Is 410 Hw 4 Cable Companies and Ott Providers

critically examine the document “A Tale of Many TVs” available on the class website. And,

consider  relevant  concepts  discussed  in  the  class,  for  example,  “one  network,  many

services”  or  “internet  of  things,”  to  carefully  analyze  the  competition  between  the  cable

companies  such  as  Comcast  and  the  OTT  services  such  as  Netflix.  If  necessary,  scan  the

articles cited in the document, as well as search for additional articles.

What is the main difference between the business model of the cable companies and

that  of  the  OTT  providers?  Is  there  any  other  context  that  comes  to  your  mind—

within  the  world  of  telecommunications/media  or  outside—where  a  very  similar

competition could be taking place?

What  would  you  do,  assuming  you  are  in  charge  of  Comcast’s  strategy,  to  counter

potential challenges from the OTT providers? If, as a team, you are unable to agree

on “the answer,” suggest a few possible options along with their likely implications.

It  might  help  to  use  a  framework  here,  such  as  the  Porter’s  Five  Forces  model

(

http://en.wikipedia.org/wiki/Porter_five_forces_analysis).    Any    other    well-known

framework would be acceptable as well.

Review  the  recent  article  “

Netflix  Deal  with  Comcast:  Net  Neutrality  Domino?

”

available  at  the  InformationWeek  website,  which  reports  a  new  deal  between

Comcast     and     Netflix:    

http://www.informationweek.com/strategic-cio/digital-

business/netflix-deal-with-comcast-net-neutrality-domino/d/d-id/1113963. Why do you

think Netflix wanted this deal despite being quite successful without anything like it?

Cable companies and OTT providers both provide content to consumers via subscription. Cable companies serve their companies through the direct connection to their homes through cables. They require their customers to purchase a set-top box which contains a tuner that can then receive the cable company provider’s digital television signals, which is then displayed on the television. The set-top box also determines which signals are decrypted based on what the customer's subscription says (the customer is only able to access channels that are under their subscription). A cable company can bundle certain content in packages which they can then sell to their customers (Rouse). In addition to providing television services, cable companies provide services such as phone and internet connection utilizing the same physical cable connection. Their direct connection to the consumer allows them to provide these bundled services and take full control over how the consumer connects to the world. With this model, cable companies become the only source of entertainment for consumers and make high margins by pushing additional programs such as premium channels and pay-per-view access to content.

OTT companies, as opposed to cable companies, do not have a physical connection to their consumer, but utilize the connection of cable companies over the public internet to provide their content to users. Customers subscribe to services such as Hulu and Netflix and gain access to a library of content that they can stream via the internet. By focusing on acquiring quality programming and investing in faster speeds, they provide their customers with a better service. Therefore, while a cable company’s business model relies on selling set-top boxes that can receive DTV signals that they can then bundle with different programs (whether the customer wants all of those programs or not), an OTT provider relies on selling subscriptions to their library of content and rely on a connection to the consumer through cable companies (Rouse).

Cable companies have an inherent source of power in this scenario, as their ownership over the physical connection to the consumer forces users to work through them to access any content. This allows cable companies to push their own content and programming to companies, and force a type of brand loyalty by preventing consumers from changing to other ISPs. Cable companies leverage this hold that they have on the market to charge higher rates to the consumers and only provide cheaper options through bundles with additional services. They create value for their customers by providing high-speed internet connection as well as investing in technologies that will improve speeds.

This improvement, however, serves as an ironic form of justice, the faster internet that cable companies offer provide a foundation that allows OTT companies to reach their users faster and to improve on their sources of power. These powers include the ability to procure a lot of quality programs to offer clients, as seen performed by Netflix. As described in the article, Netflix has an inherent strength in acquiring content through agreements and contracts with studios, and was even able to work with Marvel/Disney to create original content as well as be the sole site that streams Disney content (Xue 15). OOT companies provide content directly to the consumers by skipping the traditional distribution channels as well as offer their consumers a lower price than their cable competitors. This allows them to take a hold on the market through an arguably better service that pushes against the inherent disadvantage of not being physically connected to the consumer. Cable companies leverage their foundation to keep the consumers while OTT provides a more convenient experience.