Fog of War

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Here we go again. The New York Post reported last Wednesday (September 11) that Verizon is having talks with “major programmers” about obtaining rights that will allow it to deliver FiOS TV subscription services outside its franchise areas.

With the treat of “virtual” MSOs from Intel Media and possibly Googe and Sony on the horizon, it would seem that just about any big pay-TV operator that has any inkling of the future is likewise pursuing similar deals.

Technology, of course, is not the core issue. Content delivery networks, adaptive bit rate streaming and super-fast broadband connections will enable these sorts of services. The hard part is obtaining the off-net rights from programmers that want to be friends to all-comers and don't want to get backed into any corners that would prevent them from working with this new class of onlinve video service provider.

It wasn’t all that long ago that EchoStar was pitching a bring-your-own rights model that relied on an adaptive streaming system that used technology coming way of its acquisition of Move Networks that would enable partners -- virtual MSOs, basically – to offer subscription services over-the-top. How’s that going? Nowhere fast, it seems, based on the number of deals (zero) that have come of that effort so far. Intel Media is talking about market trials, but offering nary a word about having secured enough content deals that will allow it to put together the kind of “smart” pay TV bundles that might help it win in a saturated market. It’s been a tough slog for these new entrants, but I believe it's just a matter of time before these barriers to entry are lowered.

Verizon declined to comment on the speculation of an OTT subscription TV strategy. The good news for them is that their pay-TV business is growing, so perhaps the urgency for going out-of-market isn’t at a high level yet. But if I’m a cable operator that’s losing video subs each and every quarter, seeking new customers outside my franchise area at least sounds tempting, despite knowing that doing so would be akin to declaring war on other cable operators. Verizon’s already at war with cable, so all is fair.

For now, no U.S. cable operator appears to be willing to entertain this potentially explosive OTT idea, at least publicly. Time Warner Cable president and chief operating officer Rob Marcus was asked last week  at the Bank of America Merrill Lynch conference if TWC’s programming contracts would allow it to offer services nationally, over-the-top.

He didn’t answer it directly, but expressed that TWC’s current focus continues to be on authenticated TV Everywhere apps for its existing base. “[A]t this point, we don’t really aspire to delivering an over-the-top service,” he said. “So for the foreseeable future, we are going to be focused on delivering video to people in our footprint. And, to the extent we can expand that offering to include out of home access, we are going to work hard to do that.”

But if deep-pocketed companies like Google and Intel Media find  a way to lock in the rights necessary to offer a virtual MSO service, it would seem obvious that traditional pay-TV operators would be forced to develop a weapon to match. But even if a cable operator was able to achieve the rights to create a pure-play OTT service, will any have the guts to fire that first shot and start a war with old friends?

Maybe not today. With the right, competitive motivation, aspirations have been known to change.