Finding video Zen: broadcasters, pay-TV struggle to unify traditional video delivery with OTT strategy

Forget about disruption. Forget about content cannibalization. The overriding mission from this point forward for the broadcast, pay-TV and media and entertainment industries is to incorporate online video into their structure as seamlessly as possible. That was most obvious to anyone attending the keynotes and panel sessions at this week's IBC Show in Amsterdam.

"You can't miss that everyone is talking about OTT," Roku VP of Pay-TV Andrew Ferrone said of the show, noting that all of the products on display contained OTT integration elements.

Walking the show floor, it became apparent that many of the larger vendors -- Imagine Communications, for example -- are aiming to provide a more, shall we say, holistic product and service offering.

Other companies remained focused on solving specific problems for media and entertainment providers, such as Sintec Media with its rights management platform. But smooth integration with existing traditional delivery systems was a common talking point at many booths.

As the IBC Show comes to an end and vendors begin folding up their booths, here are a few trends I noticed at the show:

Finding video Zen is a little hard to do: Broadcasters have finally moved from the first three stages of disruptive grief and into the "acceptance" stage, according to MLBAM's Joe Inzerillo. But what that means from a business standpoint is figuring out how to work an over-the-top division into their existing broadcast infrastructure without too much expense. For Discovery Networks International, the shift in focus has required a shift in its business model as well, from a primarily B2B company to one that also caters to consumers. "Starting to build that B2C capability is not a small task," DNI President JB Perrette said.

4K equipment sales may have ground to a halt: We don't know for sure, and numbers won't come out for another quarter, but the talk of the show was the chilling effect that patent pool HEVC Advance is reportedly having on 4K/UHD component purchasing. "Everyone is talking about it," nScreenMedia analyst Colin Dixon told me.

Joe Inzerillo, EVP and CTO of MLB Advanced Media, talked about it in length as well during our meeting, noting that while the idea of the patent pool itself isn't a big issue for MLBAM, the requirement to pay a fee of .5 percent of gross revenues is a "non-starter" for the company. "If it was just another toll to pay and the toll was sort of reasonable when you aggregate the two together that wouldn't be such a big deal," he said. "But the gross revenues ... no mainstream company is ever gonna do that. As soon as you do that you wind up with audit rights and companies are not going to open their books."

Controversy around the licensor's requirements started swirling a few weeks ahead of IBC but the effect was pretty clear: Buyers are a little freaked out right now. What that means for the growth of 4K remains to be seen, also. If demand is there -- and it appears to be building for 4K-capable TV sets -- then manufacturers may simply do an end-run around HEVC and go with an open-source codec like Google's VP9 or Cisco's Tor.

Churn is something pay TV has to worry about, not OTT providers: Sling TV's CEO Roger Lynch put it out there at his keynote session during the show: Critics of his linear OTT service may point out that it likely has high churn, particularly when free-trial subs drop off without taking a regular subscription, but he's not worried about it at all. The reason: acquiring new subs or re-acquiring those who left after the free trial probably costs a fraction of what pay-TV providers have to spend. Lynch estimated operators spend about $850 per subscriber to acquire and keep them, an investment they have to recoup. That partially explains why Comcast customer service reps are so incredibly determined to keep folks from cancelling their service.

End-to-end? Ehhh, maybe not: It's a catchy buzzword, hence the reason why the term "end-to-end" was in use by almost any multiscreen services company at the show. Certainly it's more exciting than something like "managed video delivery." But companies need to ask exactly what "end" vendors are talking about: Do they really directly manage the video from ingest/playout to the end user's device? There's no one-stop solution for companies trying to deliver OTT at scale; usually a few components have to be thrown in from additional providers to make it work. It's a confusing mess for broadcasters and content owners trying to get into OTT.

Smaller companies jockey to take Elemental, Envivio's place: T3Media rebranded as Wazee Digital ahead of the show, bringing aboard a cadre of digital-focused executives led by former Harris Corporation President-CEO Harris Morris. The company, which provides a video content management platform to customers like the U.S. Tennis Association, is now positioning itself as an end-to-end (there we go again) online video management provider with its Wazee Digital Core as a central component. While the rebrand happened in August, well before Amazon Web Services acquired Elemental and Ericsson snapped up Envivio in what looks like a defensive maneuver, the timing is certainly apt as a new phase of acquisition sweeps the IP video market.

Content rules over all: According to every executive I spoke with at the show, none of this OTT madness matters if the video content that's out there isn't desirable. That means investing more money directly into original content -- something Netflix is continuing to move ahead on, with Amazon Prime and Hulu hounding at its heels with their own content offerings. Hulu, of course, is chasing down licensing deals for existing content to build a library of movies and series exclusive to its service, trying to make itself that much more indispensable to viewers.

So if content is so important, why is it at the bottom of my list? Partly because of the technical challenge and costs that lie ahead for many traditional pay-TV providers, broadcasters and distributors. And partly because providing high-quality online video content is becoming the minimum standard for these companies to reach.

With the amount of transition underway in the industry, we may see traditional pay-TV and broadcasters take up places as dominant sources of online video content by this time next year. And for IBC itself? While attendance appeared to be strong, this is an industry in flux. This year's show was interesting; 2016 may be an even wilder ride for the industry. --Sam

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