Online video eats up a lot of bandwidth, and even with the prices to move it around the Internet dropping, it's still a significant expense... or source of revenue, depending upon at which end of the pipe you're standing.
Cable companies are starting to see online video in a new light, especially as report after report comes out talking about consumer uptake and how businesses are accelerating their adoption of it as a sales tool. And with the cable industry's newly clear vision comes change.
At one point in the not-too-distant past, if you said the words "dumb pipe" to a cable operator, you were going to have an argument on your hands. Cablecos tend to be thin skinned and don't like it when they're portrayed as simple conduits through which content flows. Or, at least they didn't when they had less hefty competition, even three or four months ago.
But times change.
At the American Cable Association's policy summit this week in Washington, several smaller cablecos posited that acting as a "dumb pipe" for the flood of online video that was moving across the system of late might actually be a better business model than the current pay TV model they've rallied around for the past three decades. After all, if you charge customers or program owners for delivering the content--and you don't have to worry about DRM (that becomes someone else's headache)--your job, and profit margins might actually be safe.
"From a distribution standpoint, we control how we distribute from one point to another," said Colleen Abdullah, the CEO of WideOpenWest Holdings. "We don't control the product and the content. Our video margins are going down year after year."
Of course, the distribution model gets even easier if you simply can charge your customers for the bandwidth they use in a month; it's a great model for the operators, maybe not so great for the consumer.
"If someone is going to use a lot, they're going to have to pay more than someone who uses a little," Cable ONE CEO Tom Might said. "It's not an efficient way to deliver video to the house. But if that's the way the marketplace goes, someone will have to pay for those bits."
Suddenly, online video has a little more panache, a little more swagger.
It wasn't long ago that over-the-to delivery was a fairly new--and unexamined--segment, an acronym that pretty much was dismissed as the purview of a bunch of cord-cutters (the numbers of which have increased by some 800,000 households in the past two years).
OTT delivery is poised to take off; cable operators and telcos are looking at it increasingly as a new product to add to their offerings and less as an annoying interloper to be run off. How they add it to their product line--behind a pay wall or as a freemium--will impact the online video industry's growth. Or is it the other way around? -Jim
P.S. Ooyala CEO Jay Fulcher and I had a long conversation at NAB in Las Vegas last week. He offered some great insight on the industry, a little behind the scenes info about the rancor between Ooyala and Brightcove, and a prediction that fully half (which we later decided could be as high as 80 percent) of the five dozen plus OVPs currently operating could go belly up by the end of 2010. I'll let you decide who he wants to go first. Check it out