Over-the-Top Competition for Multichannel VOD

A new study by The NPD Group estimated that US Internet-delivered VOD (iVOD) $204 million last year, up  while paid movie rentals via pay-TV/multichannel VOD was $1.3 million. The big players in the Internet movie rental business are iTunes, Amazon, Vudu (Walmart) and Cinema Now (Best Buy), and there are many others. (Netflix and Blockbuster's streaming services are not considered part of this market; they are subscription video on demand services, rather than transactional/one-shot/pay-per-view).

The big news is that among the iVOD users, usage of pay-TV VOD declined 12% and the size of the pay-TV user base is declining.

Often lost in the discussion of cord-cutting and cord-shaving in the pay-TV market is that the different segments of the market have very different competitive dynamics.

• Until Aereo, broadcast signals were essentially not available via the Internet (although programs are via Hulu, CBS's tv.com and the network web sites). (Of course, in some ways broadcasters are the most promiscuous of all in terms of distribution, after all, they do broadcast their signals for free to all with an antenna.)
• Cable services are even less likely to be available. This makes perfect sense given that those channels rely on multichannel television for both distribution to reach viewers and license fees. Some of their programs are available via Hulu, Netflix, and their websites, but typically episodes that are not that recent and often not that many of them.
• Recent movie VOD is one where the Internet-delivered selection (the subject of NPD's study) is very competitive with the pay-TV offering, particularly in the easy of navigation of the available choices.
• In adult video, the Internet offering trounces pay-TV's (more selection, lower cost, more salacious content) and the revenues have followed, as I described in an earlier post.

The other segments of the pay-TV video offering are smaller and include foreign language services and out-of-market sports packages. It is hard to generalize about the Internet availability of the former. With respect to the latter, the MLB Extra Innings and NBA League Pass  are available on Roku, Apple TV and many other Internet platforms. NFL Sunday Ticket is available only on the Sony PlayStation 3 and DirecTV. NHL Center Ice is available only through pay-TV providers.

One thing that seems clear from the results to date is that, to the extent that the Internet-delivered services have similar access to content as the pay-TV providers, their offerings are pretty competitive and they have often been quite successful. It is doubtful that this message is being missed by any of the players in the content business. Still, there are pretty compelling reasons for certain content providers to tread carefully or slowly in this direction.