ADDRESSING QUALITY ONLINE

Before they can monetize the service, pay TV providers will have to tackle quality. As operators they are expected to provide a better-quality service than the traditionally shoddy quality of videos posted on YouTube or other online sites. Consumers will always have higher expectations for any service they are paying for, said Calvin Harrison, vice president of marketing and business development for IneoQuest. TV-like quality on the PC is not a new challenge, but it is one that service providers will have to address with TV Everywhere.

“If they don't do something, then they are enabling their competition to gobble up their revenue source,” Harrison said. “They definitely have to deliver the bandwidth and, yet, with all these partnerships going on, they are going to have their mechanism used. I think the service providers want to make sure they don't become relegated to just a pipe in someone's house and they lose their prime generator. You are paying dollars for bandwidth versus content.”

But bandwidth costs money, and this is a big issue for operators, said John Reister, chief IPTV architect for BigBand Networks. And while there is excitement around TV Everywhere, there is not money coming in, he said. “The situation from the operator's perspective is it costs a fortune to provide and there's not a clear idea on how to monetize it,” Reister said. “There are some thoughts around per use, but people have not shown a great willingness to pay on a per-use basis. You could do a monthly subscription, but we also haven't seen a lot of subscription-based services either, in terms of being able to charge a significant amount of money. So the key here is advertising.”

Being able to synchronize a TV Everywhere service with a linear ad campaign holds the promise of incremental revenue streams stemming from the delivery of that content to multiple destinations, he said, but there are challenges with relying on this model. If content is watched after being time-shifted more than three days, it is not counted on the Nielsen C3 rating system and is, therefore, not counted toward revenue. Beyond three days, Reister said that operators will have to substitute targeted ads for the linear campaigns on the PC or mobile.

“From the content providers' perspective, ABC.com is perfectly happy to provide content available over the top where it costs them very little to deliver it,” Reister said. “They are not paying for the bandwidth, as long as it doesn't take away from the ad revenues they get in the delivery of the content over the traditional mechanisms.”