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HBO Now - How Growth of OTT Video-on-Demand Influences Mobile Operators' TV Business

HBO Now -  How Growth of OTT Video-on-Demand Influences Mobile Operators' TV Business Image Credit: PCC Mobile Broadband

The TV and Video-on-Demand (VoD) space is continuing to see increased participation from Mobile Network Operators(MNOs) and Communication Service Providers(CSPs), especially in the recent year. The expansion of MNOs' and CSPs' business to these two segments, which have in the past, been a tightly controlled domain of both traditional players such as cable TV and satellite TV operators as well as online OTT video service providers, stems from the overall expansion of the telecom business to the wider digital services market, with the video segment being one of the key focus areas. 

The fact that video content can be delivered seamlessly to a wide number of end devices via IP connectivity opens up opportunities not only for OTT players who offer a wide range of VoD services either as free, ad-supported service (such as YouTube); premium and subscription-based service (such as Netflix); or pay per piece service (such as paid video downloads), but also to new entrants in the market, ranging from content producers, media channels, infotainment content aggregators, all the way to MNOs and CSPs.

Earlier this month, HBO debuted its HBO Now service, its new online channel that is essentially a standalone subscription-based OTT video (SVoD) service. The service, which is currently available on selected iOS devices, enables anyone to subscribe to HBO's content independent of their other Pay TV as well as OTT Video Subscriptions. This follows other similar moves in the industry, for example, US-based Satellite TV Operator, Dish Networks' Sling TV service which was made available over the Internet at the beginning of this year. Sling TV offers 19 channels, with various subscription packages that suit a wide range of viewing needs.

According to the research and consulting firm, Ovum, this trend could very well mark the comeback of the TV service, with traditional TV players now leveraging the Internet to introduce their own direct-to-customer online channels. What this means is that the likes of HBO as well as traditional TV Operators can now reach viewers directly - as a SVoD service, without their channels or services being bundled within third party VoD services and at the same time, without requiring them to provide any hardware, infrastructure, connectivity or requiring long term commitments from users. Existing TV channels and pay TV Operators can therefore spin off an online version of their entire service or pick a few channels to start off with, leveraging well-designed content delivery networks built across distributed data centers with adequate capacity on servers to serve millions of customers who will be streaming these content simultaneously.

Although standalone OTT video services will be competing head on with incumbent OTT VoD giants such as Netflix, Hulu or Vudu, the proposition provided by this form of online TV service aligns more closely to the consumption patterns of the growing younger consumer groups. Younger consumer groups are more selective in terms of the content they wish to pay for, partly because of the influence of the free ad-supported OTT video services such as YouTube that allows them to pick exactly the content they want, when they want it and how they want it. At the same time, video consumers, in general still tend to go for a linear TV service, where content is already pre-selected and curated to serve up to 24 hours of viewing a day. A standalone linear SVoD offering hence strikes the balance between both requirements - allowing subscribers to pay only for a single channel of content, while having a well curated line-up of videos to serve their viewing needs at any time of the day. With the rise of the individual consumer and the use of individual end-devices such as tablets for viewing long-form videos, the SVoD service is expected to come out as a close substitute for the traditional TV service, especially among Internet savvy users.  

The implication of the growth of the linear SVoD points to exciting times ahead for both incumbents in the traditional TV business as well as the newer entrants, especially MNOs. A single video channel can now be delivered directly on a paid subscription model in the form of OTT video service, and for MNOs, who will also be providing the data connection, this gives rise to the possibility of creating their own channels, especially those based on local content and delivering these on a sponsored data model for their subscribers. MNOs are already offering OTT TV services - for example, Tele2 Russia's Tele2 TV, Cellcom's Cellcom tv and a similar OTT TV service by T-Mobile Czech - and if standalone linear SVoD offerings start taking off, MNOs can work directly with content providers, such as movie studios and production houses to bring well curated content to enhance their OTT TV channels. 

Parallely, the rapid development in the Apps market allows more and more end devices to decode the IP content, enabling online digital content to be streamed onto more screens. The Connected TV for example, which is being developed to host hundreds of Apps, including video streaming apps which will enable connsumers to stream videos from a wide range of OTT video services.  

The other obvious competitive advantage for MNOs in the online TV space is that the service can be bundled as part of its existing suite of communications and content services, giving rise to the 'Mobile Multi-Play' where data brings the telephony (VoLTE, ViLTE), TV, music and Internet while cellular connectivity provides traditional voice calls and messaging.

Monetization wise, the OTT video service, is proving to see rapidly growing revenues from subscriptions, rentals and also per-piece purchases. Ovum expects worldwide revenue from paid-for digital video, across both transactional (purchases and rentals) and subscription platforms, to increase by almost one-fifth this year, reaching almost $14bn in 2015, with SVoD making up two-thirds of the total. The firm also expects the number of consumers subscribing to stand-alone SVOD services to grow 25% in 2015, surpassing 100 million for the first time this year, with a further 77 million more expected by 2019.

Read more: OTT TV and IPTV: Dual Opportunities for Operators in the Fast Growing Video Services Market

Author

Executive Editor and Telecoms Strategist at The Fast Mode | 5G | IoT/M2M | Telecom Strategy | Mobile Service Innovations 

Tara Neal heads the strategy & editorial unit at The Fast Mode, focusing on latest technologies such as gigabit broadband, 5G, cloud-native networking, edge computing, virtualization, software-defined networking and network automation as well as broader telco segments such as IoT/M2M, CX, OTT services and network security. Tara holds a First Class Honours in BSc Accounting and Finance from The London School of Economics, UK and is a CFA charterholder from the CFA Institute, United States. Tara has over 22 years of experience in technology and business strategy, and has earlier served as project director for technology and economic development projects in various management consulting firms.

Follow Tara Neal on Twitter @taraneal11, LinkedIn @taraneal11, Facebook or email her at tara.neal@thefastmode.com.

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