Brett Sappington presented on the impact of over-the-top (OTT) video services. He discussed how OTT services are capitalizing on sub-optimal pay TV and availability/portability of content. This is resulting in the polarization of operators into premium and basic service providers. Premium providers emphasize high quality and convenience while facing higher costs. Basic providers cater to price-sensitive customers with lower risks and costs but also lower revenue. Sappington notes that for long term viability, OTT services need to be profitable, premium providers require premium support, and basic providers should find ways to differentiate.

1. Multiscreen TV:
The Analyst Perspective

2. Special Research Session
Presenter:
Brett Sappington
Director of Research
Parks Associates

3. The Results of OTT Services
OTT services capitalizing on:
• Sub-optimal viewing (quality vs. cost) Pay TV
Services
• Availability of content
• Finding content
Quality of Viewing
• Portability of content
Experience
OTT Video
• Alternate business models Services
Results of operators following:
• Addressing consumption trends
• Increased cost / limited revenues
• Inevitability of OTT services
• Increased polarization among operators Cost to the Consumer

4. Polarization of Operators
Character of Services Benefits
Premium Service
Higher ARPU per subscriber.
Capitalize on heightened
appetite for content Barriers to entry for other operators.
Providers
Some supporting systems can be used for non-video applications.
Emphasize high quality Unique services can help minimize churn.
Emphasize increased
convenience (accessibility, Challenges
Variety of Services
portability, ease of use) Higher innovation costs.
Do margins scale appropriately?
ARPU
Character of Services Benefits
Lower R&D costs.
Cater to price sensitive
Basic Service
subscribers Lower risk in adopting technologies.
Providers
Customer base of laggers are less likely to churn for new services.
Subscribers are satisfied by
basic services Challenges
Lower ARPU subscribers.
Subscribers less interested in
viewing outside of the TV Price-based competition.
Price sensitive subscribers may churn for a better price discount.

5. Multiscreen Video Usage in
Western Europe
Frequency of Video Consumption by Device
Number of Video Viewing Sessions in the Past 30 Days
(Among All BB HHs or Tablet Owners)
16+ sessions 15 or fewer sessions
Tablet
Smartphone
UK
Computer
TV
Tablet
Smartphone
Spain
Computer
TV
Tablet
Smartphone
Italy
Computer
TV
Tablet
Germany
Smartphone
Computer
TV
Tablet
France
Smartphone
Computer
TV
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
% of Owners with Video Viewing Sessions
Source: Digital Video: Three Screens and Beyond
© Parks Associates 2011

6. Polarization of Operators
Character of Services Benefits
Premium Service
Higher ARPU per subscriber.
Capitalize on heightened
appetite for content Barriers to entry for other operators.
Providers
Some supporting systems can be used for non-video applications.
Emphasize high quality Unique services can help minimize churn.
Emphasize increased
convenience (accessibility, Challenges
Variety of Services
portability, ease of use) Higher innovation costs.
Do margins scale appropriately?
ARPU
Character of Services Benefits
Lower R&D costs.
Cater to price sensitive
Basic Service
subscribers Lower risk in adopting technologies.
Providers
Customer base of laggers are less likely to churn for new services.
Subscribers are satisfied by
basic services Challenges
Lower ARPU subscribers.
Subscribers less interested in
viewing outside of the TV Price-based competition.
Price sensitive subscribers may churn for a better price discount.

7. Keys to Success
Premium Service
OTT services need to be profit neutral or better for long term viability
Providers
User interface / recommendation innovations will be important
Plan long term OTT future and integrate plans into content deals early
Premium market position needs premium support
Basic Service
Be a profitable lagger – wait and adopt approach
Providers
Partner / white label to add high cost services
Find service differentiators
OTT Service
Maximize user base across markets
Providers
Benefit from Hollywood “gaps”
Prioritize partnerships