Cable Companies Hyping Over-The-Top Video, But Where’s The Business Model?
With all the news this week about Comcast’s “On Demand Online” trial and the number of broadcasters who announced they will be offering up programming for the trial, I'm still not seeing where the business model exists for such a service. How many consumers are going to be willing to pay an additional fee every month on top of their cable bill, just to get the same content they get on their TV to their PC? Why do content owners think consumers are going to pay for the same piece of content over and over, simply to be able to consume it on different devices?
I don't think I'm different than most consumers, when I say that I would not pay more money on top of the $95 a month I already pay for cable and Internet, simply to be able to get that same broadcast signal to my Mac. What's the added incentive for me to spend more money with the cable company? Why wouldn't I just go out and pay a one-time cost to buy a Slingbox and then watch TV on any device I want?
While I keep hearing people say that over-the-top video delivery threatens to disrupt the traditional TV model, I don't see that being a reality. If cable companies actually thought about adding such services for free, to enhance their current offering, it would make a lot of sense. But you know that no cable company is going to offer any kind of over-the-top service for free. And while some have speculated that such services could be offered with a "small additional fee", I have yet to see any study that says consumers are willing to pay for it and what exactly is classified as a "small fee". We all know it's not going to be just a few extra bucks a month.
For all the talk of online video disrupting the traditional cable TV model, keep it mind that online video as yet to change the financial aspect of the business. Yes, it's been a disruptor as far as the technology goes for getting video to lots of devices, but it has not changed the underlying business models that exist today. I know the bigger picture here is what it will do for the future, but right now, only Comcast is even talking about testing a service, to a base of only 5,000 customers. Nothing is being disrupted, as measured by actual revenue from such a service and won't be for years, if at all.
Keep in mind that every time such a service is talked about, rarely does anyone talk about penetration numbers, how many consumers will sign up for it, over what period of time and what it will cost. It takes a really long time for any new service like this to make any significant impact and even longer when the business model makes no sense on paper. This also applies to STBs and all of the other devices like Xbox 360, TiVo and Roku's that are capable of playing a role in the over-the-top debate.
I think the key point here is that no cable company is willing to have over-the-top replace your cable but rather try to make it look like they are providing you with more value and as a result, charge you more money each month, for the same content you're already paying for, but to a different device. Does that really sound like a compelling offering to consumers that would get them excited? It doesn't to me, but maybe it does to others.
And while I'm on the subject, I hear phrases like over-the-top (OTT), Web TV and Internet TV all used interchangeably but rarely are they well defined. What do people think these phrases mean and what's the differences between them, if there is one? Maybe it's just semantics, but I'd be interested to hear how others would define these phrases.