TV Everywhere services can boast one of the fastest rollouts in TV services history, fueled by the threat of over-the-top (OTT) services, the growth of broadband, consumer adoption of connected devices, and continued increases in online video consumption on all platforms.

Roughly one-third of all broadband households now watch Internet video on a TV or computer, and approximately 25 percent view online video on tablets and mobile devices.

Overall, mobile devices account for one-fourth of the average person's video consumption. Over the past year, the amount of time spent watching video has doubled for tablets and computers and has almost tripled for mobile phones, a trend that will accelerate as the quality and quantity of mobile improve.

The term "TV Everywhere," also known as operator multiscreen or "N-screen" services, describes the delivery of television content, including live and on-demand programming, from a pay-TV provider to connected consumer devices, including computers, tablets, mobile phones, and smart TVs.

Growth Trends

U.S. pay-TV penetration exceeds 80 percent of U.S. homes, resulting in a highly saturated, highly competitive market. As a result, operator strategies have shifted to emphasize customer retention; they are highly sensitive to competitive moves by other operators and the possible substitution of their services by alternative video content sources, including OTT video and low-cost DVD rentals. However, ARPUs for U.S. pay-TV providers are some of the highest in the world, allowing them the opportunity to innovate. As a result, many are investing in new technologies for premium value-added services, including TV Everywhere.

Major Players

Cable Operators - 58 percent of U.S. Pay-TV Subscribers
- Comcast
- Time Warner Cable
- Cox Communications
- Charter Communications
- Cablevision

Satellite - 33 percent of U.S. Pay-TV Subscribers
- DirecTV
- DISH Network

Telco Providers - IPTV services 9 percent of U.S. Pay-TV Subscribers
- AT&T U-verse
- Verizon FiOS

Technology Trends

Many service providers have expanded their video services through apps designed to allow access to smartphones and tablets (particularly the iPad). The most basic of these apps, usually for iOS or Android devices, offer program guides, remote DVR programming, or content discovery features. Operators have integrated in-home video viewing and are now exploring out-of-home options for multiscreen services.

With U.S. homes averaging about 2,400 square feet and more than three televisions, multiroom services and multiroom DVR devices are popular in the U.S. market. In early 2012, AT&T (NYSE: T) launched a new wireless set-top box, so households do not have to consider rewiring in order to change the location of the TV. The move found quick and enthusiastic acceptance among consumers.

Flat-panel TVs with HD capabilities are present in nearly 75 percent of U.S. broadband homes, which is driving subscriptions of HD services.

Using Connected CE to Reduce Costs and Provide Personalized Experiences

In a highly competitive market, cost reduction is a major driver for competitive advantage and profitability. Delivery of premium content to connected consumer electronics, particularly smart TVs, represents an opportunity for operators to lower costs by reducing the number of set-top boxes deployed per home. In addition, these offerings increase customer satisfaction by expanding the flexibility of viewing opportunities.

This recognition technology gives providers the ability to offer a unique interface between the viewer and the TV content, with the hope that this interaction will lead to a higher level of engagement with programming and advertising.

Pay-TV providers' ability to use connected consumer electronics as alternatives to secondary set-top boxes in the home has been enhanced with acceptance of industry standards for content protection on the home network.

At the 2012 International CES, the Digital Living Network Alliance (DLNA) introduced the DLNA Premium Video specification, which uses a content protection protocol called DTCP-IP to protect premium video between the set-top box and DLNA-compliant products such as televisions, Blu-ray players, and tablets. Conditional access is handled by the primary set-top box for the home, and content is then routed through the home network to the various connected devices. As the number of certified products--particularly televisions and set-top boxes--becomes more widespread, pay-TV providers will have increasing opportunity to distribute their content across the home network.

New Advertising Opportunities

By offering content on multiple screens, providers intend to increase their advertising revenues by expanding the overall ad audience. This service also allows for integrated ad campaigns across multiple screens. Improved analytics allow operators to measure the impact of advertising across different devices, leading to a more personalized and targeted advertising experience. However, several business and technical issues must be addressed for advanced multiscreen advertising to contribute to revenues in a significant way. Operators, networks, and affiliates must agree on the ad revenue splits for multiscreen video services. Pay-TV providers also must add dynamic ad insertion capabilities for both linear and VOD multiscreen services. Standards for pricing and for the amount of advertising included in online content also need widespread acceptance.

Business Trends

Mitigating cord cutting was a key focus of U.S. operators in 2011 and remains so today, but the threat of cord shaving is potentially a greater danger. Cord cutting involves subscribers disconnecting services in favor of OTT video and other content sources. Cord shavers shed large channel packages, HD services, and premium video options in favor of basic pay-TV packages, relying on online video and other video sources.

Both cord cutters and cord shavers are motivated by economic reasons. However, they differ in their affinity for video content. Cord cutters enjoy video but less so than cord shavers. Shavers love video and tend to be heavy users of Netflix (Nasdaq: NFLX) or Redbox to replace the premium services they discontinued. Cord shavers watch approximately eight hours of video per week on a computer, often accessing YouTube, Hulu, and other ad-supported video sources.

Since cord cutters are unable to fully duplicate their pay-TV service through other OTT services, they may return to pay-TV services as their economic conditions improve. OTT services can somewhat approximate the premium services abandoned by cord shavers. So, the likelihood of shavers returning to premium services is unknown.

Video-on-Demand

Many operators have built extensive libraries of content as part of their accelerating quest to generate more VOD revenue. Since 2010, U.S. cable operators have invested heavily to promote these services, emphasizing convenience and the availability of high-profile content prior to Netflix and Redbox.

Operators will continue to capitalize on VOD and multiscreen investments through promotion and recommendations in the EPG, expecting on-demand to become a much larger part of their bottom line. As multiscreen/TV Everywhere services mature, pay-TV providers will begin to assess OTT delivery as a supplement to their premium VOD services.

Acquisitions

Another revenue-generating strategy for North American cable operators is to directly own and control video content. Such is the strategy implemented by Comcast (Nasdaq: CMCSA), which purchased NBCUniversal, as well as operators in Canada including Shaw (NYSE: SJR), Rogers (NYSE: RCI), and Videotron. NBCUniversal provides Comcast with revenue streams from cable networks, filmed entertainment, televised entertainment, and theme parks, among other assets. According to Comcast's fourth-quarter 2011 earnings release, the acquisition helped grow the company's total revenues by approximately $18 billion to around $55 billion. The acquisition also provides Comcast with a stake in Hulu, one of North America's leading OTT video services.

Business Challenges--Consumer Awareness

Despite operator investments to add TV Everywhere capabilities, consumer awareness of these services tends to be low. One-third of Bell Canada (NYSE: BCE) and Bell Aliant's (Toronto: BA-UN.TO) customers are aware that they have a TV Everywhere service available to them, but one-fourth of subscribers or fewer are aware among all other operators, including customers of Comcast, the first to offer such services.

This lack of subscriber awareness negates the efficacy of TV Everywhere as a tool to combat OTT services and underscores the marketing challenges for providers going forward. The task to retain customers with unique multiscreen services will be a strategic and marketing challenge as much as a technological challenge.

From the article, "TV Everywhere: Technology and business trends" by Brett Sappington.
 

Next: Research: more people using smart TVs to watch online video
Previous: A chicken in every pot and an Apple TV in every living room

Be the first to leave a comment.

Have a comment? Login or create an account to start a discussion.