Retrans wars may break the pay-TV model, boost OTT as small operators go Internet-only

Faced with rising costs for television content, some smaller cable and broadband operators are either dropping blocks of TV channels or dumping their pay-TV service altogether, offering only Internet and phone service to their subscribers, The Wall Street Journal reports. It's a falloff that could result in as much as $2.4 billion in lost revenue for cable networks--and an opportunity for the OTT segment.

Ringgold Telephone Co., in North Georgia's mountain country, and BTC Broadband, in Bixby, Okla., are among a small but rising number of operators serving smaller populations that have decided to focus just on Internet service, typically bundled with phone services, the article said.

The move is reflective of the ongoing price battles between pay-TV providers and distributors like Viacom. In the most recent salvo, Tier 2 cable operator Suddenlink, which serves nearly 1.4 million customers in seven mid-South states and elsewhere, dropped 19 major Viacom channels including Comedy Central, BET, MTV and others. And in a coup de grace, Suddenlink told Viacom that it "had created bandwidth issues that it is unable to remedy." Meaning, rather than pony up to meet a 50 percent spike in retrans fees, the operator told Viacom that it has no plans to take its channels back.

Viacom is also squabbling with regional operator Cable One, which pulled its channels back in April, as well as dealing with an increasingly nasty court battle with Cablevision over carriage fees.

Meantime, small operators are continuing to cut back pay-TV services, both as a result of retrans price increases and of consumer demand, as more customers cut the cord rather than bear the increased subscription costs passed down to them. Cable One told WSJ that emphasizing broadband over TV service has boosted its profits.

And WaveDivision LLC said it sees a business opportunity for small providers in offering streaming-video devices and apps.

More consumers going all-broadband--and presumably all-OTT when it comes to video entertainment--could hit networks right in the wallet, and fast. The National Cable Television Cooperative's CEO Rich Fickle told WSJ that operators representing 5 percent of pay-TV consumers may "no longer be doing business the way they do today with video." A loss of 5 percent, or 5 million, U.S. households would translate to a $2.4 billion loss for cable networks alone, the WSJ article said.

For more:
- The Wall Street Journal has this story (sub. req.)

Related articles:
Suddenlink to Viacom: Sorry, we already gave your bandwidth away
DirecTV and Raycom still haven't finalized deal, another blackout looms
IBC 2014 wrap: Content rights loom large as multiscreen moves to the forefront
OTT revenues, driven by advertising, on track to reach $42.3B by 2020, study says

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