Sony Inks ‘Preliminary Deal’ To Bring Viacom Channels to OTT TV Service: Reports

Emergence of ‘Virtual’ MSOs Will Shine Spotlight on Usage-Based Pricing for Broadband, Analyst Says

In a move that possibly gives it a leg up against others that are developing “virtual” MSO services, Sony has reached a “preliminary” deal to carry channels from Viacom, which owns networks such as MTV, Comedy Central and Nickelodeon,The Wall Street Journaland other media outlets are reporting.

Sony has not announced plans for its virtual pay TV service, but it’s planning to launch it later this year and deliver it to its millions of deployed, broadband-connected Playstation consoles and TV sets ,as well as PCs, smartphones and tablets, the paper added.

If so, Sony  will find itself in a growing field of aspiring virtual MSOs.  Intel Media claims to be on track to launch an over-the-top OTT service powered by its own set-top box later this year, but has reportedly had difficulty signing content deals. Google is reportedly working on its version. And they’ll all need more than Viacom to play ball if they are to create a compelling service that can compete with offerings from incumbent cable operators, satellite TV services and telco TV providers.

The reported deal between Sony and Viacom puts the CE giant “squarely in the lead to bring to market the first virtual MSO,” Moffett Research analyst Craig Moffett wrote in a blog post Friday.

But he says the race to bring the first virtual MSO to market is just a side show, but “THE central issue defining the value of the cable industry going forward.”

Thus, Moffett contends that “the real race is over usage based pricing” of broadband services. “Whether UBP arrives before or after one of these virtual MSO services gains traction is perhaps the defining issue for how the media ecosystem will evolve from here.”

Moffett surmises that Sony will likely have to pay more for Viacom than Comcast or Time Warner Cable does now, but argues that Sony can still undercut the traditional pay TV model. “ They’ll just accept lower margins in order to do so,” he said.

UBP will be critical to what Moffett refers to as cable’s “transport charge” – or the margin that will appear as the traditional way of delivering pay TV migrates to one that is shipped over the Internet.

“If cable operators can charge for the incremental transport (usage) required by services like Intel’s or Sony’s, then they will be agnostic as to whether customers get their video directly from the cable operator or whether they ‘cut the cord’ and do so through an intermediary.”

Signs of UBP have begun sprout in the U.S. broadband market. Comcast is now testing UPB policies in several markets that are similar to policies in place at Mediacom Communications and Suddenlink Communications.  Time Warner Cable, meanwhile, has introduced usage-based plans that primarily target lighter Internet users.

The higher usage ceilings might recoup the transport charge for the average home, Moffett wrote, noting that the average home watches 250 hours of TV per month, equating to about 500 Gigabytes of data – more than many of the caps in place today.

The FCC’s Open Internet order allows usage-based pricing. But, as Multichannel News reported last June, the Justice Department had been contacting MSOs as part of an investigation that will look at the competitive effects of Internet data caps and other policies.