The Great OTT Backlash

By Tom Munro, CEO, Verimatrix Inc.

The current scramble to create video portal sites and offer juicy selections of over-the-top (OTT) content seems to have bypassed many of the normal sanity checks applied to media investments. While jostling for technology leadership with the smoothest video delivery and flashiest user interface, the new landscape now has many pay-TV operators and even content providers trying to figure out, one, how to position these new resources alongside more traditional delivery channels and, two, if and how to generate incremental revenue. Drawing a parallel with the plight of another industry, it’s almost as though the news barons had invented CraigsList and then were left wondering why their classified ad business slowed down.

As a part of this whole process, many of the systematic checks involved in licensing rights to content seem to have been sidelined. Cable operators, for instance, were guaranteed the exclusive rights to deliver premium content to their subscribers only once they had demonstrated adequate delivery security. The more highly valued the content, the higher the restrictions for content security.

We are now seeing OTT operators like Hulu and Joost offering a way to bypass cable, satellite and IPTV operators, and at least a growing urban legend about swathes of consumers who have terminated their pay-TV contracts and now live an anonymous and largely unrestricted life on broadband alone. Those operators that have paid a lot of money to gain rights to much of content are alarmed by the prospect of large-scale streaming content over the Internet.

For viewers, unrestricted content could pose an issue for objectionable material, particularly for minors. There seems to be a major gap on employing any parental controls or enforcing content ratings with OTT services when compared to traditional TV with filtering options like the V-Chip.

How can these operators compete when the rules have changed so dramatically?

Everyone agrees that OTT services are a growing trend that cannot be ignored by pay-TV operators. For example, the Broadband Services Forum is encouraging service providers to embrace OTT video as a valuable service that can leverage their network assets and provide a differentiated service.

The key is for traditional operators to leverage the technological advantages of OTT, while retaining a larger measure of control over the consumer experience. Control comes in the form of navigation and branding of an aggregated service by tracking who is accessing the service and the application with reasonable consumption rules. An OTT content service that’s associated with a pay-TV subscription seems to offer significantly more value for all stages of the value chain.

Anonymous streaming services where no registration is required makes it impossible to really know your audience or to associate viewer habits with other demographic details (and therefore it’s harder to convince advertisers to spend money with and online service). By authenticating users for a value-added OTT component of a pay-TV offering, audience targeting is much more powerful. Plus navigation can include more social networking information, which typically translates into a better viewing experience.

An authentication platform for the OTT service can also ensure the right subscribers are accessing the content packages associated with their subscription and extend their rights to more flexible consumption models. Can subscribers only view streaming content or download it for later playback? What are the usage rules once they’ve downloaded it? How are the content rating rules enforced for adult or objectionable content? If a subscriber is late on payments, can operators take action to limit their viewing choices?

It is impossible to reverse the expanded consumer expectations of online content availability, but we are still in the early days of really establishing a viable business model around such access. We are also in the early days of ensuring that such access doesn’t fundamentally damage the whole ecosystem through rampant piracy. Since they can’t beat it, pay-TV operators have to find a way to join the movement and enhance the offerings – but in a way that raises the standard of OTT content and the overall consumer experience.

Tom Munro is CEO of Verimatrix Inc., a provider of software-based content security and revenue enhancement technologies in pay-TV networks. Munro has more than 22 years of experience in both finance and technology. Prior to Verimatrix, he was president of Wireless Facilities Inc., a provider of design, deployment and management of wireless mobility and broadband wireless networks. Munro holds bachelor's and master’s degrees in business administration from the University of Washington. He has co-authored two college level text books on computer programming.