Pay TV providers must take steps now to defend against Internet TV rivals, says report

To remain strong and ensure future revenue growth, traditional pay TV providers must respond to the growing popularity of over-the-top video among consumers, says a new report from The Diffusion Group

The popularity of over-the-top video is growing and demands that pay TV operators protect their position in the video value chain or risk becoming just another video input as viewing habits and preferences evolve, according to a new report from The Diffusion Group (TDG).

The report, “TV Service Providers and Online Video – How Soon is Now?,” advises pay TV operators to take three specific steps to enhance their position, including:

  • push existing cable network TV programs online;
  • deliver Internet-only content and bonus material directly to the TV;
  • offer broadband TV services without require traditional pay TV subscriptions as a standalone service.

Doing so will help them recapture the attention of the Internet generation and create $2 billion in additional annual revenue by 2013, according to TDG. According to Collin Dixon, the report’s author, a variety of companies, including consumer electronics OEMs, Web-based aggregators and pure-play over-the-top providers, will soon tap into the growing interest among consumers in broadband video services and compete more directly with pay TV operators.

"As TV-based Web connectivity becomes more prominent, and as Web-based content providers more fully exploit these new connections, the 'local cable company' becomes just one of many conduits serving the TV screen,” he said.

Content providers like Netflix and Amazon already are partnering with consumer electronics companies to stream content directly to televisions without the need for proprietary hardware, he said.

“As this happens, these simple services evolve to something more akin to premium movie services at a far more economical price than current pay TV offerings," he added.