OTT A Major Challenge to Satellite, Ethnic Channels Group Says

By Caleb Henry | September 11, 2015 | Website Satellitetoday

Over-the-Top (OTT) broadcasting, an increasingly popular method of video distribution, is having a damaging effect on the industry, according to Ethnic Channels Group Co-founder and CEO Slava Levin. The broadcaster, which provides non-English language digital TV channels to multicultural populations in predominantly English-speaking countries, says the lack of regulation around OTT is wreaking havoc on the broadcast industry, especially for its particular niche.

"OTT, being unregulated and really unchallenged, has created a crossroads for the satellite industry, for the cable industry, for the [Internet Protocol Television] IPTV industry " for everybody in the broadcasting space," Levin told Via Satellite. "And I believe wholeheartedly that satellite is going to be the hardest one hit because of that."

Ethnic Channels Group is based in Canada, where IPTV is licensed the same way as cable and satellite. OTT, however, falls under the media exemption order. And whereas IPTV is typically linked to a specific Internet Service Provider (ISP), OTT is ISP agnostic, meaning any connection can bring viewers to an OTT operator. The lack of rules, according to Levin, has turned OTT into a hotbed of piracy, which is nearly impossible to compete with.

"In the OTT space, in the multicultural space specifically, there has been a huge influx of operators that are distributing content illegally. They don't have rights for their content. Those same operators are then reselling that content that I have right to, to my customers for a much cheaper price. That forces me to drop my price to maintain that customer on my system, whether it's on cable or satellite or anywhere else, but my margins are getting lower because I paid for that content and I have to deliver it," he said. "OTT has dramatically influenced my business in a negative way. It has influenced the industry in a negative way."

Levin said OTT is not inherently bad" Ethnic Channels Group started its own OTT service NextTV in 2007" but that it presents serious challenges for the industry. He highlighted companies such as ZeeFamily, Netflix and Hulu that have positively used OTT to create strong businesses. Ethnic Channels Group itself continues to grow, with business increasing by 30 percent from last year. The company's biggest markets are Canada, the United States, and Australia, and plans are in the works to launch channels targeting expat populations in Africa, China, India, Russia and elsewhere. Levin said he is unsure whether satellite will play a role in that expansion.

"Going back 10 years ago, on the level of importance satellite was a 10 out of 10 " the highest level of importance. But today with technology expanding at lighting speed, satellite is becoming less and less important," he said.

The reasons for this are several. Ethnic Channels Group was using satellite to retransmit to cable, but shifted to fiber about six to seven years ago. Levin said originally cable operators either lacked the capacity or were uninterested in the multicultural subscriber, where satellite was more open. Now the pace of technology is such that satellite has fallen behind the broadcaster's needs.

Ethnic Channels Group's business requires extensive links to bring content internationally. The company brings content from around the world into English speaking countries with large immigration rates, and also distributes content back out to other countries. Levin said it seems pragmatic for a company such as his to rely on satellite, but cost has made this less feasible than it appears at first glance.

"From my perspective, as much as I would love to have a [Direct-to-Home] DTH platform catering to the multicultural audiences in North America, Australia and around the world, financially it is not a feasible undertaking," he explained. "Satellite has it's place, I'm just not sure where it is going to be … because the quality that is being delivered today via the Internet, whether it's OTT or whether it's IPTV (a closed system network), it is comparable, if not better than satellite for 1/100th of the cost."

Many satellite operators are now offering or creating new ways to support IPTV and OTT in addition to traditional linear broadcasts. Whether or not OTT is friend or foe to the industry continues to be a subject of debate. What is not debated, however, is its growing impact.

"OTT is certainly becoming a must have for broadcasters, said NSR Analyst, Alan Crisp. Right now as of 2015, it is borderline optional, but moving forward this will change. NSR believes it is necessary to become a "one stop shop" for content as much as possible, increasing customer interaction with the brand/service. If a broadcaster doesn't offer OTT services, customers can and will migrate to other platforms, have less interaction with the broadcasters, and become much more likely to cancel a subscription to broadcast television. Being able to leverage exclusive content " notably sports content" into OTT content is expected to drive retention of subscribers in addition to enticing new signups."

Crisp pointed out that OTT services are growing the fastest in developed regions, where the cost of high-speed broadband networks remains lower than in developing regions. According to NSR, the threat of pirated content is also lower today than it has been in the past few years.

"While the impact of pirated content grew quickly in the last decade due to the proliferation of pirated content available online, the increasing number of ways to get legitimate content has lessened the value of pirated content to consumers. This in turn has increased that value that can be derived from this content for re-sale and distribution rights to the broadcast industry," said Crisp.

He added that in less developed regions, the impact of pirate content remains higher, but that NSR expects its threat will diminish toward the level seen in developed regions as the methods to access legal content grow worldwide.