CSI
p12 September https://www.csimagazine.com/eblast/Digital_Editions/September2020/CSI-DigitalEdition-September2020.pdf
The TV industry is still fragmenting as consumers desert linear and pay-TV in favour of SVOD stacking but there’s a wind of change blowing toward consolidation.
“What has been disaggregated will ultimately be reaggregated albeit not in quite the same fashion,” says Gideon Gilboa is the EVP of Product, Marketing, and Solutions at Kaltura.
“I’m very bullish on aggregation,” says Paul Pastor, part of the exec team for Disney ABC’s stake in Hulu now Chief Business Officer for OTT platform provider Firstlight Media. “We haven’t yet seen the full cycle of aggregation happen… there is a lot of opportunity in the market right now.”
Pay-TV companies are prioritising service/channel bundles and looking to SVOD aggregation, agrees Guy Bisson, Research Director, Ampere Analysis; “Aggregation is the next battle ground.”
“There is clear movement in this direction,” confirms Adam Davies, Senior Manager Product Marketing at Synamedia. “Service providers are adding their own OTT services, developing more flexible pricing and commercial models and creating partnerships with pure OTT players to create the new pay-TV bundle.”
They are doing this, he adds, because it is what consumers have proven they want time and time again.
Deloitte’s latest Digital Media Trends study finds the average U.S. consumer paying for four streaming-video services, up from three before the pandemic. As more media providers join the SVOD fray, it’s putting pressure on content and pricing.
“Consumers are increasingly frustrated in trying to navigate the flood of streaming options, all while trying to manage costs,” says Deloitte vice chair Kevin Westcott.
Now they’ve got the choice, it seems consumers do not want to do their own aggregation. “They want the flexibility and choice, but having so many fragmented content silos and subscriptions creates friction and frustration, particularly at the point of wanting to be entertained,” says Peter Docherty, Founder and CTO, ThinkAnalytics. “The discovery experience across multiple SVODs and pay-TV makes the viewers’ job even more difficult and time consuming.”
“Content owners and platform operators should always follow the end consumer and what they are generally looking for is to get as much specific content for their needs as easily as possible,” underlines Metrological CEO, Jeroen Ghijsen.
Service complexity
“Multiple services mean a certain amount of complexity for viewers who ultimately want to switch the TV on and find something to watch,” says Alex Wilkinson, Head of Sales and Marketing, EMEA & LatAm, Accedo. “This will likely be more apparent as the global climate returns to some level of normality and consumers get back to much busier lives. It also means that often consumers gravitate to whichever service has the most choice and either leave the others mostly unused or unsubscribe.”
In theory, offering up more content drives more opportunities for engagement, generating greater data sets and improving the likelihood that investments in technology and content will drive revenue.
“For operators, the aggregator model means having more data on what the consumer is watching and how they are interacting with different video services within a bundle,” Wilkinson says. “It shifts control to the pay-TV provider and gives them access to much more intricate viewing data, which can be used to ensure stickiness and reduce churn.”
Content providers also want to have better insights into how their content is being consumed. “They can then make better decisions from a content production point of view, making it easier to know what type of content to green-light,” says Erik Ramberg, VP, Head of Global Business Development, MediaKind. “If they own the service themselves, they are going to have clear brand association and massive amounts of data into how their consumers behave.”
The service provider needs to bring solutions that solves problems for the content provider and the consumer. “From the consumer perspective, this means they are able to offer more than just every episode of a series (such as sneak previews, recaps and director commentaries), therefore leading to a far richer space that is still appropriate to the brand,” shares Ramberg. “By incorporating the branded DTC experience into the service providers’ platform, consumers can better engage with the content providers’ brand.”
The pay-TV opportunity
Application platform vendors and UI developers understandably believe operators are in a unique position to deliver aggregated video experiences that provide reach and engagement—where their TV App Stores and UIs act as the super aggregator. These reduce barriers to entry for new viewers; surface content and apps with integrated search and discovery and provide enhanced monetisation opportunities.
“The easiest way for SVODs to get onto the big screen is through the STB,” says Ghijsen. “The single remote control remains of primary importance. It is operators who are in pole position to assume the role of super aggregator.”
He compares the super-aggregator model to that of a warehouse. “You don’t mind what is in your warehouse – it could be niche and specialist. As long as somebody interested, you can sell it.”
