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Pay TV to crush OTT - Take 36

By PETER WHITE

Published: 24 February, 2012

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Expect to see this more and more often - major pay TV company launches OTT service for $5 a month. This week was the turn of Comcast, US cable leader, a few weeks back it was Sky, one of the biggest pay TV providers in Europe. Will this kill off the idea of Netflix and companies like it? Well…No.

But you could have fool most of the US stock market, which initiated a sell off from Dish and Netflix, both offering OTT video services. If Hulu had been public, it too would have fallen.

It's very simple. Pay TV companies with ARPU at $136 and counting, like Comcast, cannot sacrifice that amount of money for a new $5 sub. They would go broke, because they have a mountain of capex to spend and a network to keep up to scratch.

This deal, as many others before it, is aimed at stopping the next batch of Netflix customers coming entirely from Comcast - and it's getting good at this - it has got better and better at losing less and less pay TV customers each quarter - with churn reduction exercises, of which this is one. Customer care should really get the attention of Comcast, but instead it has announced Comcast Streampix after negotiating new licenses with Disney, for ABC content; NCB Universal, which of course it now owns; Sony pictures; Warner Brothers and Cookie Jar Entertainment - and will wrap this into a $5 a month subscription service, as part of its TV Everywhere Xfinity line.

We think any analysis of the content will show that Comcast is deliberately making sure it has the same kind of content as Netflix, but in order to get that, it has had to commit to more money each month, and also an upfront cost - and it will get this back by some existing customers upgrading to this service. But that payment will be ON TOP of spending over $100 a month, and customers may move away from Comcast VoD, to internet VoD, but they will have to keep their overall subscription.

For a deeper analysis of this story, go to www.rethinkresearch.biz/faultline and request this week's issue or a four week trial of Faultline, the paid weekly sister paper of Rethink-TV.

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