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Connected TV services do battle with Pay TV providers and BSPs

by David Mercer | 2月 06, 2009

After commenting on Netflix’s online TV performance last week, Microsoft released further data confirming the popularity of online movies delivered to Xbox 360 users. More than 1 million US-based XBox Live Gold members (ie those who choose to pay the $50 a year fee) have downloaded and activated the Netflix service since it was launched in November 2008. Collectively these users (who subscribe to one of Neflix’s unlimited rental plans) have streamed the equivalent of 12.5 million 2 hour movies during the past three months; that’s one movie per user every week. Of course we’re not just talking about movies: the service also offers shorter TV episodes, so the actual number of programmes watched is even higher. Cold hard facts are always a useful guide to market trends ;-) Anecdotes can be dangerous indicators, but may also support or cast doubt on statistics. Two stories have come my way in the last few days on the subject of connected TV that suggest major shifts are beginning to happen in the real world rather than on tech vendor powerpoint slides. Firstly, a colleague in the US has recently bought an Xbox 360 primarily to watch Netflix online videos. He doesn’t play many games, and he wasn’t an existing Netflix customer, so both Microsoft and Netflix have benefited from this online video partnership to the tune of some $150/year combined. There was no obvious alternative as he doesn’t get cable service, but this seems to be a case where a potential traditional “pay TV” provider (cable, Fios) lost out by not having the right content package and service available. Secondly, a friend in the UK told me he has been using his broadband-enabled PS3 to watch live Premiership football on a large screen LCD TV from unauthorised websites. The quality is apparently quite acceptable if not impressive at times, with occasional breakup but nothing that detracts significantly from the enjoyment. Again, it may be the case that this was not a serious potential Sky Sports pay TV customer, since he might never spend that much on Sky’s service in any case, but Sky will be fully aware of the threat from these over the top (OTT) sources. So the internet has become a direct competitor to traditional pay television and VOD services on both sides of the Atlantic. The broadband service provider in each case receives no additional revenue; instead new OTT service providers are emerging to meet consumer demand. The sports streaming sites, admittedly, would appear to be in breach of content rights laws, but their revenues are presumably derived primarily from advertising. With current broadband networks there has to be a question as to how many concurrent users of these OTT TV services the networks can sustain. Judging from what’s going on out there, it may not be too long before we find out just how far today’s internet, and the patience of BSPs, will stretch. Twitter: twitter.com/dmercer15 Client Reading: Digital Media Survey: An analysis of US Online Premium Video Users Add to Technorati Favorites
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