Cloud-based technologies of course make the shelf-space of the ‘warehouse’ virtual and unlimited. At the same time, having billing all in one location makes it easier for consumers to monitor spend and to add and remove packages at will.
Amino says its pay-TV customers see super aggregation as key to remaining relevant to their consumers.
“If you’re a large dominant national or regional pay-TV operator, you already have a collection of channel bundles that are popular with consumers, you’re already offering multiscreen and you’re merging OTT with your broadcast or IPTV services,” explains Jamie Mackinlay, SVP Global Sales and Marketing.
Amino’s prescription for Tier 1 operators is to maintain the quality of content bundles combined with niche OTT and multiscreen bundles and to ‘super aggregate’ with as many of the top-tier SVOD services as possible.
“If you’re a Tier-2 operator, you’re probably in a similar but weaker position,” he says. “For these, aggressively following a super aggregation strategy is a way of competing with the dominant player in your market and defending your position relative to a vMVPD and other streaming providers.”
For Tier-3 pay-TV operators, super aggregation is even more important. With content costs rising and access to it diminishing as content makers go direct to consumer, super aggregation is a matter of survival – “without it you may become less and less relevant to the consumer,” Mackinlay says.
Content owners, like a Discovery or A&E, which built their business on the low carriage cost of super distribution on cable need to fundamentally change their operating model, believes Pastor.
“The reality is those business are maturing and declining in terms of losing pay-TV subs as people have switched to DTC,” he says. “Many of these companies are just treading water because of the fixed costs (of infrastructure, content, organisation) required to run the business. For those looking to transition to digital it is not enough simply to change the narrative of their company. They are trading what used to be a 50% margin business for one that barely eeks out 10%.”
Consequently, Pastor predicts a wave of aggregation driven by M&A activity, especially in the post-Covid era, and from joint ventures. “Like Hulu, these JVs will bring together niche brands on one platform where they can take advantage of ripping out some of their cost structures, generate more robust data sets and offer a more expensive, high margin proposition to subscribers.”
Operators themselves have by and large transitioned to high margin, high revenue predictability against broadband delivery, he says. “They need to broaden the number of use cases they can provide their consumers against that pipe and make it unbelievably sticky so that you can upscale the opportunity within any individual household. There’s a huge opportunity in the telco space in delivering these services over 5G and home networks since for the first time telcos and mobile operators have a competitive offering to Docsis 3.1.”
Wilkinson observes that mobile operators have seen aggregation as “a simpler solution” to offering a rich content bundle “that retains users with the telco rather than the full overhead of trying to be a OTT broadcaster.”
Super aggregation vs universal syndication
Vodafone, for example, is rolling out its TV service that aggregates linear, VOD and OTT content across markets including Greece, Romania, Portugal, Spain and Italy. It is doing so using Kaltura’s Cloud TV technology which speeds deployment to as little as seven months.
“We are providing out of the box scale for operators and broadcasters who cannot afford to invest billions of dollars to build a platform feature set to compete with a Disney or Netflix,” says Gilboa.
Kaltura says its tools and services offer a “white label Netflix” for both super aggregators and “universal syndicators” where content providers want to push their content everywhere.
“Every media company we work with are looking for a way to distribute direct to consumer and also to syndicate their content from the same DTC stream into the super aggregator's experience,” he says. [for more on Kaltura’s model see https://www.csimagazine.com/csi/Kaltura-close-to-powering-100m-users.php]
New payTV bundle, same as the old?
While there are some consumers who will continue to fulfil the role of aggregator themselves, the vast majority of us are thought to prefer the simplicity of getting content delivered in one bundle by an operator.
“This is especially true if they are already a subscriber,” Wilkinson says. “Bundled services often deliver price savings for consumers, which makes it all the more attractive.”
It is increasingly apparent that the relatively cheap price of SVOD subs are rising. The MIDiA Index https://www.midiaresearch.com/blog/is-streaming-making-it-harder-and-more-expensive-for-consumers-to-access-video-content reveals that that the most in demand TV shows of June this year remain siloed behind three to four differing services with a combined monthly price point of U$78.96. Not only is the price point higher than for a traditional pay-TV skinny bundle, but it also requires signing up to up to four different subscriptions, managing those billing relationships and the associated differing user experiences on the various services. The result, says the analyst’s Tim Mulligan, is a “suboptimal” viewing experience.
