INDEX

Cisco Bolstering Presence in the TV Everywhere Scene

Aug. 27, 2010, 8:48 a.m.
Michael Inouye, Principal Analyst

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Cisco recently announced their intentions to acquire ExtendMedia, which operates in the white-label online video platform space. ExtendMedia’s main product OpenCASE offers an “end-to-end platform for the management, publishing and delivery of innovative content services to PCs, television, and mobile devices,” (from ExtendMedia’s website) highlighting a further move for Cisco into the “TV Everywhere” (TVE) space - the company had also previously invested in Digitalsmiths.

While Cisco has a strong presence in the CPE space (through acquisitions of Linksys and Scientific Atlanta) and the enterprise level segment, the acquisition and focus on content management platforms is a strategic move to more tightly integrate the two. As more operators rely on IP and as value-add services/features like OTT gain importance the business models, transactions, content protection/management and overall monetization of content will come to the forefront.

Recently quite a bit of focus has been devoted to TVE with operators like Liberty Global, Bell TV, Dish Network (DishOnline.com), Comcast, Verizon, Time Warner Cable, and others introducing TVE to their customers. In some cases, these services may not offer additional top-line growth (at least not yet) but it serves a more important purpose in the near-term by addressing customer retention. In fact amidst the recent downturn in US pay-TV subscribers (2Q 2010) Cisco’s strategy to bolster its position in the “TVE” or “TV Everywhere” space sounds like great timing.

Although it is true that this particular decline in US pay-TV subscribers (satellite overall and Telco TV were both up) is likely not a harbinger of things to come, nor can we necessarily attribute it to consumers jumping to online content and over-the-air. There are a myriad of factors including those tied to economic and housing issues that could have attributed to the decline, none of which necessarily portend a rapid change in consumer behavior. There is however some evidence that should compel pay-TV operators to advance their TVE efforts to better address shifts in consumer viewing habits.

For instance ABI Research conducted an online survey in June/July of 2010 and queried US respondents about their feelings about cancelling their pay-TV service in lieu of OTA and/or broadband media and 13.2% said “yes”, 26.5% “maybe,” 18.3% “not sure,” 6.4% didn’t have pay services and 3.2% said they had already cancelled their pay-TV service. Only 32.4% said outright “no,” this down quite significantly from a 2009 survey where 57.9% responded “no.” While this might sound “doom and gloom” we must remember that sentiments do not always translate into actions and in this instance that is likely the case, at least for now.

What it does mean however, is that as consumers gain exposure to connected devices, be it the Apple iPad, mobile phones, Internet connected TVs or Blu-ray players, consumers are starting to consider content delivery through alternative mechanisms. While it has been easy for content holders to keep a significant portion of the premium content on traditional platforms or under their terms, a time will come when the installed base of connected devices will start to have a greater impact on the decisions of when and where to offer said content.

Moving forward the industry as a whole will continue experimenting with different business models to monetize TVE content and companies such as ExtendMedia give Cisco and service providers a solid foundation. As thePlatform mentioned in a statement following the news, consolidation is expected in this space, particularly as companies seek scale and relationships, both of which Cisco bring to the plate. While this move does ratchet up the competition in this market (as other companies such as Brightcove and thePlatform remain active in the market), it is likely operators will select providers that best fit their individual needs, supporting a range of competitors – in other words there is little reason to believe TVE will be a “one-size-fits-all” market. And even as things evolve, Pay-TV is not going away, but there are changes potentially looming on the horizon and TVE is certainly key among them.