Digital
Studio
Telcos
are taking a greater share of pay TV and using cloud services to move
further ahead
It’s
no secret that telecoms
operators
are making significant moves into the TV industry. Indeed, telcos now
provide around a fifth of pay-television subscriptions worldwide.
According to figures from Ovum, operations owned or controlled by
telcos accounted for 140 million retail pay-TV customer connections
globally at the end of 2014. This rose to 177 million during 2015,
which is 19 per cent of the total pay-television subscriber base.
Ovum
analyst Jonathan Doran comments: “The growing share of
‘traditional’ TV platforms within the telco TV base reflects a
recent shift towards a global consolidation of pay-TV operations, in
which telcos are playing a significant part.”
Following
a number of false starts in Western Europe, IPTV homes are now a
viable platform. With growth of 30 per cent expected between now and
2019, IPTV subscribers will outperform both cable and satellite which
will see a decline in subscribers of 9 per cent and growth of 6 per
cent respectively, finds FutureSource Consulting. In the US, IPTV
households reached over 12 million at the year of end 2014,
representing 13 per cent of pay-TV households with an expected rise
to over 15 per cent by 2019.
The
staggering $49 billion acquisition of satellite television provider
DirecTV by AT&T last year is proof of telco power. At one swoop
it became the U.S' largest pay TV provider, with more than 26 million
total subscribers (20 million from DirecTV and about 6 million from
AT&T’s native U-Verse service).
Rival
Verizon operates America's largest 4G LTE network and is betting on
video to drive its business. It paid $4.4
billion to acquire broadband infrastructure from AOL and launched
mobile-only video app Go90 fuelled by content including multichannel
(youth oriented) network Awesomeness TV for which it paid DreamWorks
$159m for a 24 percent stake.
Telcos
are taking large chunks of the pay-TV market, becoming MVPDs
[multichannel video programme distributors].
It’s
easy to see why. Consumers are now streaming more content on demand
than ever before, enabled by superfast broadband and 4G. Consumers
are streaming more on-demand TV series and programmes - watching six
hours of premium shows a week – an increase of 121 per cent since
2011,
according to Ericsson ConsumerLab.
That
research also found that 61 per cent of consumers now watch video
content on their smart phones. If
service providers are smart with their bundled propositions, this
could prompt an ever-increasing usage of data.
UK
quad play
Bundled
propositions are the name of the game in the mature European markets
where traditional and telco media are jockeying to offer the quad mix
of TV, mobile, broadband and landline in
an effort to increase customer loyalty and spending.
Orange, T-Mobile and Telefonica are all making moves in their
respective key markets to offer quad play services. Arguably, given
the trend to TV everywhere, it is mobile which will prove the most
important of these services.
In
the UK, BT,
Sky, TalkTalk and Virgin Media are bidding to offer quad play. BT,
the former state-owned telecoms provider, has spent the last few
years investing heavily for a connected and converged future. It is
spending $8.6 billion upgrading mobile and broadband speeds over its
fibre to the home network following its $2.8bn merger with mobile
operator EE last year which saw it take on 25 million customers. It
also spent more than $2.8bn on sports rights – mainly for English
Premier League and UEFA Champions League soccer – to entice
subscribers to a BT Sports TV package. It launched the world's first
4K live channel a year ago and is reportedly preparing to expand into
original drama and documentary content.
Unlike
BT, TalkTalk does not own expensive rights to TV content. It rents
access to BT’s broadband network and space on O2’s mobile network
and offers TV via YouView, the set top box platform co-owned by BT
and major UK broadcasters like ITV and the BBC.
The
third major UK telco prepping quad-play, Vodafone, is primarily a
mobile group but is pumping billions of pounds into an infrastructure
upgrade and is tipped to launch a pay TV package by the end of this
year. Vodafone's
operations in Spain have already scored great success with over 1
million TV subscribers signed up.
The
UK's telcos are competing against legacy cable company Virgin Media
and satellite-centric Sky whose main aim is to push TV to as many
platforms as possible. Sky
owns the most content, and has millions of customers signed to its
broadband service. It has mobile applications, like Sky Now, for
viewers to pay smaller fees to access Sky packages and plans to
launch a mobile contract to complete the quad-mix later this year.