Amid intensifying competition from Disney+, HBO Max, Apple TV+ and others, Netflix has seen its pricing power grow over the five months to May 2020.
According to a study of American consumers published by analyst Cowen & Co. Netflix customers who said they would be willing to pay more than they currently do rose from 47% in December 2019 to 55% in May. Among respondents who stream more than seven hours per week of Netflix content willingness to pay more rose from 52% to 60% over the same period.
Netflix last raised prices in Q1 2019 and the question is when, not if, it will do so again.
Meanwhile vMVPDs such as Sling TV and YouTube.tv are subject to the same rising content costs as pay-TV providers
“The risk that many of the services will simply take up the bad habits of the old cable/satellite providers is real, an example being Youtube.tv and its pricing/channel changes which look all too similar to a cable TV company,” says Wilkinson. “The biggest change now is that customers are willing and now able to move if they find the offering and pricing no longer suits them.”
Ramberg blames content providers who forced pay bundles to get fatter and fatter. “People have been unfairly pointing the finger at service providers and operators, who are not the sole source of the unsatisfactory, bloated pay-TV bundle. When an operator bought one channel, they were also forced to buy six or seven other channels. More recently, this also includes the acquisition of SVOD library content, as well as some transactional VOD offerings.”
Mackinlay also thinks channel bundling “an over-maligned” content model; “The pay-TV mega-bundle is the worst form of video delivery, except for all those others that have been tried,” he says, paraphrasing Winston Churchill.
Winning platforms, he insists, must provide a combination of price, choice and quality and developments in content discovery techniques will remove many of the issues with the bundle model. “The goal is not for super aggregation to result in bigger, more complex bundles, but to provide flexibility and convenience in accessing a wide variety of content.”
Evolution of aggregation
Super aggregation is only in its infancy and likely to evolve in different ways. Gilboa suggests a further unbundling of SVOD content to enable aggregators to offer subsets of content. He explains, “HBO or Netflix, for example, could offer aggregators different pieces of their libraries inside an app tailored for a super aggregator. An app could bundle the best original content from a variety of SVODs related to political drama, for example. Instead of subscribing to three services to view the content they love, the consumer pays for one as part of a super aggregation bundle.”
Kai-Christian Borchers, MD, 3 Screen Solutions agrees: “We’re inching toward a trend where some traditional pay-TV providers are becoming resellers. In future, they may even seek to select certain elements of Netflix, or Prime Video or HBO and package these, for instance, along with very targeted genre-based SVOD services, to create a customised service that truly appeals to the viewer.
“TV content thus becomes more of a marketplace, but the operator can again become the subscriber’s best friend and helpful curator. Subscribers gets exactly what they want, and only has to pay one simple bill to get it all. Unsubscribing is easy too, but the customer also knows that by cancelling, all of their preferences, profile and personalisation disappears, so they’ll think twice.”
Another emerging trend is that of the operator as an app, whereby the aggregation model will move onto other platforms. “Consumers are increasingly looking to move away from the STB,” says Wilkinson. “If operators are able to create a service on a mobile device or connected TV that aggregates all of the content, and includes bills and everything else a consumer needs, it is likely to be an attractive proposition. It becomes much more of a proposition for people that don’t want to subscribe to a £50 per month pay-TV contract. That may seem less appealing for the pay TV providers, but it will be extremely interesting for consumers.”
Borchers points to the phenomenon of “co-watching” which has rocketed during lockdown on services such Twitch, mimicked by operators BT Sport around live sport.
“People’s natural appetite for watching the same content, perhaps together, is predominantly going completely unsatisfied. This new co-watching viewing experience, whereby your friends and family are sharing an experience with you, and interacting with you even though physically separated, will grow significantly in the next few years. Services offering this type of experience will pop up more and more.”
Nonetheless the basics of success for pay-TV remain the same: “The viewer shouldn’t need to know exactly where the content came from or the specific controls a particular SVOD app might want them to use – they just want to watch the content,” says Docherty. “Having this seamless experience gives consumers the choice they want. Pay-TV providers ensure they reap the benefits of providing the end user experience, being the first point of contact, and importantly, of capturing the data to better understand consumer preferences.”
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