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Old: Will OTT survive? New: Will the cable bundle survive?

· October 20, 2014

The mainstream media is catching onto the disruption theme we noted in last week’s post on the new HBO and CBS services.

On Friday, we covered announcements from HBO and CBS to offer over-the-top (OTT) video services, independent of cable packages.  Moreover, in addition to HBO and CBS’s recently announced projects, earlier this month ESPN had announced a nine-year deal with the NBA to deliver basketball games via an Internet streaming service, and just this morning Lionsgate and the Tribeca film festival organizer announced their own subscription video-on-demand (SVOD) service.

In all of these packages, the details will matter (and likely vary) greatly, but a review of the headlines shows that journalists have latched on to the potential end of the cable bundle’s reign.

At the New York Times, David Carr writes that the competition and certainty provided by Netflix may have been the catalyst for cable and broadcasting incumbents unpredictably venturing into this new territory:

Netflix pointed a way forward by not only establishing that programming could be reliably delivered over the web, but showing that consumers were more than ready to make the leap. The reaction of the incumbents has been fascinating to behold.

He also used theories about disruptive innovation and competition:

For any legacy business under threat of disruption, the challenge is to get from one room — the one with the tried and true profitable approach — to another, where consumers are headed and innovators are setting up shop.

TIME seemed to be more skeptical about the benefits of these changes, but also noted that:

A careful, decades-long dance between pay-TV providers and networks has ensured that, for the most part, you need a cable or satellite subscription to watch live TV. Two back-to-back announcements this week could threaten this extremely lucrative business model.

Wall Street Journal’s Gautham Nagesh also suggested that the HBO news might not be so disruptive after all:

HBO’s new OTT service won’t break the pay-TV bundle, but it will have appeal, especially to boxing & GoT fans. That’s a few million people.

The AFP, however, found last week’s news to be significant:

For years, the notion of on-demand, anywhere television has been slowly disrupting the traditional pay TV industry. Now it seems that streaming video has hit a watershed moment.

US News too reported on the news, wondering if this would “kill” cable—or rather, cable’s business model:

Cable TV has been attacked on several fronts by groups trying to disrupt its pricey subscriptions by offering a la carte online video, but now the industry faces challenges from within. Stand-alone video services offered by HBO and CBS Corporation will offer users the chance to pay for those networks’ programs without buying a package of channels on cable TV, which could spell impending doom for that subscription practice known as “bundling” channels together.

It appears that the media narrative about OTT television has changed from ‘Will this exciting new service survive?’ to ‘Will the cable bundle survive?’

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.