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Cable Technology Feature Article

October 27, 2014

Why Sports Will Matter in OTT Video Environment

By Gary Kim, Contributing Editor

Industry executives have some ideas about how content demand could change over the next decade as linear and on-demand offerings shift. Prerecorded content (songs, movies, TV series) already has moved substantially in the direction of on-demand access.

And most everyone believes the best type of content for on-demand, real-time or linear access is sports events. And by "best" is meant "most unique," "hardest to replicate" and "nearly sure to attract an audience."

So it comes as no surprise that TV executives have bid sports programming rights into the stratosphere over the past few decades.

Sports programming is among the media types least susceptible to time shifting, binge viewing or over the top substitution. Sports are among the best forms of content to anchor a network (regional sports provide an example; coverage of single teams another example).

Blockbuster music or other events could provide another example of content events that lend themselves to “real time” consumption, though not on the scale, or with the predictability, of sports.

By some estimates, nearly half of all cost of a linear subscription is for sports content, the result of a few decades where sports rights have grown much faster than inflation, and faster than the costs of content overall.   

At some point, for that reason, sports content will anchor the value proposition for linear services, but also will likely drive value for mobile video services as well.

For Verizon (News - Alert), the new wrinkle is mobile-centric content, and the thinking clearly is that there are ways to leverage live events (concerts and sports, especially) specifically in the mobile domain.

Video in the fixed network is a different issue. Verizon executives might argue, because it is anchored by linear video, a product that already has likely passed the peak of its product life cycle, and also because profit margin for linear video lags profits for other products, at least as Verizon experiences the business case.

So what other routes might be taken? Verizon tends to believe that over the top services hold some promise, compared to linear video, even if saving money really is not the issue.

Creation of lower-price linear services now is on the agenda for the linear video business, especially to reach Millennials who never have acquired the habit, or are abandoning the habit of buying linear video.

Ironically, even if “saving money” is the value, many consumers would not be able to save money replacing a linear video subscription with a purpose-built set of alternatives.

At some point, when a consumer watches a fair number of channels, the bundled linear video service, with access from smartphones and tablets on a remote basis, arguably will be a cheaper alternative to buying many individual channels.

But Verizon, AT&T (News - Alert), Comcast and others already see that the key strategy is to leverage end user demand for video to drive high speed access services with some usage component.

In that view, the precise mix of video content options (linear, OTT) matters less than supplying the high speed access customers need to view all that content.

That noted uniqueness will still tend to rely disproportionately on sports content. 

Edited by Maurice Nagle

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