InsightFuel Thoughts on the market from the Amdocs Market Insight & Strategy Team

Having recently returned from CES, I was amongst the tens of thousands of people drooling over the thousands of consumer electronic devices on display. What is immediately noticeable at such conventions is the open, symbiotic relationship between service providers and device manufacturers. Almost every major wireless carrier announced a slew of new connected devices including smartphones, tablets, laptops and even automobiles. The relationship is clearly advantageous to both sides with carriers looking to drive network and service consumption while device manufacturers get to sell more devices. It seems that everybody loves connected devices…well almost.

There was one group of companies who were noticeably absent and rather reserved about embracing all things connected, namely television broadcasters and Pay TV content distributors such as cable and satellite companies. For the Pay TV industry, connected consumer electronics such as tablets, televisions and vehicles still present a challenging proposition. They bring with them a new consumption paradigm driven by ubiquitous connectivity and an ever growing catalog of content, much of which is freely available. While this offers great choice and flexibility to consumers, it does not sit well with the traditional content revenue models that have served the industry up until now.

And while smart televisions were a key theme of CES it was still not evident how Pay TV providers are looking to develop the relationship with these new connected sets that break the bonds with the familiar set-top box. For the moment Pay TV providers seem to be more focused on letting users remotely program the DVR using a Smartphone or search for content using a tablet, but there is still a long way to go in terms of truly embracing over the top devices and content. I discussed this in a recent eBook that I wrote looking at the new online experience battleground and potential OTT strategies for Pay TV providers. You can read the eBook here: http://www.dox-brand.com/ebooks/paytv/

In contrast, new online distributors are only too happy to partner with connected device manufacturers. Take Netflix for example who recently announced deals with several major device manufacturers to embed the Netflix “Watch Instantly” streaming service across a variety of connected platforms including internet-connected HDTVs and Blu-ray players (read more about it here http://gigaom.com/video/forget-tv-everywhere-how-about-netflix-everywhere/). Netflix now accounts for more than 20% of downstream internet traffic during peak times in US and they have crossed the 20 million subscriber mark.

While I don’t believe that traditional Pay TV companies are going out of business any time soon, I can’t help feeling that the OTT train has left the station and Pay TV providers are not really aboard. They still need to urgently accelerate their strategies to become the new online experience providers of choice before somebody else does.