OTT still a burning issue for operators

For the Asia Pacific IPTV operators attending the IPTV World Forum 2010 in London last month, exploring Over-The-Top (OTT) content remains high on their agenda but they are still cautious about working with OTT providers on a commercial basis.

April 6, 2010

5 Min Read
OTT still a burning issue for operators

By Tony Brown

For the Asia Pacific IPTV operators attending the IPTV World Forum 2010 in London last month, exploring Over-The-Top (OTT) content remains high on their agenda but they are still cautious about working with OTT providers on a commercial basis.

With IPTV subscriber numbers still low Asia Pacific IPTV operators realize that they need something – the proverbial killer app if you will – to help turn the tide against incumbent DTH and cable operators and to start improving their market share.

To make their task even tougher, the IPTV operators also understand that young viewers in many Asia Pacific markets have simply abandoned the lounge-room based TV altogether in favor of watching online content instead, most frequently in their bedrooms on their laptops.

For their part, the Asia Pacific IPTV operator executives that I spoke to at the IPTV World Forum 2010 in London realize that OTT content could be a crucial tool in their platforms – but are still unsure on exactly how to use it.

The operators realize that Internet-based OTT content is something that their cable and DTH rivals simply cannot deliver and will provide them with a key differentiator and, more to the bargain, might also tempt some young viewers back to the lounge room TV.

However, for Asia Pacific IPTV operators finding high-quality OTT video content is problematic because of the number of different local languages spoken in the region.

The English-speaking world has a huge amount of high-quality content from the production powerhouses of the US and UK – a factor exploited by key OTT players like Apple, Hulu and the BBC.

However, the key Asia Pacific IPTV markets like Japan, South Korea, China and Taiwan must look to their own much smaller internal production markets for local language OTT video content, making the task of sourcing quality OTT content partners much more difficult.

The Early Signs

Given that my discussions with many IPTV operators at the IPTV World Forum were on a strictly off-the-record basis I am limited in how much I can reveal about the operators’ latest plans for OTT collaboration.

Nonetheless, I think it is safe to say that things are moving in the right direction with a senior executive from one leading Asia Pacific IPTV operator telling me that his company had already entered serious talks with You Tube about a possible collaboration deal.

Although the executive was excited about bringing the power of the You Tube brand to his firms’ IPTV platform he willingly conceded that the UGC content that will be on offer from the portal will not necessarily generate additional revenues for the company.

Instead, the executive says that he hopes that the strong You Tube brand will enable him to attract the attention of young users and bring them to his IPTV platform as well as increasing the attractiveness of the service for existing users.

“If I am being honest, the best thing about the content we are trying to bring in from You Tube is that it is much cheaper than buying content from the mainstream content producers,” the executive conceded to Informa.

Indeed, in a similar vein, another IPTV operator executive told Informa that his company was in talks with a Peer-to-Peer video sharing site in his country about a possible collaboration over what he referred to as a “connected TV” service.
“Peer-to-Peer sites are extremely popular with young users and we need to work out how we can work with them rather than against them – although we know that it will be a complex process,” the executive said.

The Koreans use their capacity

For their part, South Korean IPTV giants KT and SK Broadband, both represented by senior personnel at the event, are taking a slightly different approach to deploying OTT content.

With both KT and SKB still blocked from carrying many of the country’s leading cable channels both operators are keen to offer new and exclusive local language content to attract subscribers.

As a result both operators are pursuing an ‘Open IPTV’ strategy in which they allow third-party content providers to lease capacity on their IPTV platforms and offer VOD content or linear channels, rather than simply working with Internet-based content providers.

Both operators hope that this huge expansion of the content available to viewers will help drive subscriber take-up and increase monthly ARPU, although revenues from deals with the third-party content providers will be divided up on a revenue share basis.

This approach being deployed by KT and SKB is an extremely interesting one given the wider context of their struggles to gain top-ranking content and is evidence that both operators are prepared to think outside of the box when it comes to the problematic question of exclusive content.

Indeed, in conversations at the event, both operators acknowledged that the ‘Open IPTV’ strategy was also very useful in lowering content acquisition costs given that neither operator is in a realistic position to launch a content rights bidding war with the cable operators.

Where is the value?

Although it is clear that some Asia Pacific IPTV operators are moving towards embracing out-of-the-box strategies to solve the problem of acquiring more attractive content the key question remaining is whether these strategies will really be effective in driving subscriber growth?

Getting You Tube onto your IPTV platform might give you a powerful brand partner and improved recognition amongst subscribers but it is questionable whether the ability to watch You Tube on a TV screen will actually drive subscriber growth.
Similarly, there is also little doubt that KT and SKB will be making themselves very popular with independent Program Providers in the South Korean market by opening up their platforms to them it remains to be seen how popular this content will be with subscribers.

After all, the cable operators still remain in control over the vast majority of key programming – most especially sports rights – that mass market subscribers are willing to pay for meaning that the IPTV operators might be hard pressed to generate significant revenues from their niche content.

All in all, the impression that one is left with is that although IPTV operators are increasingly convinced that OTT content is a key weapon in their platforms that they remain unsure on exactly how to use this type of content.

This is hardly a surprise given that we are all in unchartered territory here – so it looks likely that we will all have to show up at IPTV World Forum 2011 in London to see what new lessons the operators have learned from their experimentation.

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