Every week the Opus team picks a news story or topic or idea that is relevant to the entrepreneurs and businesses we partner with.

RSS Feed

Archives

ESPN, Carriers, and the Prisoner’s Dilemma

Ajit Deshpande - - 0 Comments

Players in the internet ecosystem can broadly be bucketed into one of three categories – carriers (aka the infrastructure providers), Over-The-Top content providers (aka the ones that make the money), and end-consumers (the ones that pay). Over the years, one of the carriers’ approaches towards maintaining profitability has been tiered wireless data pricing (also being tried out for landlines), and along the way, this model has also helped keep per capita data consumption from spiraling out of control. That’s until now. Last week brought news that ESPN was in talks with one major US carrier to set up an arrangement wherein ESPN data consumption would not count towards the user’s data plan.

With more than 27 million monthly unique views, ESPN is one of the top 20 mobile content sites currently. The site values engagement with its user base; in fact ESPN tried becoming a MVNO around 2005-2006 in an experiment that failed. In today’s smartphone era, they feel they could re-visit the idea of subsidizing consumption of their content on mobile and by monetizing the correspondingly higher viewership. This might be the first example in recent times of OTT folks willing to pitch in with the carriers, and it will probably work well in the near term for ESPN if implemented. But the big concern is – what sorts of dominoes might this action by ESPN eventually cause to fall. ESPN acts first, other OTT players follow, carriers make some money, consumers watch more content, and a positive feedback loop develops. Along the way, some of the carriers’ new dollars get fed into infrastructure, but probably not enough to counterbalance the increased consumption, and so the spectrum crunch accelerates. Eventually carriers go back to throttling consumers, data prices worsen, and the ecosystem reaches a new ‘equilibrium’. Except, this time, the OTT players are left footing part of the bill.

Is ESPN leading the way in getting all the OTT players shot in the foot? In general, the answer might be yes. A few content providers might be able to monetize better in this new scenario, but most other content providers will likely be left much worse than before. So let’s see if this ESPN deal actually happens. If it does, then look out everyone, prisoner’s dilemma might be coming!

« Back to Blog
Also on the Opus Blog

Dirt Cheap Digg

July 15, 2012
Ajit Deshpande - Digg, a once iconic company, a shining star representing ‘the wisdom of the crowds’ was acquired last week for the paltry sum of $500,000. As a social news website founded less...

Consolidation at Point-of-Sale

December 4, 2012
Ajit Deshpande - Last week brought news of consolidation in the POS system segment – National Cash Register (NCR) Corporation announced its $650M acquisition of Retalix, a developer of software...

Can FreedomPop disrupt the carriers?

August 13, 2013
Ajit Deshpande - Last week, Los Angeles based startup FreedomPop announced that it now has more than 100,000 users, and that it will now be using Sprint’s LTE network as its infrastructure...

Withings and the Rise of Connected Health

July 23, 2013
Ajit Deshpande - Last week, French company Withings, a leading innovator in connected health and wellness devices, announced that it had received $30 million in venture funding from a syndicate of...