OTT Television Will Get Worse Before It Gets Better

We are all both loving but are at the same time overwhelmed by the era of ‘peak TV’. A similar thing is happening with the evolution of how we watch TV. This is a landscape that is experiencing a glut of offerings, with more coming – and with it the inevitable fragmentation and customer confusion. If I look at the roadmap over the next couple of years, I see this becoming worse before it gets better. The question is, how might it get better, and who will be the winners (hopefully consumers) and losers?

First, how did we get here? For the 50+ crowd, it started with the VCR. For the 40+ crowd, things changed with DVRs and the whole notion of time shifting. But that landscape was still largely owned by the cable companies, who turned this into a new way to charge you an extra 10-15 bucks a month. The next major shift was the penetration of good enough broadband networks and Netflix’s big shift to online – and the bet on content and concomitant rise of other ‘over the top’ (OTT) options, from Hulu to Amazon to YouTube and a whole bunch of other ones. In recognition, and perhaps semi-capitulation, those who were being disrupted — Comcast, DISH, DirecTV — are also now disrupting themselves with a slew of the industry’s worst acronyms since ‘throttling’: ‘skinny bundles’, ‘vMPVDs’, and the like.

How are they doing it, you ask? In part, by stripping out some of the stuff you don’t want to pay for, but then occasionally want…such as live sports. Remember the Oscar-nominated song, “Blame Canada” from South Park? The Pay TV anthem should be “Blame the NFL! Blame ESPN!” for this whole confusing mess. If a neophyte/technophobe asks you the following question at a cocktail party: “I hear I can cut cable. What are the options?”  G’luck, you’ll be three drinks into it or they’ll have walked off.

And just when you think this might have sorted this itself out….when the vMPVDs (say that one out loud or try typing it ten times) like DirecTV Now and YouTube TV offer a critical mass of channels and functionality, so you only have to make eensey-weensy levels of compromise instead of God-awful [First World Problem-ish] levels of compromises, along come a whole lot of industry perambulations that are going to create a hot mess all over again. Love Netflix? Say goodbye to Disney and Pixar next year, and say hello to Disney’s own branded streaming service. Thought you had sports figured out or chose the vMPVD that had the most sports content? Say hello to ESPN+ (has anyone said hello to ESPN+?). Then, look at the daily headlines — AT&T-Time Warner (please, please, please don’t mess with HBO)! The battle for Viacom/CBS! The bidding war for 21^st Century Fox! What’s Apple Gonna Do? — and the 20% – ish of you who have cut the cord, alongside the rest of you who are understandably deer in the headlights on this one, will have rapidly concluded that whatever choice you made isn’t exactly future-proofed.

And then, on your next trip outside the U.S., try to figure out what you can and can’t watch on your tablet (Netflix, mostly yes! Most other stuff, mostly no!).

Actually, what you might conclude, after skinny bundling it, plus the new (surprise!) unbundled price of broadband, plus Netflix, plus Hulu, plus Amazon, plus HBO, plus Showtime, plus some sports, plus the 3-4 things your particular vMPVD inevitably doesn’t have, plus the three sticks for your “not smart TVs”…end up being more expensive and a whole lot more trouble than if you’d just stuck with cable in the first place.  Or, plunge yourself back into the 1970s with an antenna (really, they’re selling like hot cakes) and actually watch This is Us when it’s on and with your family. Or, you could head in the Leave No Trace direction.

Kidding aside, there are some great things happening. Yes, Peak TV with 500+ new scripted shows this year alone, and untold billions being unleashed to create more content. Lots more choice of programming options and bundles. And there are steady improvements in on-screen UIs, programming guides, and even voice integrations such as Alexa to help make all this stuff a bit easier to sort, search for, and figure out.

But the business end of this is going to go through a lot of tumult over the next 3-4 years. First, there are 3-4 major deals involving major media/content companies, with more inevitably coming. Second, there will be landmark battles on rights fees, as the media landscape gets rearranged in this wave of M&A. Prediction: the sports leagues are in for a take down. Third, there’s going to be a shakeout in the whole vMPVD space, with 2-3 emerging as clear winners. How this will all play out, with the move by some properties such as Disney, ESPN, CBS, and so on, to their own direct-to-consumer offerings is anyone’s guess. Parenthetically, I think the direct-to-consumer approach, for all but a few properties, will be a disaster.

The end result, in my view, might be greater emphasis on a la carte, one-of type offerings. Subscribe to FX this month to binge a couple shows, then switch to Showtime next month. Buy a season’s worth of your favorite ball team through MLB, rather than choose the vMPVD that carries your local sports channel. All of this might be made easier by an evolution in the UI, in search, and better integration in the new generation of Smart TVs. This is a great project for the voice-driven assistants, like we’ve started to see with Alexa and Siri (but still has a long way to go). It’s also fun playground for AI, as long as it doesn’t get too creepy on us.

Consumers might save a few bucks along the way, but at the other end, they’ll be a lot more educated on the arcana of rights fees, the industry landscape, and what content is worth paying for. But it’ll be messy along the way. And it will get worse before it gets better.