OTT Competitors Should Unite

Over-the-top competitors should join forces. They ought to federate.

The independent OTT market isn't fractured; it's inchoate. My colleague Adi Kishore over at Telco Transformation thinks that this might be an excellent opportunity for some pay-TV service providers to serve as aggregators of independent OTT services. (See Growth of Netflix Competitors Could be Positive for Pay-TV Providers.)

And he's right. From the standpoint of an OTT provider, it makes some sense; you get to address a much wider audience. From the standpoint of a pay-TV provider -- a traditional MVPD -- it also makes some sense; it's another service. Current MVPD subscribers would get access to more content.

But I'm a little skeptical the proposal would work.

Among the motivating factors for many cord-cutters (and many cord-nevers) is that the traditional cable bundle costs too much. Another is never having to deal with an MVPD. If you're a cord-cutter, having your MVPD aggregate your OTT options doesn't help at all. You're back to having a cable subscription.

But part of the frustrating thing about cord-cutting is that compelling content is flung across several competing OTT providers (as Adi also noted). If you stitch together your own bundle, your aggregate bill can quickly rival what you'd pay an MVPD for a classic cable package -- and you'd be getting far less.

There's only two ways I can see this working from a cord-cutter's perspective.

One is if, as Adi suggests, MVPDs create a tier that can be populated with competitive OTT services. The other is if OTT services do that themselves. In truth, both might be problematic. Some Tier 2 and Tier 3 MVPDs are already supporting Netflix; they might be amenable to an OTT tier.

But I can't see the biggest MVPDs creating an OTT tier. They're already hostile to Netflix Inc. (Nasdaq: NFLX) and they don't much like Hulu -- even the one that owns a slice of Hulu LLC . What good is an option that the vast majority of viewers -- MVPD subscribers and cord-cutters alike -- are unlikely to ever see?

But if the competitive OTT providers somehow federate? The idea would be to throw all their content behind a single interface. They would charge a single flat fee. It's streaming; it would be easy to track which shows every individual account-holder has viewed, and then distribute the proceeds proportionally.

Cord-cutters would have one bill that should still be much more affordable than an MVPD subscription, but they'd get access to a much wider menu of content, grazing whatever they consider the best shows from a variety of sources.

The potential benefit to the OTT providers would be wider audiences. A potential problem is that there might not be enough cord-cutters to make a revenue-sharing proposition worthwhile. On the other hand, the same viewers who subscribe to both a pay-TV service from an MVPD and a competitive OTT service or two might also find a federated OTT service appealing, expanding the potential pool for the service.

— Brian Santo, Senior Editor, Test & Measurement/Components, Light Reading