While over-the-top video has made huge strides over the past few years, those cutting the pay-TV cord are still, by and large, early adopters.
With the high-prices of cable and the rapidly expanding choice of content available online, why exactly hasn’t the mass market started to cut the cord? Because for all the talk about the cost of pay TV, most people really like the content they get on their set-top box. It’s reliable and easy, much if it’s exclusive and there’s a whole lot of it bundled together.
And it’s that bundle that really matters, both in the world of pay TV and, believe it not, over-the-top.
In fact, it’s the bundle that’s responsible for Netflix’s success. What consumers get with a Netflix Watch Instantly subscription is a whole lotta perceived value by having access to tens of thousands of titles, all bundled together, for a low subscription fee. Hulu is built on a similar concept.
When I predicted last December that 2011 would be the year of the virtual video operator, what I was really talking about the bundle. In other words, 2011 is the year someone — Apple, Microsoft, Google or another company — finally brings a bundle of channels to over-the-top that looks, smells, and even tastes like a pay-TV subscription.
Judging by the news this week, the race to bring that bundled content over-the-top to the TV screen is on. Apple scored a big win, bringing perhaps the second most successful OTT paid service to the Apple TV in MLB.tv and NBA subscription services.
There was also talk this week of Microsoft’s renewed efforts to bring IPTV services to the Xbox, and also a possible new bundled content service platform. This follows up last year’s rumor that Microsoft had been in discussions with media companies to create a virtual service offering of video channels in a subscription package.
For both, it’s all about the bundle.
While economists have long touted the benefits of bundled goods and services and cited the Internet in particular as the perfect distribution channel for bundled content, many cord cutters have pointed to the expensive bundled cost of pay TV as the reason for their cutting the cord.
But what both Apple and Microsoft understand is that the bundled-goods theory still applies in the world of over-the-top video, because an irrefutable law of consumer behavior dictates that they will gravitate towards perceived value. Sure, content-bundles in OTT may be narrower than the huge array of linear content channels providers in the world of pay TV (such as, say, a subscription to a season of live baseball games), and cheaper, but they are, in fact, still bundled content goods.
So don’t think OTT is going backwards as it begins to resemble, in some small ways, pay TV over the next few years. What’s happening is that the big-players want to push beyond early adopters, and they understand the content-bundle is the linchpin in making cord cutting a mass-market phenomenon.