Different OTT strokes for different folks

We’re just at the dawn of the virtual MVPD era and we’re already seeing signs of more market segmentation and product differentiation than with the current, facilities-based service provider model.

sling TV logoOn the heels of Dish’s breakthrough launch this week of its Sling TV service, Sony has begun to pull the curtain back a bit on its own virtual pay-TV service, PlayStation Vue, which is expected to launch by the end of the first quarter. GigaOM’s Janko Roettgers got a sneak peak courtesy of a beta tester, including some screen shots of the UI, and it’s clear the Sony service is a very different animal from Sling TV.

Unlike Sling TV’s low-priced, slimmed-down bundle of a dozen channels built around ESPN, PlayStation Vue includes a nearly full load of broadcast and pay-TV networks — over 70 according to the list provided to GigaOM — along with catch-up VOD and cloud-based DVR functionality, and is likely to cost $60 to $80 a month — roughly the same as traditional cable or satellite service.

The difference in the bundles reflects the very different audience segments Dish and Sony are targeting as well as their different strategic goals. Sling TV is targeted at the 10 million or so U.S. households, many of them counted among the Millennials, who currently have broadband service but do not subscribe to pay-TV.

“For Millennials, pay-TV is no longer a utility. Broadband is the service they regard as must-have, and they assemble their own entertainment experiences,” Sling TV CEO Roger Lynch said in announcing the service at CES earlier this month. “We think [Sling TV] will pair very nicely with Netflix and Hulu; it wouldn’t surprise us if a lot of people ended up subscribing to all three.”

At $80 a month and a fully loaded bundle, PlayStation Vue is clearly not aimed at people who reject the pay-TV model. Rather, it’s aimed at people who already have or are already inclined to subscribe to a multichannel video service. Sony’s hope, presumably, is that some significant share of those people will be attracted to the idea of integrating their pay-TV service into the same box and UI they use to download, stream and play movies and games now.

In other words, whereas Dish is looking to break out of the living room and onto the full panoply of connected devices, Sony is looking to burrow deeper into the living room by bolstering the utility and functionality of PlayStation consoles. Different strokes for different folks.

Verizon, meanwhile, which is preparing to launch its over-the-top multichannel service later this year, is apparently planning to offer differentiated versions of the product to different groups of its subscribers: a mobile-optimized version for its LTE wireless subscribers that will leverage LTE Multicast technology for live broadcasts; and a separate version for its home broadband subscribers.

Rival AT&T, which is awaiting approval of its acquisition of DirecTV, may offer a variety of different subscription video packages bundled in with other services and sold through its retail outlets, CEO Randall Stephenson said on the company’s fourth-quarter earnings call this week.

It’s much too early to know whether any of the new or proposed OTT services will actually catch on with consumers. But just as faster broadband speeds and connected devices have created a host of new — and still evolving — use cases for video on demand, linear TV today is on the cusp of a similar proliferation of use cases and audience segmentation as it increasingly goes over-the-top.

Accommodating those new use cases, however, is likely to prove challenging, for both rights owners and service providers. The legacy linear-TV bundle has been built up over decades largely to accommodate a single use case: in-home (or at least indoor) viewing from a fixed location. But it’s likely to prove an awkward fit — both technically and economically — for many of the new use cases OTT delivery will enable.