS, Android, Windows and Roku. The implications of this are difficult to predict, but it appears likely that the hardware manufacturers (Apple, Google, Microsoft, Roku) will get a boost in their efforts to take a bigger role in the video market.

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