Colin Dixon
February 14, 2012

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Virgin Media, the British cable company, announced last week that it intends to open up the company’s TiVo-branded DVR to over-the-top (OTT) video providers. That’s right: a cable operator is welcoming OTT providers such Netflix and Amazon’s LoveFilm onto a company-provided DVR. Talks are at an early stage but Virgin’s intentions are clear. In the words of CEO Neil Berkett, “We want TiVo to be completely open. We’re talking to everyone.”

The extent of this new openness will be gauged in part by whether these conversations include archrival Sky, who has its own OTT offering in SkyPlayer. Should Sky be invited to participate, we could be witnessing a major shift in how U.K. companies operate.

You may recall that Cox Cable announced a similar agreement with TiVo in August 2011. In this case, customers could buy a TiVo at retail and Cox would support it. The TiVo was to include OTT offerings such as Netflix and Amazon, as well as unified search across both cable and online services. The agreement looked promising, but customers have yet to enjoy its benefits—the deal remains mired in contract negotiations.

It is worth asking whether operators like Virgin are leading the fox to the henhouse. Won’t partner OTT providers compete at least in part with the company’s offerings? This matter is not lost on Virgin, as the company’s leadership appears to understand that OTT is both an opportunity and a threat to incumbent operators. Left to their own devices, subscribers will undoubtedly find the low prices and on-demand access of OTT services attractive and, over time, begin to see these services as substitutes for some or all of a PayTV offering. For example, in just the last year, the number of Netflix streamers thinking of downgrading their PayTV subscription—for example, by canceling HBO—doubled to 32%.1

This may be true, but if an operator can help subscribers find the content they want to view—regardless of source—it is likely to remain relevant in their entertainment lives. Remember, today’s adult broadband consumers are awash in content. That’s not the issue. The challenge is figuring out which service has a particular movie or show and which offers the best deal. By aiding subscribers in the search and discovery process—a centerpiece of these integrated offerings—operators will be providing a highly valuable service. In the end, this serves to reinforce the value of the PayTV content they provide. Who would bother to rent a movie from Amazon if it is available for free in the operator’s VoD system?

On some level, it is clear that the folks at Cox understand this as well. Yet its foot-dragging stands in stark contrast to the increasing pace of OTT service evolution. Just last week, Amazon licensed content from Viacom, while Verizon and Redbox announced they were entering the OTT arena with a Netflix-like DVD and streaming service. If operators do not move more quickly, they run the risk of losing that cherished central role in the entertainment lives of PayTV subscribers.


1TDG primary research, 2011


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