02 May 2016

Revisiting The Innovator's Dilemma and OTT Competition with Cable

Over two years ago, in November 2013, I wrote one of the most popular posts on this site, Over-the-Top Video and The Innovator's Dilemma. In the wake of a Wall Street Journal article on Hulu's plans to offer a cable competitor service with live streams of certain channels controlled by its owners, Disney and Fox, I thought it worth revisiting that post. Where was the analysis on target and where did it miss? More importantly, what really changed?

What Changed?

The Hits

The Miss
  • The availability of over-the-top services didn't happen in one form that I expected -- the roll out of Aereo to additional markets. 
  • I made no mention that over-the top services would expand, but they have. PlayStation Vue, Sony's over-the-top service, not mentioned in the original post, launched in a handful of markets, then went national this year. Hulu's build-out of a service with streams of linear channels would be another expansion geared to the mass market. There have also been all manner of subscription video on demand services for niches by major companies like NBC Universal's SeesoWorld Wrestling Entertainment), and Crunchyroll for Japanese anime (its backers). In an earlier time, each of these would have been a cable program service.


    The Innovator's Dilemma continues to be a useful lens through which to look at the development of over-the-top video, finding its purchase in markets/use cases not central to the big screen at home. Unlike other innovations, however, the role of content makes the video distribution system unique. Some holders of high profile content can make more money going direct to consumers than through the cable bundle -- adult video made the leap a long time ago. The next ones to prosper over-the-top are the new services that probably couldn't get carried by distributor's protecting their margins (Crunchyroll, WWE), followed closely by those that are already sold a la carte (HBO, Showtime, and Starz). Those left are the basic cable channels, whose play in over-the-top is focused on their library content (like Lifetime Movie Club) and may be for a long time.