As the popularity of over-the-top (OTT) video grows and cord cutting spreads, cable operators need to become more than just traditional pay-TV providers. Instead, they must become aggregators of all video services or transform into true digital service providers (DSPs).
Of course, this type of transition into a next-gen service provider is much easier said than done. To their credit, many cable providers have recognized the need for this transformation and are taking steps into the digital world.
Cable operators are transitioning into DSPs in several different ways. Some are adding OTT video services like Netflix and Hulu to their broadband data packages, offering them as product upgrades or enticements.
Other providers are going one step further and incorporating Netflix, Hulu, YouTube and other popular video-on-demand services into standard pay-TV lineups. In other words, they're using their managed video networks to deliver OTT video content to cable set-top boxes and other consumer devices, rather than relying on their broadband networks and the internet.
In some cases, cable providers are launching their own branded OTT services. They are testing the skinny bundle or at least the skinnier bundle—TV services that they hope will attract new customers and, perhaps more importantly, keep their existing, more price-conscious customers from churning. Several leading MSOs in the U.S. and Canada are taking this tack.
But all these efforts, while certainly laudable, are probably not enough to do the trick. To become true DSPs, cable operators must do more than add a couple of OTT video services to their offerings. They must also transform their legacy, analog-oriented cable systems into true digital distribution platforms.
What's required for this transformation? First, cable providers must open up their managed networks for video programming that they don't own or control in order to incorporate OTT video and other non-traditional video services into their legacy pay-TV offerings. That introduces greater security risks but also invites opportunities for strengthening revenue streams.
Second, cable operators must revamp their legacy video distribution systems so they can extend their reach beyond conventional set-top boxes to tablets, smartphones and other video devices. Only then will cable operators be able to offer true TV Everywhere services, not just TV services within the home.
Third, cable operators must build new business models with OTT video providers and other partners that enable the monetization of digital video services. Operators will also have to set up creative revenue-sharing programs so that all parties are encouraged to make partnerships work.
Finally, cable providers must upgrade or even overhaul their BSS/OSS in order to ensure that video customers are tracked, billed and serviced properly. This means switching from traditional infrastructure that serves entire households to a more advanced platform that deals with individual customers.
Although the journey may be long and difficult, there has been progress and it's clear that the quest to become digital service providers is finally underway.
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