Don’t Believe the OTT Hype
Back in early December, Streaming Me- dia’s Dan Rayburn wrote a lengthy and in- cisive analysis of why OTT business success has thus far eluded even the biggest players
in the market, including Netflix, Amazon, and
Hulu ( go2sm.com/rayburnott). He broke down
the numbers on subscribers, revenue, and content licensing costs to show that the status quo
is unsustainable—subscriber numbers aren’t
high enough, subscription fees are too low, and
licensing is through the roof. Netflix alone spent
$5 billion on content licensing and creation in
2016—up 50% over previous years, while the
company’s revenue has only grown 26% compounded annually.
Rayburn wrote this just after the introduction of AT&T’s much-hyped Direc TV Now, the
latest OTT cable replacement package to hit
the market (others include Sling TV and PlayStation Vue). As Rayburn also reported, AT&T
reserved CDN capacity to support up to 1 million subscribers at launch, though the company has yet to release early sign-up numbers.
AT&T offered major incentives for early sign-up—customers who prepay for 3 months in
advance get an Apple TV, and customers who
pay 1 month in advance get a free Amazon
Fire TV Stick.
Packages range from $35 per month for 60
channels to $70 per month for 120, though early adopters of the 100-channel tier can lock in
at $35 per month rather than the list price of
$60. With those numbers, it’s hard to see long-term success for the service, though Direc TV
Now has the advantage of being just one of
the many services AT&T offers. The company admitted that part of its goal in launching
Direc TV Now was to entice customers to sign
up with the company for internet or mobile, or
even convince them that a subscription to the
regular Direc TV service is worth it.
I subscribed to the 100-channel “Go Big” tier,
and I was quickly reminded of why I ditched
cable TV in the first place. Sure, it’s nice to be
able to channel surf, though it’s a bit awkward
with the Apple TV remote, and it’s great to
stumble on a movie that I loved but might not
have thought about searching for on an SVOD
service. (Within minutes of getting Direc TV up
and running, I was enjoying Weird Science.)
And from a technical standpoint, Direc TV Now
is impressive. It has only a 1- or 2-second lag
when switching channels, and the picture qual-
ity is as good as cable (AT&T hasn’t released any
information about what bitrates it’s delivering).
But of the 100 channels I now have at my fin-
gertips, I’ll still only watch a handful of them
regularly. I’m not in one of the markets that
includes the big three networks, so I don’t get
NBC or ABC (CBS isn’t even included in the ser-
vice). I’ve got a digital antenna for that, but if I’m
going to pay for a cable replacement service, I
shouldn’t have to augment it with over-the-air.
And then, of course, there are the commercials—or on some channels, the 90 seconds or 2
minutes of cheesy synth music while the screen
displays a placeholder because Direc TV Now
hasn’t been able to sell any ads on that show
or network. I’m not sure which is worse—
commercials for things I don’t want (or that try to
convince my kids, who’ve grown up in a com-mercial-free household, to nag me for things
they do want), or those placeholders, which
only serve as a reminder of the business challenges a service like Direc TV Now faces. If most
early subscribers sign up for the 100-channel
tier at the discounted rate, that can’t be good
for AT&T if many of those channels aren’t generating any advertising revenue.
I’ll probably keep the service for a couple of
months, even though it doesn’t offer many of
the things that we’ve come to expect from cable, like DVR or even the consistent ability to
rewind live programming. After that, though,
I’m not convinced that AT&T has figured out a
way to keep me as a subscriber, or to make its
service a success in the long run.
Eric Schumacher-Rasmussen ( email@example.com)
is editor of Streaming Media, as well as conference chair of
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