DirecTV among pay-TV distributors seeking over the top rights
Some of the nation’s biggest pay-TV distributors are seeking to secure so-called over-the-top, or OTT, rights from programmers, according to several industry executives.
The efforts, if successful, could ultimately clear the way for the demise of the set-top box -- which is how multichannel video program suppliers currently deliver content to customers -- in favor of Internet delivery of pay-TV packages.
DirecTV, Time Warner Cable and Charter Communications are among the distributors that have aggressively sought over-the-top rights.
“They are all trying to get OTT rights,” said an executive at a major cable channel who declined to speak for attribution because such negotiations are confidential.
The push comes as Intel Corp. prepares to launch a video service that would be delivered via broadband and as Amazon and Netflix step up their efforts to compete against traditional pay-TV companies. Intel has yet to sign any programmers to its service, which it hopes to launch this year.
To be sure, no cable or satellite operators appear to have any immediate plans to deliver their packages of TV channels via the Internet.
For cable operators such as Charter and Time Warner Cable, the desire to land OTT rights is seen as a defensive move so they have the same distribution rights as any potential competitors. In their eyes, this is no different from a restaurant wanting the option to serve soda in cans or in bottles.
Representatives of the two companies declined to comment.
DirecTV’s wanting to land rights to offer an OTT package may coincide with its interest in Hulu, the online programming site that is for sale. If DirecTV were to acquire Hulu, it could in theory use it as a platform to offer its service to consumers who are unable or unwilling to get a satellite dish.
A DirecTV spokesman downplayed the satellite broadcaster’s asking for OTT rights.
“Our programming deals are confidential so we can’t specifically comment, but our one objective in these deals is not to restrict access but to ensure we get equal or better treatment with both existing and new competitors,” the spokesman said.
If distributors did land OTT rights they could start to compete against one another as well. Time Warner Cable, for example, could offer a service via the Internet in a market served by another cable operator.
However, no cable operators have expressed a desire to compete against each other.
Also, many programmers are not eager to sign away OTT rights.
“Most of the major programmers don’t agree to it,” said one programming executive at a major media company that owns several popular cable channels.
As for Intel, programmers are reluctant to sign on for an unproven service that could potentially alienate their biggest customers. That’s why if Intel wants popular programming services, it will have to pay a premium, which it seems to be willing to do, according to programmers who have been approached by the company.
“They are very aggressive,” said one cable network executive. Another executive thought it was only a matter of a time until Intel landed a deal and that, once that happened, others would fall into place.
A spokesman for Intel declined to comment on its talks with programmers.
Some cable operators also have been aggressive, trying to insert conditions into programming contracts that might make a carriage agreement with Intel or another start-up difficult.
In a recent report on the video marketplace, the Government Accountability Office warned of the potential challenges Intel and other new entrants will face.
“While content providers are interested in providing some content to online video distributors (OVD), their incentive to do so is somewhat constrained by the potential effect on subscriptions to traditional multichannel video program distributors,” the report said.
Another hurdle for the would-be over-the-top providers, the report noted, is that the cable operators that they seek to compete against also own the broadband delivery pipes they’ll need to use to deliver programming.
“MVPDs may have an incentive to charge for bandwidth in such a way in such a way as to raise the costs to consumers for using OVD service.”
Follow Joe Flint on Twitter @JBFlint.
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