The American over-the-top market remains dynamic, with a number of major announcements in the past week. While there is a great deal of speculation about what this means for the traditional TV market, known for its higher prices, the number of 'cord cutters' remains small for the moment. However, there is some shift from cable to satellite. At the same time, a new phenomena is emerging: social media used to attract viewers to traditional broadcast TV. Twitter's role has already been compared to the 'water cooler' effect, enhancing the social function of TV as colleagues gather around the coffee pot (or water coller) to discuss the previous night's TV. Recent research on the UK market also shows that TV is only getting more popular: viewers there are watching around two hours more a week, for a total 28 hours per week for the average viewer.
Some of the recent American OTT announcements include:
- Redbox (operator of 30,000 kiosks for DVD rentals) is introducing a streaming video service.
- Netflix (started in online DVD rentals and now big in the streming video market) is adding content from CBS. Some of the shows are even exclusive to Netflix and not available on any other platform. (CBS is not involved in Hulu, the main provider of catch-up TV in the US).
- Amazon launched Instant Video: streaming video, mainly made up of older content; free for Amazon Premium subscribers, who pay USD 79 per year for free and quick deliveries of their Amazon orders.
- YouTube (Google) is reportedly in talks with major sports leagues (NHL, NBA, European football), but this may be a service only outside the US.
- ivi TV was banned after a court ruling. The OTT player offered broadcast content based on retransmission. While it arranged copyrights, broadcasters wanted the service stopped.
The growing competition on the OTT market, which offers online video via broadband, is driving prices lower. Amazon is leading the way, although it's lacking new content. But for USD 79 per year, the user gets access to a lot of content, as well as still the free deliveries. Amazon is expected to expand the content offering going forward, and in the mean time it's gathering a group of loyal customers. The company also offers paid content (Amazon VOD), and just like Hulu and Netflix is looking for the maximum possible reach by signing a number of deals with players on the connected TV market. They act as a 'front office' for Hollywood, which through deals with these parties are creating a major delivery channel.
The content industry is keeping tight control and pitting the OTT players against the tranditional TV providers (cable, satellite). It's still to be seen what the long-term effect will be, but if the prices keep falling, the operators will be under pressure. They are likely not afraid of cord cutting, as broadcast TV for the moment will continue to form a fixed part of the total video offering. But the OTT players are threatening to take a piece of the digital TV market, putting pressure on the operators' ARPU. While the video pie is likely to grow in the coming years, it will be cut up into many more pieces.
The evolution of Netflix's share price speaks volumes about this. Since hitting a low of USD 19 in October 2009, it has been steadily rising to reach an all-time high of almost USD 248 on 14 February.The news from Amazon and others caused it to drop back to USD 206 on 23 February, but within a day it had recovered to USD 215.
Telecompaper is organizing on 27 April the International Connected TV 2011 conference in Utrecht.
