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Cable Technology Feature Article

March 29, 2014

Cable Technology Week in Review

By Tara Seals, TMCnet Contributor

It’s not a newsflash that linear video service suppliers rank low on measures of “quality of experience.” But the results of the 2014 Temkin Experience Ratings show that none of them can even crack the “good” designation.

A score of 70 percent or above is considered "good," and a score of 80 percent or above is considered "excellent.” Overall, the TV services industry averaged a 54 percent rating in the 2014 Temkin Experience Ratings, making it the lowest ranked of any of the 19 industries. Top performers were Bright House, with a rating of 63 percent, while DirecTV ranked at 62 percent. DISH Network was rated at 60 percent, Cox Communications at 58 percent, and Cablevision at 56 percent. The telcos fell short too: Verizon was ranked at 54 percent and AT&T at 53 percent. Bottom rankers were Time Warner Cable, which got a 52 percent score, Charter Communications (News - Alert) with 48 percent and Comcast with 47 percent.

So perhaps it’s no wonder that the U.S. pay-TV industry marked a dubious milestone in 2013: it posted its first-ever full-year decline in subscriptions, according to SNL Kagan. The firm’s analysis of cable, satellite and telco offerings at the end of 2013 showed that while seasonally driven quarterly declines have become routine for industry watchers, the annual dip illustrates longer-term downward pressure even as economic conditions gradually improve.

According to the tally for the trio of platforms, service providers collectively shed 251,000 subscribers in 2013, dipping to approximately 100 million combined subs. The industry added 40,000 video subscriptions in the fourth quarter, slightly weaker on a year-over-year basis and not enough to offset the broader downward momentum. Losses from cable providers fueled the overall declines; MSOs lost nearly 2 million video subscriptions for the full year and 388,000 in the fourth quarter to finish 2013 with fewer than 54.4 million basic subs.

Satellite growth slowed in the fourth quarter as both DISH Network and DirecTV, but the telco IPTV segment finished the year strong, led by AT&T's U-verse.

Of course, traditional pay-TV options for consumers are dwindling. Comcast (News - Alert) is attempting to take over Time Warner of course, but it looks like satellite is looking to consolidate as well. Though a merger of DISH Network and DirecTV was rejected by regulators in 2002, DISH appears to be trying again. With other big mergers in the mix these days, the deal may be more feasible, from a regulatory perspective. DISH and DirecTV could argue they only are combining in response to a reshaping of the market.

Unlike cable TV and telco competitors, DISH and DirecTV cannot easily add voice and high speed access services. DISH does own Hughes (News - Alert) Network Systems, which sells satellite-based broadband access, but that service operates using different satellites than DISH’s video service, and has throughput limitations, compared to fixed network services. If the market moves from linear to over the top delivery, the satellite providers instantly will be disadvantaged, as they simply cannot provide such access. In that sense, a DISH-DirecTV merger is defensive both in short term and long term ways.

Consumers are increasingly turning to over the top (OTT) options to fill perceived gaps in traditional service. One of those options, online video streaming startup Aereo, is getting ready for its trip to the Supreme Court next month to defend its right to exist, and is already prepping its strategy. The Barry Diller-backed company has filed its response brief to the plaintiffs, blasting broadcasters and urging the court to protect the Copyright Act.

Aereo is facing lawsuits from nearly every major content company and broadcaster, which are claiming copyright infringement because they allege that the company retransmits local TV affiliate feeds via the Internet without paying retransmission fees. Aereo has counter-argued that because it provides dime-sized antennae to its subscribers—who pay $8 per month for access to a couple dozen channels—it constitutes an over-the-air, rabbit-ears-style service, which is exempt from retransmission fees.

The Supreme Court is scheduled to hear oral arguments in the Aereo case on April 22, with a decision expected in June. Amicus briefs are due April 2.

Apple meanwhile sees the landscape as an opportunity time to shake up its content delivery model with a subscription service for online streaming—and it’s in talks with No. 1 cable MSO Comcast in order to do so.  According to people familiar with the matter, the two are discussing a scenario that would use an Apple set-top box (STB) and provide preferential streaming to Comcast ISP customers. According to the Wall Street Journal, the talks are merely nascent for now, and many hurdles remain. But the news illustrates that Apple is still mulling its next move in the digital distribution space. It also has been wanting to team with traditional pay-TV providers for years.

Some cable operators are seeing the value in offering OTT options for consumers, as a differentiator. TrueVision, Thailand's largest cable television provider, recently opted for Verimatrix’s Video Content Authority System architecture (VCAS), to provide revenue security for OTT services over multiple networks. It features enhanced HLS security, while VCAS for Internet TV secures pay-OTT services to multiple screens and across multiple network types. Officials said that VCAS for Internet TV will help protect the TrueVision Anywhere, True Movie, and H Movie service offerings.

The services are provided through a hybrid network comprised of both broadcast/linear and over-the-top components using a single digital rights management head-end. Multiple TrueVision companies can share this head-end. Further, these services can be accessed through a multitude of devices, including iOS and Android (News - Alert) tablets and phones, a USB/HDMI Android dongle, as well as Macs and PCs.

Meanwhile, the content business goes on. For instance, ProSiebenSat.1’s Red Arrow Entertainment has invested in Collective Digital Studio (CDS). CDS looks after YouTube (News - Alert) multichannel networks with over 600 channels delivering nearly a billion views a month. The company distributed premium digital content to television and has delivered branded content initiatives for Fortune 200 brands. The company’s sales organization includes offices in New York, Los Angeles, Detroit and San Francisco.

“With the ProSiebenSat.1 investment, CDS has gained a strategic partner that will enable us to monetize the global reach of our content as well as tap into the Red Arrow distribution system to create additional opportunities for our creative talent,” said Michael Green, Chairman CDS. “With a fierce commitment to the most talented creators on the platform, a top tier nationwide sales division and global distribution both on and offline, CDS is now poised to become a leading 21st century media company.”

To check out more details on all of this and more, visit our homepage. And have a great weekend!

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