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IPTV/VoD may be an obvious way for many small and medium telephony service providers and ISPs to enter the triple-play business. Otherwise, their end customers will migrate to somebody else who offers it. In addition, if they do IPTV and VoD right, the door to far higher margins than other lines of business stands wide open. There are also many enterprises, businesses, and organizations, including universities/colleges, school districts, governments, large apartment buildings and residential communities, which are interested in enriched and low-cost packaged IPTV/VoD services.

However, the business of IPTV/VoD is expensive to build and operate. Adding to the network cost of managing distribution and delivering contents/services economically to customers or end users, there are the costs of:

  • Content negotiation and acquisition;
  • Aggregating and packaging contents in way that will differentiate one ISP from another, or way to meet the specific needs of its end customers; and
  • Secure advertising deals.

It all comes down to scale.

Small players do not have sufficient base to spread costs and to reduce price while keeping margin reasonable. Even for a big player that can afford these costs, it still wants to further lower cost base and raise profit margin.

Wholesale IPTV/Video-On-Demand is a potentially lucrative service for Google (NASDAQ:GOOG) because it can economically negotiate, acquire, and package content based on small/medium ISPs or the IPTV/VoD operators’ specific needs and efficiently deliver the content to the ISP and the IPTV/VoD operators by its own national distribution networks (or partner with a low-cost carrier), which is finally distributed by the IPS/IPTV operators to the end users/customers.

Apparently, Google is uniquely positioned to secure advertising deals for all the IPTV/VoD operators.

Currently Avail Media, Echostar (NASDAQ:SATS), and SES Americom are just a few of the wholesale IPTV players. However, SES Americom is shutting down its IP-Prime satellite TV services. After all, it is a satellite company rather than an IPTV systems integration company. Still, according to the SES spokesman, if a third party expresses interest in the IP-Prime platform, or contributing to it, SES may reconsider the service.

Disclosure: No position with GOOG or YHOO.

Source: Is Wholesale IPTV/VoD in Google or Yahoo's Future?