Cable Satellite International
Pay-TV operators have long grappled with cord cutting but ‘cord confusion’ may be the issue that offers them a new opportunity. The huge array of TV and video services available baffles many consumers, as they are increasingly compelled to mix and match services such as Netflix, Amazon Prime, Hulu or NOW TV and devices ranging from standard customer premise equipment to streaming players Chromecast, Roku and Apple TV.
2019 is primed for SVOD overload as Hollywood majors near the launch of their D2C services. Disney+, an international rollout for NOW TV and another from NBCU join MGM’s Epix and AT&T’s WarnerMedia-fuelled direct to consumer (DTC) strikes. ITV plans an online paywall for its content if a united UK broadcaster service fails to fly. Then there’s Apple’s long anticipated debut, among many others.
The dichotomy is neatly put by Dimitar Serafimov, demand generation manager at OTT solutions developer Cleeng: “The rationale behind the OTT surge is to give the freedom to consumers to pick and watch their preferred video everywhere, every time, on any device possible. At the same time there are signs that the market is moving towards consolidation mainly through a string of acquisitions and the emergence of services like Amazon’s subscription hub [aimed to manage all digital subscriptions for Amazon users].”
Jeroen Ghijsen, CEO at user experience specialist Metrological makes a similar point: “Aggregation of video content is on the rise. Historically it was the MVPDs - and they are still trying to bring as many OTT channels as possible into their video offerings - but now there’s competition from OTT streaming devices which unite a variety of OTT channels.”
Roku, Netflix, Amazon, even Sling TV are slowly becoming what optional premium channel bundles were fifteen year ago, observes Tony Maroulis, research manager, Ampere Analysis. “Netflix’s list of pay-TV partners has grown rapidly, and Amazon’s Prime Video has followed suit, albeit a little bit further behind.
“Simultaneously we’ve seen a growth in SVOD-stacking [consumer taking multiple SVOD services], with some countries exhibiting very high stacking rates amongst SVOD subscribers,” says the analyst. “As many as seven in ten US SVOD respondents take more than one subscription OTT service, and with heavy content hitters planning their own DTC services this is likely to increase.”
Pay-TV opportunity
The explosive growth in TV choices has seemingly escalated consumer frustration. A Hub Entertainment Research survey of US consumers last July found consumers hungry for consolidation: looking for fewer platforms—even a single platform—that will deliver their full array of content in one place.
“The opportunity is for pay TV operators to take advantage of this ‘cord confusion’ by providing a single platform that will build loyalty among existing subscribers, bring in new consumers and even win back lapsed customers,” suggests Mark Evensen, CTO at software provider Amino.
The research indicates the time is right: among respondents, more than twice as many would rather access all their TV and video content from a single provider (69%) than through a range of sources (31%) “making it crystal clear that consumers long for simplicity when it comes to choosing and managing their entertainment choices,” says Evensen.
Laurent Maillot, marketing manager for pay-TV operator Orange agrees: “Consumers are looking for some flexibility. They prefer to have premium content from different providers but only one stop shopping. They don’t want multiple accounts.”
He adds, “We are convinced that the next phase of pay-TV strategy globally is about aggregated SVOD.”
There are other trends too. While the number of content providers is growing to respond to a clear demand from consumers for more targeted video content, many consumers want to enjoy that on the main TV screen.
“SVOD is a mainly a complement not a replacement to broadcast TV for end users,” says Jorgen Nilsson, CEO at TV software solutions company Zenterio. “There’s a great opportunity for operators now, and it is a must for them, to maintain the role of prime provider of content and services to the home.”
Yet OTT subscription fatigue is real. “The ‘Netflix 20 minutes’ is when you spend a long time just deciding what to watch, instead of actually watching content,” adds Nilsson. “Users need and appreciate an easy way to discover content and manage multiple subscriptions in a straightforward and consistent way.”
The argument is that consumers need an aggregator to deliver an array of targeted content and services like contextuality, second screen and voice control in a single user experience that they can access without leaving their TV.
“This will ultimately satisfy their desire for easiest access to their changing content needs,” says Ghijsen. “Integrating apps/OTT and live TV behind one remote control can help showcase a broad range of targeted, contextual content and significantly enhance the user experience with second screen, voice control, and universal search.”
