Over-the-top television has potential to alter TV consumption, disrupt television industry

Despite modest inroads in Canada, over-the-top (OTT) television has the potential to alter the way Canadians consume television, experts say. OTT, a form of Internet protocol television (IPTV), is the direct delivery of video over the Internet to any device, anywhere, at any time. “When I watch television and I don’t watch it through a phone company, and I don’t watch it through a cable company, but I go onto the Internet, and I go to a content-creator or a network site … I am bypassing the distributor and going over-the-top,” Duncan Stewart, director of research at Deloitte Canada for technology, media and telecom, said in an interview. Stewart said OTT has also been used to describe “television everywhere”—when a consumer buys video content from a cable or satellite company and can watch it on a variety of devices at different times. According to a 2009 research note by American firm The Diffusion Group, platforms for OTT delivery include computers, connected television sets, gaming consoles, PC extenders (digital media adapters), hybrid set-top boxes, connected DVD and Blu-ray players and open network access nodes (allowing open access to media from the Internet on a television set). Other potential devices include smart phones, tablet computers and GPS devices. Stewart said that, because OTT television involves bypassing the cable and satellite “middlemen,” it has the potential to cause “serious economic disruption” to the television industry. “I am a television station or network and I don’t want to pay cable companies any money. So I will go around them, direct to the consumer. Once that happens, what is to stop : why don’t I just go direct to the consumers and keep all of the money for myself?” Stewart said. Production houses or content providers with popular shows have strong brands, and could offer their programming directly, Stewart said. A November 2009 white paper by British digital television and broadband provider Endurance Technology predicted that as OTT becomes prevalent, distributors like ISPs are likely to form relationships with content aggregators. Aggregators will “look to become the single portal for all goods, service and content,” according to the paper. OTT is also a potential threat to Canadian content, as viewers would be able to access any content, any time. “If you have the world of OTT, there is no more ability for the CRTC to dictate what Canadians want,” Stewart said. “If I want to watch American shows with nothing but American commercials … I could do that, because it’s all over the Internet, and you can’t regulate the Internet.” A popular example of OTT television is American website Hulu, which provides commercial-supported streaming video from a variety of networks and studios. The site, only available to American viewers, is a joint venture between NBC Universal, Fox Entertainment Group and ABC Inc. “Over-the-top is already happening in Canada today. It’s just not very big,” Stewart said. “Fewer than one per cent of television is being watched over-the-top. The actual number is actually probably less than one tenth of one per cent. It may even be less than one one-hundredth of one per cent.” Canadian examples of OTT—while not so comprehensive—include any content provider that streams video or libraries like the National Film Board’s Screening Room or Radio-Canada’s Tou.tv. Bob Kerr, the CBC’s director of digital programming and business development, said in an interview that the broadcaster began putting video content online in the mid 1990s, but launched its consolidated video player in the fall of 2009. “It is very much a focal point of CBC.ca right now. The main impetus for that is that it aligns well with what we’re doing on air,” he said. Kerr said CBC.ca is gaining in popularity, but cannot compete with traditional broadcasting—for the moment. “They don’t pull in the kind of numbers that the broadcasts pull in, and it varies from program to program,” he said. “It varies from thousands per episode to tens of thousands per episode, and even higher depending on what it is, like for one-off events.” There may be advantages to OTT, such as the personalization of content delivery and increased portability, but there are also barriers to its widespread success. According to the Endurance Technology paper, OTT television faces four main challenges: “lack of Internet connections to television sets, bandwidth-limited video quality, lack of business models, and the challenge of navigating through millions of video programs and content clips.” The paper says these problems are on their way to being resolved, but it will take “a few more years” before OTT can compete with cable and satellite. Stewart estimated it may be five-to-10 years before OTT starts to make its mark with Canadian audiences. “Five years from now, it seems reasonable to think that somewhere between 10 to 20 per cent will be either OTT or television everywhere,” he said. “Ten years from now, that number will probably be between 25 and 50 per cent.” But Stewart didn’t say that OTT is “the future of television.” For the most part, Canadians watch broadcasts when they come on their television sets—and will continue to do so, for now. kfournier@thewirereport.ca

Over-the-top television has potential to alter TV consumption, disrupt television industry

Broadcast | April 14, 2010

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