Over-the-Top Video Delivery Speaks to Minority Markets
Colin Dixon, Practice Manager, Broadband Media
February 19, 2009
Last week I was invited to attend an LA launch event for a new over-the-top video service dubbed &TV, yet another example of the host of new vertical content services targeting looking to use the Internet to deliver programming directly the living room TV. &TV is an excellent example of how the stage is being set for an explosion of similar services. It shines a light on why the economics and technology of Internet delivery are set to change forever how we access entertainment in the 21st century.
Korean Not Spoken Here
With 1.5 million South Koreans living in the U.S. today, there is a significant audience for Korean-language television programming. Major cities with sizable Korean populations already enjoy a few dedicated radio and television stations, and a network of video stores catering to this audience has matured and continues to do a brisk trade even as chains such as Hollywood Video file for bankruptcy. For those not in a major metropolitan market, the choices are much more limited: satellite television may be the only option. For example, Dish Network offers five Korean-language channels at $5 a month each. This is a far cry from the 500 channel universe English-speaking viewers have come to expect.
This speaks to the difficulties with which traditional TV delivery models have had in serving minority audiences in America during the last 20 years. A substantial audience thinly spread throughout the country is simply not economically reachable. That is, until now.
Connecting the Dots
With broadband penetration in the U.S. now at close to 70 million households, many Koreans living in the U.S. have access to an Internet connection perfectly capable of delivering high-quality video to their PCs. Even the slowest broadband connections can support a download delivery model. And with Internet delivery rates as low as 10 cents a gigabyte, the possibility of launching a television service to all Koreans living in the U.S. has suddenly become very economical and thus very real.
Enter Celrun, a South Korean company that makes set-top boxes and turnkey OTT delivery systems. Working with SK Telecom, Celrun has already launched a broadband television service in South Korea called Broad&TV. Leveraging existing broadband connections, Broad&TV has been able to quickly build the service to around 800 thousand subscribers, making it the largest OTT PayTV operators in the world. This should give many telecoms, especially those investing in expensive network upgrades to support traditional telcoTV, pause for thought.
The Perfect Storm
So the stage is now set for &TV to launch in the U.S., and the formula appears to be convincing. Add (1) a large, population of Koreans with broadband connections, (2) a dearth of Korean-language video entertainment, and (3) a robust but economical technological solution with access to all the best (and, I’m sure, some of the worst) Korean entertainment has to offer – and you have the makings of a successful OTT video delivery service.
For $26 a month and a two-year commitment, &TV subscribers will have immediate access to more than 5,000 hours of video content, growing rapidly to 30,000 hours, 70% of which is included in the cost of subscription. &TV is expecting to add 2,000 hours of new content each month, drawing heavily on new shows originally broadcast in Korea and a large PPV library costing $1-$2 a movie. And if the quality is as good as I witnessed at the event, service subscribers will be very happy.
Will &TV achieve success given its business model and niche audience? One cannot say with certainty that this will be the case, although if the success of Broad&TV is anything to go by, the signs are very positive. However, one thing we can say for sure is that there will be many more companies following in their footsteps. And there is a very good chance that one of these new OTT video services will be targeting you!
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