Why Pay-TV OTT has More Chance to Succeed than Telco OTT

11/03/2014

Operators have effectively raised a white flag when it comes to launching their own VoIP services, but I don’t believe they will do the same with pay TV.

TV

If you look at messaging systems, then you can’t ignore the last 2 acquisitions:

  1. Viber being acquired by Rakuten – commerce vendor adding messaging
  2. WhatsApp’s acquisition by Facebook – social network going messaging (and voice in the near future)

No messaging OTT vendor has been acquired by an operator as far as I can recall. The closest one was Telefonica’s acquisition of TokBox, which isn’t exactly a messaging system but rather an API platform. It is as if operators have decided to stop competing.

If you look at the TV domain, carriers are fighting back their OTT competitors (Netflix being the biggest one) and not giving up. Dish’s latest deal with Disney indicates a Pay TV’s plans at launching an OTT service of its own that can be streamed to anyone – and not limited to its subscribers base of satellite dishes. There’s a reason they are fighting back – and a reason why they stand a better chance at success than their telecom brethren.

Back to Telecom

You see, RCS and VoLTE aren’t here, and won’t be for some time. And when they finally decided to arrive (there’s an IF statement there) – they won’t be on par in terms of features.

Operators also have their own messaging OTT services – Orange Libon and T-Mobile Bobsled comes to mind here. But there are smaller than the WhatsApp’s of the world by orders of magnitude.

Last week, I heard a lecture. It was about decision making. The best quote I can give from it, translated to English is:

“When a good friend of mine succeeds, a small piece of me dies”

A few months ago, in one of the WebRTC conferences I attended; the telecom vendors sat on stage in a panel and had this notion that the TV industry doesn’t know what’s coming to them – how OTT is going to disrupt TV the same way it did to telecom 10 years ago – and how telecom are so much stronger today after this ordeal.

Somehow, it seemed ridiculous. Telecom vendors who know OTT is a growing pain for them are happy because others might face the same fate.

I didn’t buy it then and I certainly don’t agree with it now.

Pay TV and OTT / TVE (TV Everywhere)

If you look at pay TV and the incumbents there – the content providers – cable, satellite, IPTV – they do have challenges coming from the likes of Netflix.

But their future is quite different than that of the telecom operators with voice and messaging.

In voice and messaging, there’s no advantage to the operator besides being the one you pay for to gain access to the network today. The rest? Just IP packets running between users in the network.

I don’t give more value to a voice call to my wife done over my carrier than I do to the same call done over Skype or Viber. I might even prefer the latter because of a better user experience (HD voice, presence, etc). And if my operator does come with his own offering, I have a good chance of passing the opportunity because I don’t need such a solution any longer – I already have good enough OTT services.

TV and entertainment is different. It isn’t between people, but rather between the viewer/subscriber/customer and the content itself. And again – I won’t place more value to the same content coming over Netflix or my carrier. But the thing is, content isn’t easily accessible.

The value chain in this industry places content owners as the ones negotiating with both the operators and the OTT vendors. And their sole purpose is to increase their revenue. That revenue today comes mostly from the operators, and as long as that is the case, “premium” will be available mostly on the operators’ side and not with the OTT vendors.

This is why attempts of operators at introducing their own OTT services (Bobsled, Libon) have less of a chance at success than the TV Everywhere initiatives, which are essentially Pay-TV OTT offerings.

With TV Everywhere, an operator offers his TV entertainment services on mobile and tablets via an app instead of through a managed set-top box over a managed network. This approach is the same from a technology perspective as streaming Netflix to that same device.

If you are going to pay for your TV shows, would you rather pay to a small inventory of TV series or to a larger one (assuming there is no real difference in pricing)? For TV and entertainment – content is king.

Responses

Dean Bubley says:
March 11, 2014

In general I agree, Telco-OTT content & TV offers are more successful than consumer TelcoOTT VoIP & messaging. Some of it is TVE extensions of existing IPTV platforms, while others are “pure OTT” propositions. I’ve been tracking numerous examples for a few years.

Couple of minor points:

– T-Mo Bobsled was based on Vivox’s platform IIRC
– Telefonica acquired Jajah
– SKT acquired social network Cyworld & had an earlier pre-Kakao messaging service called NateOn
– At least 3 telcos looked at acquiring Skype but backed away
– You could argue Genband/Fring = telcos acquiring OTT messaging by proxy via a vendor
– BT had OTT enterprise VoIP apps as far back as 2006

Cheers

Dean Bubley
@disruptivedean

Reply
    Tsahi Levent-Levi says:
    March 13, 2014

    Thanks for adding these inputs. I have a nagging feeling that Telcos will continue investing in VoIP OTT offerings but won’t see as wide an adoption as their OTT competitors. On the other hand, TVE initiatives have a lot more potential.

    Reply
      Dean Bubley (@disruptivedean) says:
      March 13, 2014

      Ultimately it’s a lot easier to succeed with Internet services that don’t revolve around n-squared user numbers.

      TV, content, cloud, security & similar OTT services are just user-server and scale linearly.

      Messaging, VoIP etc is generally user-user which makes it much harder to “cross the chasm”, but potentially more valuable if you succeed – hence $19bn for Whatsapp

      TVE, music streaming, SaaS, M2M value-adds, various types of security aaS & maybe specific voice services like recording or translation are easier (but perhaps less enticing) targets for telcos.

      Some enterprise VoIP services are typically OTT-based and are probably easier for telcos (especially fixed operators) to develop/sell than consumer apps.

      Reply
        Tsahi Levent-Levi says:
        March 13, 2014

        It isn’t just about ease of development and agility. It is also a lot about perception (who do you buy from, who do you trust, etc) and also about the ability to consume the service elsewhere. In that regards, TVE makes more sense – a lot more from SaaS, M2M and even music streaming. Disrupting TV means getting content owners to change their business models, and since they are also entrenched in their “legacy” models, it gives MSOs the time they need to become competitive versus pure OTT offerings.

        Oh – and there’s this nagging issue of the bandwidth being consumed for TV, which is again controlled by the MSO.

        Reply
          Dean Bubley says:
          March 13, 2014

          There’s two different classes of telco in this respect:

          – Those that already offer cable or IPTV (& have content distribution rights) who can extend that fixed offer to “everywhere” via mobile, at least in their domestic marketplace.
          – Those that have small or zero presence in TV, music or content distribution, who want to build an OTT proposition from scratch, or acquire one. Can be fixed, mobile or both. May be online music or video rather than longform TV/movies.

          1st category includes MSOs, some DSL/FTTH players with triple-play etc. , eg Comcast Xfinity, Sky etc

          2nd category includes others such as Orange+Deezer & Dailymotion, KDDI+KKBox, Verizon Redbox Instant etc

          Reply

Comment