Three Reasons Over-The-Top TV Apps Will Beat Big-Cable

With Apple bringing its second-generation living room box to market, it might be time for cable carriers to reconsider their decade-plus journey through the interactive TV desert. The Cupertino giant isn’t the only competition, after all; Google’s app-platforms are coming to an HDTV near you soon, the outlook for big cable’s own app efforts has never looked more dim.

A Short History of OCAP and Tru2Way

Before we go over the reasons why OTT apps will likely prevail, let’s take a quick look at cable industry’s efforts to develop its own interactive services and application framework:

The OpenCable Application Platform (OCAP) —  the specification for U.S. cable operators’ interactive TV efforts using a Java-based middleware platform — was first published in January 2002. The effort had been under development for many years before that, and since then had been re-cast under its own consumer-facing brand called Tru2Way.

Tru2Way got a coming out party at CES 2008, when Panasonic, Samsung, LG and others demoed new Tru2Way compatible HDTVs and renewed hopes for the moribund OpenCable efforts. Now, not only could you connect directly without a set-top box, but your TV would be able to perform interactive services (read apps).

So where are we now? Pretty much nowhere. While Verizon —  itself not a cable provider but an adoptee of OCAP and EBIF — pushed things forward by rolling out the industry’s first commercial app based on EBIF, the overall momentum OCAP and Tru2Way has stalled. Panasonic recently abandonded its Tru2Way efforts, while the carriers themselves don’t appear in too big a hurry either. While there are millions of OCAP enabled set-tops in the field, little progress has been made on actual apps or services.

The OTT App Era Begins

So why are over-the-top apps likely to win out over the cable industry’s efforts? Besides the lack of progress discussed above, here are three key reasons:

Carriers are too slow and cautious. Speed is perhaps the biggest reason carriers are being left in the OTT app dust. Cable MSOs have been cautiously developing their app-platform for over a decade. But they have been slowed down by a combination of factors: a large installed base of underpowered infrastructure, a fiscally conservative predisposition towards investing CAPEX, a lack of enthusiasm for the necessary market development needed for interactive services (at retail, developer and hardware partner levels) and  glacial testing and rollout process for their interactive services.

The mobile-market proved the OTT app model works. In a sense, over-the-top won in mobile as well, when Apple, and later Android, clearly beat out on-deck carrier app stores in the U.S. If that fact is any indicator, Apple, Google and others building on their platforms could conceivably move ahead of the MSOs in reaching consumers with app-platforms in just a few years.

Where developers go, consumers will follow. Anyone who knows someone working on an iPhone app, raise your hand. Now how many know someone developing a Java app for EBIF/OCAP? Thought so. Developer momentum is key; with an installed base of hundreds of thousands of hungry iPhone and Android developers now seeing a new market for TV apps, chances are high that these markets will see an explosion of innovation over the next few years.

The carriers had a decade to get this right, but I think it’s too late. Apple, Google, Boxee and a million-man army of developers is on the march, and in just a few years, we’ll likely see a serious new industry for OTT TV apps.

Related Research: TV Apps: Evolution from Novelty to Mainstream

Question of the week

What are the key reasons over-the-top apps will win out over the cable industry’s efforts?
Relevant Analyst
Wolf

Michael Wolf

Chief Analyst NextMarket Insights

Do you want to speak with Michael Wolf about this topic?

Learn More
You must be logged in to post a comment.
46 Comments Subscribers to comment
  1. Michael, agreed, the pace of progress has been slow — initially, I was upbeat when I saw the SelecTV release http://bit.ly/d2Q3GS

    Then, to your point, momentum seems to have stalled. Meanwhile, the CE leaders, such as Samsung, have gone into overdrive while the window of opportunity is still wide open http://bit.ly/cyGAZ4

    That said, attracting and engaing independent software developers to your open platform and APIs would seem to be the near-term focal point — it’s an acknowledgement that the TV apps “community of interest” will likely choose the winners.

    BTW, I welcome counter-points from others…

  2. @David – The problem with carrier-driven software ecosystems are numerous. First, they tend to be hamstrung by the carrier’s predispositions towards a closed-first mentality. Secondly, multiservice operators have a hard time fostering well-developed consumer-facing marketplaces that result in decent ROI for popular and well-done software applications. And perhaps the biggest nail in the coffin is that pay-TV standards bodies – CableLabs in this instance – move remarkably slowly and just can’t react to fast and nimble market moves by OTT players.

    It’s a recipe for failure.

  3. I think Google TV is a potential wildcard in the deal. If you look at what Amazon is reportedly planning (http://tinyurl.com/2bqokca) in launching its own app marketplace on top of Android I think there might be a similar opportunity for cable operators. Google is pushing hard (http://tinyurl.com/27fjg4a) to persuade MSOs to integrate their UI’s and EPGs with Google TV, which could be a perfect opening for MSOs to incorporate their own Android-based app ecosystem into Google TV on their STBs.

    Like Amazon, MSOs already have a billing relationship with their users, which would facilitate e-commerce and paid apps. But first they’d have to chuck EBIF/OCAP.

    1. @Paul – good point. I think trying to be a carrier friend is a logical strategy for Google, but I’m sure they’re very hesitant to let the Google Fox in the henhouse. I imagine that it’s a tough sell given the amount of control cable MSOs want. They make wireless carriers look like pushovers relative to the amount of control they like to maintain.

      1. @Wolf — No question, it’s going to be a tough sale for Google to close. It’s also a tough call for the MSOs. But it could be a matter of holding your friends close and your enemies closer. If the MSOs can figure out a way to package Google TV integration as a new, premium service tier — one that also adds value to their double/triple-play broadband offering — it might be better to have Google in the tent pissing out rather than the other way around. Still, not an easy call.

  4. Hey Mike – long time no talk/interaction. And to Paul, your TV Apps Novelty to Mainstream was a bellwether work! I’m steeped in Cable’s and Pay-TV’s current apps development arena both in my f/t and p/t (OCAP/EBIF Developer Network) roles. It took me a while to appreciate the sector’s control-freak approach. The difference are the target markets – everybody over 50 and the rest under 50 years-old. The babyboomers want limited apps working with their remote control – bound and synchonized to programming and purchasing – and well-behaved when working together. Everybody else will pick and choose from thousands of apps that can deliver any and every content possible – a quality vs. quantity play I still believe. But the former’s slowness to market frustrates me one year later, and I’m doing all I can in my roles to change that fact. Too little too late…I’ll wait to see what 2011 brings. Congrats to the SF Giants, by the way…

    1. @hey Robert – good to hear from you. Glad to see you are knee-deep in making this thing happen. Long time since ABI days!

      I think the generational divide around what is both desired and expected on TV is a huge one and valid. However, I think much of it is also demographic – meaning those who are early adopters and technology savvy, even older (and this also means more affluent) – may adopt these technologies and be open to them. I think the iPhone adoption (and now iPad) among older consumers may train them for desiring choice in an app-centric consumption model, even if that choice is highly controlled.

      I think Apple has a better shot at bringing the older generation over compared to the Google TV approach, which seems, at least early on, a bit disjointed and not as user-friendly (Google’s consumer efforts outside of search have shown a tin-ear towards toward useability and intuitiveness of navigation).

Explore Related Topics

Latest Research

Latest Webinars

Want to conduct your own Webinar?
Learn More

Learn about our services or Contact us: Email / 800-906-8098