The Taming of the OTT Video Shrew

Like many disruptive technologies and market segments, the over-the-top (OTT) video market has been cast as the great equalizer. Greedy corporations would be forced to concede to consumer demands for viewing TV and movie content when, where, and on the device of choice. We could finally be rid of the expensive pay TV services, in favor of less expensive, but more personalized, online entertainment services. The day of reckoning for the US entertainment industry was just around the corner.

Somewhere along the way, this utopian vision has been lost. A dramatic shift in the industry is happening that will take the OTT market down a path quite unimaginable just a few months ago. Signs of this seismic shift are everywhere. Over the past year, Netflix has found itself vilified and rejected by HBO, Showtime, and most recently Starz. There is little chance for mending fences in the short term.

Forced to fight, Netflix appears to be headed towards a new strategy that will transform the company into an online premium-TV network. Like HBO and other premium TV channels, Netflix will attract and retain subscribers from original TV programming and high-value movies. They will be introducing their first original TV series, “House of Cards,” in 2012, and they are busy licensing a wide array of supplemental recent TV series, movies and specials. Welcome the newest premium TV channel: on-demand, unbundled, and multi-platform.

Other streaming VOD services are going down another path. Last week, DISH Network announced a Nefllix-like streaming VOD service under the Blockbuster Movie Pass moniker, but the service is not designed to compete directly with Netflix. The Movie Pass service will be available only to subscribers of DISH satellite pay TV service. Thus, Dish is positioning Movie Pass as an extension of their core pay TV service.

Even Microsoft is aligning itself more closely with the pay TV industry. The company recently announced its Xbox Live video service that will stream live broadcast TV programming. The Xbox service is linked to TV Everywhere services, such as Comcast’s Xfinity and Verizon FiOS services. As long as you have an appropriate pay TV subscription, users will be able to stream live TV broadcasts to their TV via their Xbox 360. Not exactly disruptive, is it?

As streaming VOD migrates toward a more premium TV-centric model, movie studios still must monetize their movies through online rentals and electronic sell-through (EST). The studios are realigning their release windows and introducing the Ultraviolet digital locker platform to encourage more online video purchases; yet much of their success will be left up to fledging transactional VOD (T-VOD) suppliers, such as Vudu, CinemaNow, Amazon, Alphaline, Qriosity and Blockbuster. Consumers have been slow to adopt online video rentals/purchases and the content producers have limited leverage to speed up the process.

After all is said and done, it appears that the OTT video shrew has been tamed. The OTT video market will be split between the pay TV industry commandeering the subscription VOD services and the movie studios that will control online rentals and EST. Maybe it was inevitable. Maybe it is for the best. Even though we will continue to pay premium rates for entertainment, we will at least be able to view it when, where and on the devices we choose.

Blockbuster? Really?

The next big force in video rentals is (ta-da!) Blockbuster. Really? You ask. Not Netflix, Quikster, Vudu, Roku, Apple…? Nope: Blockbuster. The same Blockbuster tortured by financial analysts and left for dead until bought by DISH Network at a fire sale. DISH Network announced a new Blockbuster initiative that would offer discs by mail, movie streaming, and a package of value added channels. Read more »

Despite CinemaNow, Best Buy Won’t Pooh-Pooh Vudu

As I’ve noted when discussing the e-reader market, Amazon and Barnes & Noble have an inherent advantage in garnering overall revenue given that they can call upon databases of millions of active book-buyers. When I wrote about the in-store Nook angle that Barnes & Noble was taking, I mentioned how electronics retailers could benefit from this level of integration. Last week, prior to the Google TV announcement, Best Buy announced it will offer its version of Sonic Solutions’ RoxioNow video program under its original CinemaNow brand, which Best Buy has acquired.

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Walmart Rings Up Vudu

This week brought news that Walmart has purchased Vudu, a one-time on-demand video device company that transformed its business to servicing connected TVs and Blu-ray players. As the largest seller of packaged home video in the country and one of the largest sellers of consumer electronics, Walmart clearly has an interest in maintaining its position as more video is consumed digitally, but also in establishing ties to the televisions and Blu-ray players that are featuring the Vudu service.

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