Pay-TV operators gear up to challenge Netflix

Michelle Clancy ©RapidTVNews | 09-12-2011

The trend of pay-TV operators launching their own online streaming service to combat the likes of Netflix and Hulu is only set to continue, a Rogers Communications exec has warned.
Speaking at the NextMedia conference, he predicted at the NextMedia conference that broadcast operators across North America will soon rush to launch streaming, Netflix-style services over the course of next year in order to remain competitive in this new digital world.
Pay-TV operators, with content relationships firmly in place, are in a good position to leap into the breach with a service that provides streaming, access to Web and cloud-based services via new access devices like connected CE.
"The sands are shifting as expanding numbers of households access their TV-displayed content online," said Tricia Parks, CEO at Parks Associates. "Methods include smart TVs and a host of connected devices, several of which are in a high-growth trajectory. This shift will create havoc with today’s well-understood TV revenue model potential. All players want a piece of that revenue, but not all players will hold their current positions over time.”
Netflix, a pioneer in the subscription video model, reached nearly 25 million subscribers by mid-2011, before its recent price increase. This deeply unpopular move, in which the company increased the price of its streaming and DVD-by-mail services by a full 60 percent, creates an opening for other service providers to compete for these subscribers on price and a wider selection of newer titles, she added.
Pay-TV operators have an advantage in the fact that their content partnerships are already firmly in place. "Licensing is one of the biggest challenges for providers in this space," Parks said. "A successful subscription model has lots of content options. [Pay-TV operators] must leverage their strengths as established providers, serving millions of households, to secure rights to premium content and combat encroaching over-the-top solutions."
The trend can already be seen. DISH Network of course is leveraging its Blockbuster acquisition for the Blockbuster Movie Pass streaming service, included in new subscriptions. Executives have not ruled out making it available beyond the existing customer base; a service that would be available to all consumers regardless of status as a DISH subscriber would challenge Netflix directly and likely with many more new releases than Netflix has to offer.
Meanwhile Verizon Communications, according to reports, is planning its own online streaming service that will be targeted outside of its regional residential territories. According to Reuters, rather than become a virtual TV operator with a service that replicates FiOS, however, Verizon is eyeing the 85 million U.S. households outside of its regulation-approved wireline territory for a "package of programming [that] would be limited in its scope," involving one or two content partners. For instance, it could launch a premium movies package or a children's programming bundle.