nScreenMedia OTT multiscreen media analysis

MobiTV helps pay TV ops become virtual MVPDs

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As the video world turns toward the smartphone, mobile video pioneer MobiTV turns toward the television. Why would the company do this just as mobile seems set to become the dominant platform for online video delivery?

MobiTV announced it has closed a $21M funding round from Oak Investment Partners and Ally Corporate Finance. The company states the money is explicitly to accelerate its expansion as a technology solution for the IP delivery of pay TV service.

Move to address pay TV market not so strange

This might at first seem an unusual move for an 18-year-old mobile TV infrastructure company. It has already taken $143M in funding, and has used that investment to become the mobile TV platform of choice for companies like T-Mobile, AT&T, and Sprint. However, Charlie Nooney, CEO of MobiTV, sees an opportunity with pay TV providers that he thinks MobiTV’s ConnectTM is perfectly placed to answer.

Charlie Nooney MobiTV

Charlie Nooney, MobiTV

“We’re able to future proof the service providers’ Pay TV offerings through state of the art features and rich user experiences that are not constrained by the legacy STB ecosystem. Our ability to utilize widely adopted streaming devices allows real time enablement of new technologies like 4K/HEVC, Cloud DVR, replay TV, robust voice control, and other consumer preferences across all screens without the high cost of replacing legacy QAM STBs in the home.”

Signs are that many operators a ready to dump their set-top boxes and make the jump to consumer owned streaming media players and smart TVs. A tier 1 U.S. pay TV operator executive told nScreenMedia he would be prepared to deliver service through an Apple TV or Roku immediately “if our STB software provider supported it.”

Operators have two very good reasons to dump the pay TV set-top box and leverage consumer in-home connected TV devices.

Pay TV needs to improve sagging margins

Comcast ARPU versus programming costsIf ever there was a time operators would like to reduce operating costs, it is how. Content licensing fees have been increasing faster than operators can raise subscription rates for years. And this has had a dramatic impact on profit margins. Programming costs at Comcast increased an eye-popping 12% in Q4 2017 over the same quarter last year. In Q4 2015, 48% of average video revenue per unit (ARPU) went directly to pay for the content, and in Q4 2016 that increased to 51.7%. It’s sobering to think that just 42% of ARPU went to programming costs in Q4 2012.

Outside of the content, one of the biggest costs faced by pay TV operators is in-home equipment. Eliminating the set-top box  removes that cost from the bottom line, and it cuts the cost of the truck roll to install it. This desire to reduce costs is part of the reason that Comcast has an app in beta for Roku that provides the Xfinity TV service without the X1 set-top box.

Pay TV needs to take the battle to virtual MVPDs home turf

What started out as a skinny bundle revolution has morphed into more complete online pay TV services. These virtual MVPDs provide TV packages that are much closer to traditional pay TV, at significantly lower prices.

Two-thirds of US households subscribe to at least one SVOD service. The convenience of having a virtual MVPD like Sling TV or PlayStation Vue on the same device could sway some pay TV customers to abandon their current pay TV provider.

To counter this, pay TV operators need to ensure their services are available on these customer devices. In other words, they need to become virtual MVPDs too!

MobiTV will find big competitors

Ironically, the biggest competitor for MobiTV’s operator solution in North America is Comcast. The company has already licensed its very successful and proven Xfinity platform to Cox and Charter. And Cox has already launched services based on the platform.

However, MobiTV’s platform is also proven and scalable. Reliance in India launched IP services with MobiTV in September 2016. Reliance’s Jio service includes advanced features like network DVR, and 7-day catchup. It has also proven scalable, bringing 400 live channels to 95M unique users.

If you would like to learn more about the future of the pay TV operator set-top box download the free white paper Owning Input One.

Why it matters

Mobile video delivery company MobiTV has raised additional funding to sell its IPTV platform to pay TV operators.

This somewhat surprising announcement could be a good move, particularly in the U.S.

U.S. operators face shrinking profit margins and increased competition from virtual MVPDs, making an IPTV launch an attractive option.

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