Like It or Not, The Future of PayTV is Broadband

In the last few months, there has been a flurry of announcements from multi-channel operators regarding the fact that they had (finally) brought their PayTV services to Xbox 360. Only last week, Comcast announcedXfinity on-demand video on Xbox. Verizon announced a client late last year that included live broadcast channels as well as on-demand video. In the UK, operators Sky and BT have had clients on Xbox for more than a year.

At first glance, this activity might seem confusing. After all, an operator already brings quality video services to the TV through a dedicated managed network and set-top box. Why waste time with unmanaged delivery to the TV via broadband and an Xbox only to bring shows and movies to which the viewer already has access?

We can best understand this activity by looking back to the start of the OTT streaming revolution in early 2009. This was just after Netflix had introduced its Xbox streaming client. In the three months that followed,one million people had enabled the client and streamed 1.5 billion minutes of video. This remarkable performance was, in part, a testament to how ready the game console audience was for an Internet platform that served not only their gaming needs but their video needs as well.

Since then, Microsoft has been working to reposition the Xbox from a simple game console to a home media hub—a phenomenon TDG first predicted in 2005. Microsoft has since created its own online movie store (Zune) and signed up a number of independent OTT providers including Hulu Plus, ESPN, MLB.com, BBC iPlayer, SkyPlayer, and LoveFilm, to name but a few. Microsoft is clearly determined to make the Xbox the only TV platform a user will ever need and has had success with this approach. The company just announced that 20 million Xbox Live members now spend more time watching streaming video on the box than playing games.

Therein lays the problem for operators. If their content services are not available on the Xbox, they run the risk of being ignored by the 20 million folks already watching streaming TV content on this platform. And as those users increasingly turn to the Xbox and its services, they will decreasingly turn to their PayTV service. One day, perhaps, they may decide to forgo cable altogether. A far-fetched idea at the moment, but it underscores an inevitable fact that all PayTV operators must face: their future is tied to broadband delivery and the Internet. The extent to which they incorporate IP will determine in many ways the extent to which they survive in a multi-screen or quantum universe.

There are, of course, several benefits to this shift in delivery. User interfaces on Xbox are generally gorgeous, fast, and easy to use; in stark contrast to those stuffy, clunky set-top box guides. As well, reaching all of a subscriber’s screens from the Internet is now a relatively simple matter, quite different from the heavy lifting required to roll out and support such services as Sprint TV and U-verse Mobile TV. For an ISP, reaching customers over broadband is less expensive than building a telco TV network. True, broadband video delivery offers many challenges, in particular securing high-value content and ensuring consistent high-quality performance. But to a large extent these problems have been overcome.

For some, the benefits of broadband delivery have already goaded them toward transitioning their PayTV services. Operators like Jazztel in Spain have shut down their dedicated telcoTV networks and have shifted entirely to a broadband infrastructure. Such companies are already reaping the benefits of an all-IP delivery over broadband network. Other operators, such as BT Vision in the U.K., launched with broadband delivery from the start and now view platforms like Xbox as a convergent media hub that (conveniently) connects to the television.

Just as broadband has proven to be a durable platform for the delivery of services such as telephony and audio, so it is now proving its metal in the delivery of video services. For operators the issue is no longer if they will launch on broadband, but how long they can afford to wait before they do.

If you would like to learn more about the issues in launching PayTV services on broadband, join us for our webinar next Wednesday entitled PayTV on OTT: How Operators Can Tame Video’s Wild West.