Whether from an operator or the likes of Roku, the bottom line is that consumers are willing to pay for it if they can find and purchase their preferred content with ease of use and one billing system, integrated into a single UI.
“You will see OTT look like pay-TV with prices going up and pay TV more like OTT with prices and contractual terms more like an SVOD service,” predicts Jean-Marc Racine, chief product officer at video software provider Synamedia. “From a consumer’s point-of-view a [pay TV aggregation] will be attractive because it will be less expensive to access several SVOD services plus linear programming from one platform than if you shop for the same content and subscribe to them one by one.”
Win-win
The benefit for pay-TV and OTT providers, especially the smaller ones, of a unified TV hub appears mutual. “Users who want to watch shows and movies from different producers need to multiply DTC platforms which makes their bill quite expensive at the end of the month,” says Cleeng sales director Alexis Gaï. “By signing partnerships with DTC providers, operators can create hubs and packages that will make the pill easier to swallow and give easy access to all the content they need. On the other side, operators will benefit from the fact that consumers will stay locked into their environment and will be willing to pay an extra dollar for the easiness of use.”
Viacom seems to have this strategy in mind from the get-go of its first DTC subscription service for MTV. Initially available only in the UK, MTV Play is designed to reach the mobile screens of millennials and Gen Zs will provide long-form content experience in a standalone app.
“We know there is a segment of younger potential MTV fans who sit beyond the basic pay-TV bundles,” explained Arran Tindall, SVP, commercial and content distribution, VIMN.
Viacom nonetheless acknowledge the importance of Sky, Virgin Media and BT and said it was speaking with telco providers and other platforms about future distribution partnerships.
Stemming churn
A combined SVOD/ pay-TV offer should help stem churn on both sides. As Cleeng point out, when Netflix and pay TV are packaged together the pay TV provider reaches more viewers who want that SVOD experience. Consumers can switch from a schedule to an on-demand experience within the same UI and an operator can deliver the latest UHD (HDR) experience for integrated SVODs.
Among other factors, DTC providers can guarantee a high QoE for viewers with pay-TV carriage, no longer being reliant on an external CDN to deliver their content to viewers.
“Operators can guarantee QoE on their managed network,” says Broadpeak’s vp marketing Nivedita Nouvel. “DTC content providers have the possibility of following Netflix, for example, where they would provide operators with local caches to boost the quality of their video content. Combining local caching with a CDN service is a win-win situation for DTC content providers and network operators.”
Technical challenges
Historically, it was difficult for operators to setup their own back-end systems to onboard and aggregate myriad content and SVOD services. It is becoming easier and easier as technology matures.
“With cloud-based technologies, all that’s needed is a browser and a platform that can take care of the abstraction layer between the cloud and the underlying hardware, such as a STB or smart TV, as well as the APIs underneath it for payments, DRM, etc,” says Ghijsen. “Similarly, where custom, native implementations used to be required, while the resources on the hardware were limited, now we are seeing HTML5-based cloud implementations.
Nonetheless, there will be pressure on aggregators to keep pace with every new content provider and integrate or onboard them in an aggregated offer. This creates business and technical challenges - and opportunities for vendors.
Zenterio, for example, offers its Zenterio Cloud and Zenterio TV solutions for premium OTT app integration, working with APIs to deliver unified search and discovery.
“The operator needs to find ways to make all content available easily and give the user the possibility to browse different content providers seamlessly,” says Nilsson. “This is mainly around how the operator can control the UI/UX to maximise content consumption, but there is a technical aspect as well to harmonise the metadata available from the different content providers.”
Bringing IP and broadcast, together, architecturally, is what Synamedia call Blended TV. “Whether the broadcast network is digital terrestrial, QAM, IP multicast or DTH, operators require next-gen platforms to aggregate services with unified metadata and content discovery,” says Racine.
“Synamedia enables operators to retain control of those services in order to advance both user experience and monetization strategies. It also improves the content catalogue, allowing operators to add strategic OTT services to their existing pay-TV linear and on-demand offerings. Perhaps most importantly, it enables operators to create a profitable TV subscriber journey that starts with streaming. A frictionless customer acquisition workflow can be ramped-up to include UHD and time-shifted viewing experiences.”
