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June 26, 2018
History continues to repeat itself, constantly affecting those who don’t want to make adjustments. Video killed the radio stars, CDs killed cassettes, and downloadable content somewhat put DVD sellers in jeopardy. TV service providers are fighting a hard battle against the advancing technology. They are in the same position where technological advancements are making their services obsolete, and unless they make quick adjustments to the changing trends, they are bound to end up losing this battle. The biggest challenge for cable and satellite services providers is OTT.
OTT stands for over-the-top. It refers to content being delivered to end consumers utilizing over-the-top means. In simple words, a company lets you watch some TV content without requiring you to subscribe to its “TV services”. It does that by delivering you the content through internet. So, you might have an internet connection from Verizon, but some third OTT company can deliver movies, TV shows, documentaries, etc. using that Verizon internet connection even though Verizon has its own paid TV services too. Examples of some famous OTT services include the following:
These services can deliver your favorite programs to your screen using the internet connection you have.
Now, it’s OTT trying to camp in the lands owned by traditional TV. On the other hand, the TV service providers are trying to penetrate the realms of OTT. OTT service providers achieve their goals by allowing their viewers and subscribers to view content on any device that is connected to the internet. That’s more like compelling users to ditch their traditional TV. Traditional TV service providers are competing with that by allowing their services to be available on all the screens in addition to TV. The biggest advantage for OTT services is that there are different subscription models from which customers can choose. The three main VOD subscription models are TVOD, SVOD and AVOD.
AVOD is ad-based or advertising video on demand. This is a unique subscription model in which users can watch the content for free. However, they have to agree to watch ads as part of the streaming. Since users cannot skip these ads, advertisers find this model quite attractive too.
In this subscription model, you as a user will have to either pay to buy or rent the content. When you pay to rent, the content is available for you to watch for only a limited time whereas purchased content is yours forever for a onetime fee. TVOD is short for transactional video on demand.
SVOD is the most well-known and widespread model. SVOD stands for subscription video on demand i.e. you pay a fixed monthly fee to access the content of your choice. Netflix is a good example of this model.
Being able to watch only the content that you like gives you a sense of freedom that has made OTT services very attractive for users. The variety of subscription models act as another great advantage that goes in the favor of OTT service providers. Since more native companies are expected to compete against the current OTT giants in the coming times, it is believed that users will receive even more useful content as “free content” in the coming times. However, these reasons are still not enough to say that traditional TV is dying.
Yes, TV service providers have panicked big time after seeing consumers taking tremendous interest in OTT services. In the third quarter of 2016, the OTT industry saw a 63% YOY growth in the ad revenue. Moreover, in 2017 the number of American homes watching videos using OTT services increased to 51 million, which makes up nearly 54% of all the homes that have a Wi-Fi connection. Despite such exponential growth, traditional TV is not to disappear just like that.
First, OTT still relies on a broadband connection and not every country in the world has the best internet connection speeds. Most countries in Africa, South and Southeast Asia, South America, and Middle East don’t have the best internet speeds. For example, world largest democracy, India, has an average internet connection speed of only 2.3Mbps.
What makes matters worse for OTT is that many countries in Asia have very cheap TV cable service. For example, most TV cable operators charge Rs. 200 to Rs. 250 a month to their subscribers in India. That amounts to only 3.70USD per month. The cost of cable service is quite low in India’s neighboring countries as well.
You can safely say that OTT is not replacing traditional TV as quickly as some people might have guessed. Not to mention, high-speed internet connections can cost up to $20 to $30 per month in these same regions.
One must realize that no matter how attractive and appealing OTT services sound to the worldwide audience, they still rely on the internet connections that usually come from cable TV service providers. Whether it is Comcast or Verizon, OTT service providers will need their partnerships to reach out to their potential customers and penetrate new markets. If they start their own internet services, the concept of OTT will die and the company will have to ramp up its monthly costs to offset the infrastructural and operational costs of a full-fledged internet service.
Traditional TV and OTT might appear opponents on paper as they compete to garner more market share than each other. However, many experts believe that the two types of services will have to marry each other for a future that benefits them as well as the end users.
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