Don’t get us started on the name. We have always associated the term “over the top” with excess and extravagance. However, the entertainment industry uses the term to describe programming that goes over the top of the walled garden of proprietary distribution systems like Comcast and DIRECTV. Despite the odd name, there is no doubt streaming content, over the Internet to devices like smartphones and tablets offers many advantages over broadcasting content to televisions via cable, satellite or over the air.
The Television Generation is Fading Away
Source: Consumer Technology Association (CTA)
Millennials (age 18 – 34) are leading the charge away from traditional viewing screens and content delivery. Pick up any survey or report on TV viewing patterns and you’ll find statistics like those recently published in a 2015 Consumer Technology Association (CTA) report that says 11% of respondents had cancelled a subscription Pay TV service in favor of a less expensive, fee-based streaming service.
Furthermore, the CTA study revealed that 21% of respondents indicated they have been cable or satellite-free for at least a year. With 62% of millennials opting for paid streaming services and 57% of them preferring a computer, tablet or smartphone for viewing content the market will only get more skewed as younger generations replace aging television viewers. A ray of hope for the television and broadcast industry comes with the 77% of all respondents who said they would still buy a TV. Hook a TV up to a set top box or build one into a TV and you may still have an attractive platform for watching streaming content.
Packets vs. Pipeline
Although cable and satellite distribution networks allow providers to maintain a high quality of service, the Internet was designed for resiliency and flexibility. Internet packets can be resized, retransmitted and rerouted and they can be transmitted over different mediums like wires or radio waves. As higher quality content becomes available that offers higher resolution, higher frame rates and most recently, higher dynamic range and wider color space, fixed-medium content distributors will be challenged to provide high quality content for an affordable fee. Providing a dedicated channel with a proprietary cable box has fed a huge market for programming. On the other hand, the cable industry can be slow to change, look how long it took them to convert from SD to HD. Savvy consumers like those in the millennial generation have learned they can satisfy much of their content needs and a desire for newer brighter content via free or lower cost sources available online. Mobile devices like smartphones and tablets allow media consumption anytime and anyplace and in many ways, are technically better equipped to display higher quality content than older televisions.
One of the big advantages of packets over pipelines is the degree to which content can be optimized for the type and quality of the display and environment it’s running on. Companies like Trusight can transform, enhance and optimize content for the type of display, ambient lighting condition and even remaining battery power. The ability for the content streamed from the cloud to be modified in advance or on-the-fly and tailored to the device trumps fixed channel distribution networks that are limited by the size of their pipes and abilities of the devices connected to them. Trusight technology could not only provide many different feeds for OTT systems, it could also provide similar feeds for big media and distribution services.
New Set Top Box RulinG
A new proposed ruling from the FCC may change the set top market and make it less necessary for consumers to pay monthly fees from cable and satellite providers for a set top box. In the past, the cable industry successfully rebuffed an attempt to open up their platform using Cable Cards and they may be able to fend off the new FCC ruling as well but if the ruling stands we will not only see third party set top boxes providing a more cost effective alternative to the monthly rental charged by cable and satellite providers but we also may see set top box functionality built into the devices themselves. With more emphasis placed on the software side of content processing, we could see enhanced viewing experiences without major hardware upgrades. It is quite possible that this move on the part of the FCC is intended not only to open up competition to the aging and change-resistant networks but also to stimulate innovation. Broadcast industry insiders at the recent HPA Retreat acknowledged the powerful content delivery implications of hybridized systems that incorporate IP delivery and broadcast channels around the home.
Netflix, Amazon, Apple, and others are all considered OTT services that stream content directly to consumers. Parks Associates says that over 60% of U.S. households with broadband have at least one OTT subscription. Hulu has a mere 9 million subscribers compared to Netflix’ 45 million in the U.S. and 75 million worldwide but it’s growing at a faster rate thanks to a new $11.99 ad-free monthly fee.
The big telecom and cable companies that offer broadband services stand to win as consumers cut the cable cords but rely more heavily on their Internet services. They are also hedging their bets with investments and acquisitions. Time Warner is said to be in talks to acquire a 25% stake in Hulu which is jointly owned by 21st Century Fox and Disney and Comcast’s NBCUniversal.
TV Everywhere, a service that allows cable and satellite subscribers to watch programming on devices other than their TVs is seen as a possible way for these companies to compete with the OTT services although consumers, especially millennials may still balk at the monthly fees.
OTT and HDR
HDR or “High Dynamic Range,” in many viewer’s opinion, delivers more quality to content than 4K resolution while requiring much less demand on infrastructure and devices. Independent 3rd party testing of HDR vs 4K and HD displays shows audiences strongly positive and visibly emotional responses to HDR. Industry professionals say this quality jump is akin to moving from VHS to DVD and its like 3D without the glasses when executed well. The new HDR spec adds more contrast, more colors, and more details in depth perception for a noticeably improved viewing experience. Unfortunately, consumers will be required to purchase new TVs to view new HDR content. We expect there will be plenty of disgruntled shoppers who just purchased a new 4K (8 bit) UHD TV only to learn they won’t support the new HDR standards. Although in some cases upgrade kits may be available from the manufacturers at a not so nominal cost. Fortunately for some consumers, their current mobile device or computer may already have the capability to display some HDR caliber content. OTT streaming services are in a much better position to provide HDR content over the Internet than traditional cable and satellite providers and these OTT services are now delivering HDR content to HDR enabled televisions around the world.
Trusight has developed technology they call “Dynamic Luminance Management,” (DLM™) which is based on algorithms that replicate what human vision uses to transmit information from the sensors in the eye through a relatively narrow pipe (optic nerve) to the brain. Trusight produces images that can provide HDR-quality viewing on current devices, turning much of today’s content currently available, into an HDR-quality experience. Trusight technology is a perfect match for today’s OTT delivered content since it can be applied either at the source (in the cloud) or on the device.
As millennials lead the movement away from more traditional viewing devices and distribution networks toward watching OTT streaming content delivered over the Internet, consumers will be able to watch high quality content anywhere they can connect. OTT content can be watched on just about any fairly new device hooked up to the Internet. The viewing experience may vary but the flexibility of sending packets to all kinds of devices including connected TVs appears to offer the most programming bang for the buck to most consumers. Using new image enhancement software from companies like Trusight, OTT streamers may also be able to experience HDR-quality content without having to invest in new gear.