May 15, 2015 | Authored by: Vindicia Team Blogs
How will cable change in the OTT content landscape?
Cord-cutting is a term that has brought weight to the argument that cable companies are going to have to adapt to a new business model. With over-the-top content and streaming video on demand, consumers are actively seeking out ways to avoid paying for excessively large cable bundles that only allow them access to a limited number of channels, while potentially restricting them from content that they're actually interested in viewing.
This is where OTT media is able to capitalize on a consumer market hungry for control over what they see and happy to sign up for subscription-based services. The rise in OTT content consumption has caused many media organizations to question what changes cable companies will make to keep up and compete with the likes of Netflix, Amazon and Hulu, all of which give users choice in what programming they watch.
"The bundled packages that cable operators have traditionally championed as the way to satisfy their customers' needs are becoming a relic."
The writing on the wall
The proverbial gauntlet has been thrown down by several of the major telecommunications businesses like AT&T and Verizon, both of which have a strong foothold in linking consumers to the Internet with broadband connections. Meanwhile, The Motley Fool reported that Time Warner Cable saw roughly 600,000 of its customers defect in 2014, while Comcast lost 150,000 subscribers of its video content.
The message du jour is a-la-carte content consumption. In other words, the bundled packages that cable operators have traditionally championed as the way to satisfy their customers' needs, while also making the greatest profit are fast becoming a relic. Instead, it's the telecom companies that appear to have taken up bundled services, but they've put their own spin on it. Telecoms like AT&T and Verizon have one principal advantage in that they've already got an established network of wireless Internet that their mobile device users depend on. They're able to leverage this resource to draw more customers into subscribing for SVOD content.
Giving the service bundle a slick new look
Marketplace explained that Verizon is one of the companies leading the charge with a new pay TV service that essentially allows subscribers to customize their programming. This goes against the structuring of most cable bundles, in which content providers like ESPN and Fox demand that their channels be part of the packages. Advertising revenue is one of the big reasons for this. The more people exposed to the ads, the better the deal for the content providers.
Verizon's challenge to the old guard in asking customers to customize their bundles has drawn the ire of companies like NBC and Fox, The Washington Post explained. Subscribers are able to select 35 basic cable channels. The major content producers say Verizon is not complying with existing licensing agreements, but the telecom firm sees things differently.
While Verizon is still far behind SVOD content providers like Netflix, which has 57 million subscribers, it's making a play to improve its standing. Subscription-based OTT services are increasingly popular for consumers, and this reality is spawning a greater number of services. Whether the major cable companies take advantage of this shift and steer away from bundles remains to be seen.
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