When will OTT Pay-TV arrive?

Josh Wein

Wasn't 2013 supposed to be the year a major over-the-top pay-TV service launched?

Just a few months ago, it seemed multiple new services were imminent. Most of the Internet and consumer electronics giants were reportedly working on something big. Intel (Nasdaq: INTC) even talked openly about its plans. And though executives at the media companies which would ostensibly supply programming to these new distributors were more discreet (after all, there are NDAs to be honored), they too indicated that they were open for business and having meetings with all kinds of parties.

Now, with few weeks remaining in the year, and fewer still before the holiday shopping season starts in earnest, the chance that any of these services will materialize is slim at best. Maybe next year.

Starting a new business is no easy feat, especially if it requires the participation of the media conglomerates. On top of that, any new OTT service would have to work perfectly--or close to perfectly--from the moment it launched. Major flaws would doom a project because TV viewers have a low tolerance for hassles. To introduce that kind of product takes lots of testing. Testing takes time. It's possible these services are still on their way and their backers just have a few more contracts to sign and kinks to iron out.

There's a certain logic to the idea that more companies will enter the over-the-top pay-TV space. For one, content owners should welcome the advent of new distributors which presumably represent new customers. Furthermore, incumbent pay-TV distributors seem ripe for disruption. Their customers like to complain about the cost of their products. Industry observers like to complain about the outdated user interfaces, while the service providers have been hustling to update them. And some of the companies reportedly interested in the sector have cash to burn.

But so far it hasn't happened. And there's a possibility that it never will--at least not in the way some consumers hope it might.

Lately, some of the loudest voices discussing over-the-top pay-TV service are the pay-TV incumbents themselves. Comcast (Nasdaq: CMCSA) executives have discussed the opportunities a "virtual Xfinity" product could bring. Verizon (NYSE: VZ) might take over Intel's planned project. Charter's (Nasdaq: CHTR) CEO told investors the company may one day sell subscriptions "everywhere."

There's also logic behind this development. These distributors have the most to lose. They have built successful businesses delivering pay-TV programming to millions of U.S. customers and do not want to stand by while upstarts come and steal their customers. If you believe the future of video distribution is Internet Protocol, then you also have to believe these companies will participate in that future.

What's harder to predict is how soon it will arrive. --Josh