Virgin arguably has faster broadband speeds - up to 200Mbps in some
areas - but can't compete with Sky on content.
Cloud
to keep ahead
Given
the obvious synergies, what should these service providers keep in
mind as they move into the world of anywhere, anytime TV? A succinct
answer is Cloud.
In
order to match the heightened consumer expectation for TV everywhere,
most service providers have Cloud technologies on their roadmap.
Rollout is uneven, hampered in many cases by existing investments in
legacy on premises equipment, copyright and legislative issues and
some technical nuts which have yet to be cracked.
“Moving
to an IPTV/cloud environment makes true multi-screen TV significantly
easier
for operators, while also helping them to compete against the OTT
players,” says Product
Marketing Lead, Content
Discovery and Access Services, Broadcast and Media Services, Jennifer
Walker.
“What’s
important about the cloud is how it helps operators to break free
from the bounds of the set top box and use software for development,”
says John Carlucci, president, Alticast.
For
example, Parks Associates highlights the total number of Cloud DVR
subscribers worldwide will total 24 million by 2018. Accedo expect
over half of Cloud DVR penetration to have taken place by 2022.
There
are numerous advantages for the service provider in terms of capital
savings from using shared and scaleable storage over dedicated hard
disks, and fewer customer service call outs. Importantly, Cloud DVR
delivers a greater degree of control over content for customer,
service provider and advertiser alike.
“A
content provider can assign rules around which content can be
recorded and for what period,” says Roland
Mestric, Head
of Video Marketing, Nokia.
“Such data can be capitalised on by advertisers who can place
relevant ads around content when it is actually watched.”
However,
technical and licensing challenges are hampering rapid advancement of
this kind of service. Negotiated
rights vary programme to programme and region to region, with the
pivotal issue being whether a unique copy is required for every
subscriber.
According
to Ericsson, an objective for all telcos is to personalise the
content discovery journey through the delivery of rich, detailed data
delivered in the correct format to any screen. Cloud-based technology
is also central here.
“There
are two clear benefits to getting this right: ‘sticky customers’
who don’t want to leave, and monetisation opportunities, which
boost returns,” says Walker. “The latter is achieved by
collecting information about consumer behaviour and using that data
to deliver targeted content, promotional offers and advertising.”
As
cloud-based on-demand TV consumption increases, the value in managing
addressable ads delivered to personalized, connected screens will
become more transparent.
Transplanting
user experience (UX)
to the cloud also affords the ability to change the interface rapidly
and at scale, rather than rewriting UXs for every make and model of
STB, and enabling an operator to innovate discrete user interfaces
for every subscriber.
“The
always-on nature of the cable or telco network enables the cloud to
be harnessed so that operators can deliver advanced user experiences
– such as Millennial Navigation, Kids’ Modes and Sports Zones –
that are not capable of being supported by the set-top box alone,”
says Carlucci.
There
are a number of instances illustrating how Cloud can bring a
diversity of UXs to STBs. VOD and catch-up services with Ziggo in the
Netherlands; trend-driven UIs with multiple tiles of live video on
single tuner STBs with Liberty Puerto Rico; and the complete YouTube
experience to upwards of 500,000 existing STBs at UPC Hungary (all
these are ActiveVideo deployments).
Cloud-based
or STB strategies are not mutually exclusive. “You’ll see the
industry continue to use the cloud to deliver TV UXs even as boxes
become more capable,” says Carlucci. “We will leverage what the
improved STB can do but we also will continue to see the Cloud and
the network evolve.”
The
approach to engagement, marketing, packaging and delivery are all
very different in the traditional TV sector. “Telcos will need to
change from being mobile service providers with ‘pipes and devices’
to becoming credible content aggregator and delivery brands,” says
Walker.
However
one thing is certain: with exposure to the cloud and consumer centric
propositions, there is no doubt that telcos are well placed to face –
and address – the technology challenges that lie ahead and realise
seamless anywhere, anytime TV.
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