The pay TV industry is facing increasing competition from new entrants to the digital TV market using IP delivered content to boost viewers’ access to entertainment services. High profile launches of services such as YouView and GoogleTV have attracted attention and are helping to establish the concept of Over the Top (OTT) with mainstream audiences.  While it is debatable whether these services can challenge premium pay TV to become a dominant force in the living room, OTT does potentially open up additional revenue windows for both pay TV companies and new entrants alike.

There’s no doubt that IP delivered content in a lean back context will increasingly become a standard part  of consumers’ viewing habits, the question is who will manage the user’s access to this programming? The company that “owns” the remote psychologically takes ownership of the whole viewing experience and that brand becomes synonymous with what is typically a major component of the viewers’ leisure time.

There are currently three (main) ways to receive OTT content on the big screen, through a hybrid STB (subscription or free to view), a connected TV or a media streamer.  To date the vast bulk of connected TVs have been large format premium products and have not, therefore, seen mass market pick-up. A cheaper solution which minimises the barrier to entry for consumers has been the development of low cost web adaptor STBs. Sony, Apple and Toshiba have all brought low cost OTT devices to market to extend the connected TV experiences. Sony and Apple were able to deploy quickly since they had their own in-house solutions in place, whilst Toshiba recognised the importance of bringing their offer to market quickly and thus used third party, Netgem, middleware.

By offering these types of flexible services, along with the option to access both free to air with their own and/or third party premium OTT subscription services, it has been possible for less established digital TV players, such as CE vendors, to set themselves up as virtual service providers at a fraction of the set-up cost of a cable or satellite pay TV operator. There is also the potential to drive revenue by taking control of the home’s secondary television sets by providing services that will complement those of the incumbent pay TV service providers

However, recent statistics released by Oliver & Ohlbaum Associates indicated that a significant number (around 20%) of UK pay TV subscribers would be “quite likely” to cut the cord in favour of the hybrid YouView platform when it launches whilst a further 6% would consider using it for secondary screens in the home. As broadband speeds increase and the concept of OTT is established with viewers competition for ownership of the living room will clearly become more heated.

Of course it won’t be possible for a CE company to offer the breadth of content provided by established pay TV players since much of the premium programming is locked to the service providers due to exclusivity clauses.  Equally, bandwidth constraints limit the amount of HD and 3D content that can be consumed over IP.  All this makes it highly unlikely that alternative vendors will be able to wrest away control of the living room from the pay TV operators, at least in the immediate future.

Despite the clear advantages these factors offer the Pay TV operators, they will need to move fast to launch the types of digital home services which will meet subscriber demands. Features including access to IP content, such as YouTube, through the TV, catch-up programming and multi-screen services with a usable interface across all screens have all reached the market already. As consumers become increasing familiar with these services they will become seen as first desirable, but ultimately standard. If operators do not meet these expectations, then subscribers have a growing number of options to replace their services.

At this point the market is more open than ever before and only time will reveal who prevails in the battle for the remote.