nScreenMedia OTT multiscreen media analysis

A la carte pay TV arrives, one OTT service at a time

Netflix on pay TV STB

The deals between operators and OTT SVOD services continue to multiply. With more and more operators opening up the STB to these Internet interlopers, is a la carte pay TV finally arriving?

The pressure on operators to help subscribers get OTT on the television through managed set-top boxes just keeps mounting. Pay TV subscribers with a Netflix subscription are spending at least 13% of their TV viewing time with the streaming service.* This makes Netflix the most popular “TV channel” in many pay TV subscribers’ homes, and something unavailable through their pay TV operators set-top box.

As well, with so much quality exclusive content available through OTT providers the reasons a subscriber might switch away from pay TV just keep multiplying. Netflix signed an agreement with the Weinstein Company to air the sequel to Crouching Tiger, Hidden Dragon on the same day as the theatrical release. Amazon Prime Video’s just-released Transparent has received high critical praise and will be must-watch TV for many.

The allure of OTT SVOD services means every day a substantial number of pay TV subs put down the pay TV remote control, switch to another TV input and pick up another remote control. That’s dangerous behavior if you want to make incremental revenue from pay-per-view. Once the subscriber is on a Roku or Apple TV STB, any searches for movies will return hits from OTT services, not pay TV operators. It’s even more dangerous when a cable customer is way more satisfied with their OTT service than pay TV.

Many operators have already made the decision to allow Netflix and other OTT services onto the DVR in some customer homes. Some operators have launched TiVo DVRs with their customers; including Virgin Media in the UK, ComHem in Sweden and Suddenlink in the US. Armstrong in the US has just announced the company will also be launching TiVo. Many of these operators are also offering Netflix and other OTT providers on their TiVo DVRs. The boxes also provide a unified search which returns items in the pay TV world as well as services like Netflix. No need to switch remotes in these households.

Unfortunately, being on the DVR leaves out all those plain old STB households. This could be changing. Netflix will appear on Belgacom’s Proximus set-top boxes in 1.5M subscriber homes by the end of year. The SVOD service launched in Belgium two weeks ago. And Netflix is already on Waoo! STBs in Denmark.

Hulu is also providing a lot of original content. It too is looking to partner with operators in the US to get on the set-top box. CEO Mark Hopkins announced earlier this year the company is in “active discussions” with TV distributors to get onto operator STBs.

While operators and their content partners hesitate to provide a la carte access to individual channels within the pay TV bundle, OTT providers have no such qualms.

Why it matters

Pay TV operators and their content partners have resisted the idea of allowing subscribers to pick only the channels they want (so called, a la carte access.)

The pressure for operators to include OTT providers on the set-top box is growing as increasing numbers of pay TV subscribers spend longer with services.

When OTT services come to operator STBs they bring with them the standard web practice of a la carte access.

*Nielsen reports time spent watching live and on-demand TV each day is 5 hours and 10 minutes. nScreenMedia estimates the average Netflix viewer watches for at least 40 minutes a day.

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One Comment

  1. Colin –
    Here’s one on which I COMPLETELY agree with you. I’m not a huge “Pay-TV should go A La Carte” person… but it is going to happen. A whole ecosystem is growing up around them and either they embrace it or become less my ONLY video provider and just ONE OF my video providers. That seems inevitable (if not old news) at this point… and then the rest of the story is somewhat inevitable.

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