Unified search
Unified-search is considered a key component of the additional value provided by aggregators. Should studios choose to keep all their content within their proprietary ‘walled gardens’, the value of a content aggregator will increase, reckons Ampere’s Maroulis, “assuming the aggregator can provide a greater degree of convenience for the customer.”
He says, “For a consumer wishing to see whether a specific TV show or movie is available to them through any of their existing subscriptions, it could require logging into each platform separately and performing the same search in each platform. This could be cumbersome and time-consuming, particularly on the T9-style keyboards provided on most remote controls.”
Since there’s no difference in the consumer’s mind about where content comes from, “the ability to aggregate metadata and go from search to directly viewing the content is essential,” stresses Racine.
What’s important is for operators to have the ability to react to consumers’ personalised, shifting content appetites—whether the consumer desires niche/localised programming or international content—with the tools in place to track and measure real-time content consumption, and modifying the content without disruption to the network.
“Simply put, related to the user’s personal preferences, if an application isn’t being used, then it should be removed,” states Ghijsen. “If an application is being used often, it should be integrated into the EPG, so it appears as if it was just a broadcast channel.”
“The key for the operator is to remain the main point-of-consumption for users and make sure that users can find all the content they love in one platform, rather than many different platforms,” says Nilsson. “This is the differentiator for operators compared to DTC platforms.”
Content mix
Striking deals for the right mix of SVOD services is another factor. Customisation and personalisation is key here as there’s no one-size-fits-all approach. Says Nilsson, “Different users will need a different mix in their UX so it is crucial that the operator can aggregate as much content as possible and be flexible in deciding how to present that to different users, via personalisation, recommendation, unified search, editorial promotions. This way, every user can get the optimal mix over time.”
There are ‘must have’ services [like Netflix] “which consumers expect to get access to,” says Racine. “Don’t forget the importance of local channels either. FTA content still attracts the lion’s share of audience. The combination of these with catch-up and SVOD is where pay-TV can differ.”
“Linear and local TV is key,” agrees Orange’s Maillot. “Local content has a good ranking… we will keep on distributing FTA channels. Even if the audience is increasingly fragmented and weakening every year, linear remains mass consumption and enables us to keep control of the TV. Our battle is to keep the user on our side.”
Maillot says Orange’s target is to offer the maximum available content. “There are some services which are a no-brainer, such as Netflix. With others there are trade-offs to be done. Amazon is a competitor on the aggregation side and that’s an issue for us. We don’t deal with them now…. maybe in future.”
There will be pressure for a clearer distinction between content providers and aggregators. “Hybrid models - where the same company is both content provider and aggregator - can work for very big players, but has its challenges,” outlines Nilsson. “They will compete with their own distribution channels, because a user could find the same content in various places, at different prices. Another challenge is that there will always be some piece of content that users want but that is not available on a DTC store. It seems more likely that pure-aggregators have a better chance to provide a complete content offer to end users, and simplifying the discovery and access to it.”
The consumer wins
Inevitably, there will be casualties. Many SVOD-only services (ad-funded, transaction- or subs-based) simply won’t survive the aggressive content origination strategy of Netflix or Disney. There has already been a lot of consolidation and quite a few failures in the SVOD-only DTC space (Turner’s FilmStruck and CanalPlay just two although the latter may be revived). Even Amazon is looking to cull some of its SVOD Channels to focus more on exclusivity.
“Media giants with top-notch content (HBO, Disney) won’t license to the likes of Netflix which will in turn strip SVODs of a chunk of their subscriber base,” says Cleeng’s Serafimov. “That will increase competition among the best and will raise the overall quality of the service offered. That is always good news for the market and the consumers.”
“The winner will be the one that makes life easiest for the end users by removing as many friction points as possible,” says Zenterio’s head of business strategy Tom Keaveney. “Amazon excels in customer experience and customer knowledge and operators need to have a sense of urgency to address this and strengthen their role in the future.”
Ultimatley, the future of TV will be about deploying new integrated experiences that are truly personalized and contextual to what consumers are watching on TV.
“It is the consumer who will win in the long run, as they are able to get access to the content they want, anytime, anywhere,” agrees Ghijsen. “The disruption and evolution that is taking place is most beneficial for the consumer as they are presented with a wide variety of personalised, premium services as well as niche content and localised apps, in a seamless and integrated fashion.”
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