While direct-to-consumer over-the-top (OTT) offerings have sprouted in the U.S. in the past few years, many regions are further along with OTT. Areas with less pay TV penetration see more success with OTT, said Braxton Jarratt, CEO ofClearleap, interviewed at the 2015 NAB conference.
“It’s funny that almost every other country is ahead of the U.S., which most people don’t know here,” Jarratt said. “The pay TV penetration in the U.S. is the highest of pretty much anywhere in the world, but I think that’s what kept programmers from going direct-to-consumer because A) there’s leverage that the operators have but B) there’s a smaller addressable market if 80 percent of the population is pay TV.”
While OTT and pay TV seems like an either/or proposition in the U.S., other regions show the two models coexisting.
“If you look at the Nordic region, where HBO has gone direct-to-consumer over a year ago, the pay TV penetration is 50 percent or less, so that addressable market for OTT is huge as a percentage of the total population,” Jarratt explained. “If you’re a content owner, you have to do OTT, otherwise, you’re missing out on a giant spectrum of consumers. I think Nordic is probably one of the most advanced. Some of the Asian markets where there’s a high GDP, high broadband penetration, and relatively low pay TV penetration, you’re seeing OTT one or two years ahead of where we are in the U.S., and what I find interesting is they’re coexisting with the existing business models.”
Eric: Hi, I’m Eric Schumacher-Rasmussen, editor of Streaming Media Magazine here at NAB 2015 with Braxton Jarratt who is the CEO of Clearleap. Hey Braxton.
Braxton: Hey, how are you doing?
Eric: Good, thanks for joining us. Clearleap is a company that helps video publishers and entertainment content owners with their multiscreen solutions. Current clients include A&E networks, HBO, and Scriptz, among others. Speaking of HBO, 2015 really seems to the year of direct to consumer offerings, right, with HBO Now, HBO Go, Sling TV. How does Clearleap fit into that equation? How is Clearleap helping publishers with their direct to consumer offerings?
Braxton: Well, we started about 6 years ago with the hope that all this would happen, and you see today on the floor where direct to consumer and even TV authenticated, you know, services become really mainstream, and so we started building core software that made it really easy to take your content in whatever form you have it, usually some high resolution mezzanine type file, and then do all the things that you have to do really quickly, efficiently, use internet technologies, the cloud, in order to make all that content available to publish online. Then we built the systems that enable content owners and brands to essentially manage a really highly scalable service direct to the consumer that allows them to pay directly with a credit card, do authenticated services or have a free to air service because frankly there’s going to be a combination of all those things going forward with all the different business models that we’re seeing.
Eric: Right, and speaking of the other business models, there’s been so much written about cord-cutters and cord-nevers. What impact are services like HBO Now and Sling TV going to have on the cable companies and the pay TV companies from your perspective?
Braxton: Well, that’s the million dollar question.
Braxton: Billion dollar question probably. That’s what everybody’s talking about now, looking really hard at the idea. The premise with HBO Now being that they’re going after that market segment that wouldn’t otherwise subscribe to cable. That’s kind of how their positioning it to their partners, but I think everybody knows there’s some segment of the population that that would be the tipping point that says, “You know what, I am ready to cut the cord because of that.” So I think there is no debate whether it’s going to have an effect, it’s just how big is that effect going to be and does the benefit to the programmer outweigh the risk of alienating that operator? But I think the, you know, it’s already happening. It’s going to happen. If you look worldwide especially, there’s these kinds of services they’re everywhere, ubiquitous, and so I think that’s our future is a combination of direct TV plus coexisting with the existing business models.
Eric: You know, if HBO Now was always looked at as one of those tipping points that might convince people, “Okay, I can get rid of my paid TV subscription.” The other one has to be sports, particularly live sports, right? It’s conventional wisdom that, you know, once there’s a critical mass of live sports available over these kinds of services, that could really be, if not a death note for cable, that could put a serious dent in subscribers.
Eric: Do you see more and more live sports coming to these kinds of direct to consumer services?
Braxton: Absolutely. We’ve seen examples with NFL mobile doing direct to consumer on a mobile device to where they carved out specific rights to be able to do that while still selling the multibillion dollar, multi-decade rights to DirecTV and the networks for the big games. I think what we’ll see is more and more of the biggest brands who really need the cable pay TV dollars to pay the players and pay the rights that they pay downstream, but they are going to carve out the ability to, you know, say beyond mobile direct to consumer or be on connected TVs direct to consumer and monetize those things separately kind of the same way entertainment companies have content licensing windows based on time.
Braxton: But I think that’s what’s going to happen for the big brands. I think that smaller brands, they’re already going direct, you know, OTT. Tennis Channel is an example of one that is a smaller niche but very passionate fan base and there they have a paid, you know, OTT service, and I think we’re going to see a lot of those happen, you know, because they don’t have the same sort of long deals and the need to have a multibillion dollar licensing deal .
Eric: Right, right. Now, you mentioned earlier about the availability of these kinds of services internationally and Clearleap is an international company. Are there other markets, I can think of one or two, that are ahead of the US on the availability and the uptake of these kinds of services. What are they and what do you seeing there?
Braxton: You know, it’s funny that almost every other country is ahead of the US, which most people don’t know here. The pay TV penetration in the US is the highest of pretty much anywhere in the world, but I think that’s what kept programmers from going direct to consumer because A) there’s leverage that the operators have but B) there’s a smaller addressable market if 80 percent of the population is pay TV. But if you look at the Nordic region, where HBO has gone direct to consumer over a year ago, the pay TV penetration is 50 percent or less, so that addressable market for OTT is huge as a percentage of the total population. If you’re a content owner, you have to do OTT, otherwise, you’re missing out on a giant spectrum of consumers. I think Nordic is probably one of the most advanced. Some of the Asian markets where there’s a high GDP, high broadband penetration, and relatively low pay TV penetration, you’re seeing OTT one or two years ahead of where we are in the US, and what I find interesting is they’re coexisting with the existing business models.
Braxton: They are doing authentication, they are doing TVE, authenticated TVE, but they’re going direct to consumer and everybody seems to be okay with that.
Eric: Right, right. Exactly. Well thanks so much, Braxton. I’ve been speaking with Braxton Jarratt from Clearleap. I’m Eric Schumacher-Rasmussen signing off from NAB 2015.
Braxton: Thank you.