Determining the Right OTT Business Model

By | September 10, 2012 | IBC

The fragmentation of the broadcasting landscape shows no sign of slowing. Conversations range from SD, HD, Ultra HD, 3-D TV, video on smartphones, video on tablets etc. It can be bewildering at times given the influx of new technology. Players like NetFlix, Hulu and even Google are looking to shake-up the video market. I had a real interesting conversation with Sky Deutschland CEO Brian Sullivan, an executive who played a key role in the success story of BSkyB in the first part of the last decade. While Sullivan said that competition was always a good thing, he was still unsure about how some of these new over-the-top (OTT) video business models might work. Sullivan talked about how a lot of these companies were building services on a low content cost and consumer pricing, but then pointed out that “it costs a lot of money to create content, and they need significant revenue streams”. The inference being if you don’t invest substantially in content, you might not make the revenue you expected.
   It is certainly an interesting debate to discuss whether or not OTT business models will work. A few years ago, when most of the big telcos started launching video services to go head to head against cable and satellite pay-TV alternatives, satellite DTH players remained surprisingly resilient in terms of retaining subscribers in the face of competition. While on may levels it is great to see new innovative players such as NetFlix emerge, the satellite industry has maintained its healthy position in the overall broadcasting ecosystem. Undoubtedly, DTH players will use methods other than satellite to access the customer, but the demands for capacity when powering next generation broadcasting services are likely only to increase.  

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