I recently attended a panel at CES on the disruption of Internet TV. Some takeaways from this panel include the following.

1. The rise of OTT creates opportunities for local broadcast channels. Local broadcast channels have long been overshowed by national programmers. In the U.S., broadcast network (ABC, NBC, CBS, FOX, and CW) programming is carried on “local affiliates” or local stations. In some markets these local affiliates are owned by the broadcast network. These networked owned stations are commonly referred to as owned-and-operated (O&Os) stations. Due to ownership limits imposed by the Federal Communications Commission (FCC) the total number of television stations owned by any company (including the broadcast networks) cannot exceed more than 39% of U.S. TV households. Therefore, the broadcast networks need to reach agreements with station groups (companies such as Sinclair and EW Scripps) that own local stations in those markets they do not have O&O stations in order to reach the remainder of the country with their programming. 

 Since the FCC began allowing Online Video Providers (OVPs) to carry cable- affiliated programming and local TV station broadcasts in December 2014, virtual multichannel video service providers (virtual MPVDs) such as Sony’s PlayStation Vue have been trying with limited success to negotiate the right to carry local broadcast channels. So far, PlayStation Vue is only available in a limited number of markets where they carry local stations owned by the U.S. broadcast networks.  Local broadcasters are missing an opportunity. They should make use of geolocation technology and push OTT TV apps to their Designated Market Areas (DMAs), thereby creating a new business opportunity for themselves.

2. Make the OTT experience comparable to cable TV. It’s a common view that audiences are shifting from linear TV to OTT video, but things like program discoverability and the user experience on OTT TV still leave a lot to be desired. OTT streaming apps were designed for programmers to have control over viewership, but in the process they’ve created severe market fragmentation. Content is often spread out across different services with limited search capabilities, making it hard for a viewer to discover programming in a seamless experience.  While individual services such as Netflix have done a fairly good job in recommendation and discoverability, it remains difficult for consumers to get any unified search or recommendation. Strategy Analytics Consumer Metrix survey shows about 75% of Netflix users in the U.S., Germany and France are satisfied with “the shows that Netflix recommends to you”, while the satisfaction rate in the U.K. is slightly lower, at 66%.

3. Peak time congestion remains an issue. According to Sandvine’s Global Internet Phenomena 2015 Report, streaming video and audio traffic now accounts for over 70% of North American downstream traffic in the peak evening hours on fixed access networks. Five years ago it accounted for less than 35%.  With the growth of OTT video services, the introduction of 4k UHD and virtual reality this number is only going to grow. If OTT video is going to deliver a quality video experience industry practitioners believe bandwidth concerns must be addressed. 

4. Amazon’s “video bundle” will show its power this year.  Last month, Amazon launched a new initiative called “Streaming Partner Program” that allows Prime members to add subscription VOD services from close to 20 partners, including Showtime and Starz for an added fee to their Prime video service. As discussed earlier, discovering programs in the fragmented OTT market and dealing with multiple OTT billing services can be challenging for consumers. Amazon’s partnership with third party providers to make it possible for Prime subscribers to easily select which services they want to subscribe to within Amazon’s OTT video hub. While the standard Prime subscription includes access to Amazon’s own library of movies and TV shows, subscribers can now subscribe to premium OTT video services like Showtime through a Prime membership for $8.99 a month, compared to the $10.99 a month a user pays when subscribing through Apple’s iTunes store or Google Play. For Starz, this is the first time the channel made its programming available over the top. Amazon’s move to include more services, and essentially more content, will make its video streaming service more attractive. Speakers at the panel believe the power of OTT bundle will further show up this year.