Cannibals' banquet: HBO Now, linear OTT raise the stakes in battle for viewers

Samantha Bookman, FierceOnlineVideoIt's almost here: On Sunday evening, hit HBO series Game of Thrones will premiere its fifth season. At the same time HBO Now, the network's much-anticipated, or much-dreaded if you're a cable operator, OTT service--which launched a few days early--will get its first real stress test.

I'll be streaming the GoT season premiere in a hotel room in Las Vegas right about then, just ahead of opening day of NAB 2015, the National Association of Broadcasters' annual tradeshow. It will be interesting to see how much HBO Go's streaming quality has improved since the network signed on with Major League Baseball Advanced Media, and to see how well HBO Now handles the potentially huge spike in demand.

What will be even more interesting than that, however, is how much HBO Now's launch will be a topic of conversation--both formal and casual--at NAB. I expect to hear it mentioned quite a bit. MVPDs, regardless of whether HBO's stream holds up under huge demand, will likely continue to dismiss the standalone service as an insignificant threat. OTT players will hail it as a milestone for their industry segment. In short, the rhetoric that we've heard for the past several months won't change.

But expect to see traditional providers and distributors intensifying the battle for control of the content landscape. Earlier this week it was revealed that Dish Network's pioneering linear OTT service, Sling TV, will likely have its growth hampered by a subscriber cap of just 2 million. The reason, an Ad Age article said, is that traditional distributors don't want Sling TV stealing away too many of their viewers. It's a requirement that networks have put on other services in the recent past.

Pay-TV operators are clearly worried about cannibalization of their subscriber base by new over-the-top services. And if they haven't put a plan in place to compete with a newer, more versatile IP-based landscape, expect to see some wild thrashing about for the next several months. Here are some situations you likely will see between now and next year's NAB Show:

  • Programmers and pay-TV operators will continue to try to bully new OTT services to cap subscriber numbers, with the threat that they'll pull networks or content off of those services. (Content owners also impose caps on the new "skinny" pay-TV bundles that operators like AT&T U-verse, Verizon and Cablevision offer their subscribers.)
  • Content owners will continue to up their prices for content rights, forcing OTT providers like Hulu and Netflix to struggle to keep a balance between having a robust content library and maintaining profits.
  • Negotiations between programmers and pay-TV providers for retransmission or carriage rights will get even nastier, with networks wanting to charge ESPN-like prices for their content and operators struggling to maintain profitability with a declining subscriber base.

What does this mean for the average consumer? For the short term, they could see a positive impact on their wallets as online video and traditional providers battle for their hearts ... and dollars. Netflix and Amazon will certainly take revenue hits in content acquisition if it means attracting new customers.

Hulu is in an interesting position as it is majority-owned by NBCUniversal, Fox Broadcasting and Disney; with lower subscribers and revenue than its two main competitors, its owners may increasingly call the tune on content.

Long-term, however, consumers could lose out. Operators and OTT providers can damp down subscription costs for only so long. And as the status quo is threatened and that ugly word "cannibalization" gets tossed around, a series of protracted content licensing wars may impact the burgeoning OTT segment. So, increased subscription fees and less overall content may plague consumers for some time.

Linear OTT providers, a.k.a. virtual MVPDs, like Sling TV and Sony's PlayStation Vue, will compete not only with traditional pay-TV for subscribers but with pure-play SVOD providers as well. Hulu's core model--providing broadcast content shortly after it airs--will be increasingly challenged by on-demand windows licensed to Sling TV, for example.

If content providers, broadcasters or traditional pay-TV operators feel they're losing audience share, and its associated revenues, to OTT, they'll grab an even tighter hold on existing content. Distributors and networks may impose draconian restrictions on OTT providers--smaller subscriber caps, regional restrictions, or more. Providers may attempt to circumvent net neutrality rules that require them to deliver data on their broadband networks in an unbiased way.

The best one can say about the next several months is that they will be interesting times. For the first time in perhaps ever, video content is basically being put out there for consumers to choose from. What they'll choose, and from which provider, will set the direction for online video for the next several years. -- Sam