Traditional Pay TV Operators Surviving OTT Onslaught15 Mar 2016
Pay TV providers, long thought to be suffering at the hands of the new over the top (OTT) market, are doing OK. At a high level, the Digital TV Europe Industry Survey 2016 shows that the growth of OTT and the entrance of big internet companies into the video space has not dealt a death blow to more traditional pay TV operators.
Responses show that pay TV is far from dead. Pay TV will continue to see growth, in the view of survey respondents, but OTT TV disrupters will see stronger growth.
The survey said that pay TV operators need to evolve their business plans to stay ahead of the competition. In particular, in the view of respondents, operators with the ability to combine TV with a larger multi-play offering will be better placed to win consumer loyalty and deliver a compelling offering that can compete with OTT entrants.
Yet pay TV providers will also have to match higher expectations from viewers about the overall experience and about the flexibility of the offering, in particular demand for the ability to consume content on-demand.
Michal Fridman (pictured), VP marketing at Comigo, which was one of the sponsors of the survey, told IBC Content Everywhere News: “As content becomes more and more available to viewers on demand, and digital capabilities enable easier access to online content and data, pay-TV providers will need to fight a tougher battle and stop relying only on their content.
“TV and content providers must concentrate on enhancing the TV experience in order to keep up with the rapid technological changes that are happening in our lives. There is a positive side to this for TV operators; leveraging various internet services, they can dramatically enrich content and meet consumers’ elevated expectations for an advanced TV experience.
“A good example of how operators can use contextual data to enrich content is sports,” added Fridman. “Using internet sources, relevant sporting statistics and data can be matched with a broadcasted sporting event. A dedicated app can then be developed to display the contextual data in a way that integrates smoothly with the viewing experience while boosting viewer engagement. This application can be attached by the operator to the relevant sporting events and promoted via teasers, marketing campaigns, and any other applicable marketing channel.”
Operators that consistently present innovative and attractive new features and content before their users – for example UHD TV content – are more likely to retain their customers in an increasingly competitive field, the survey showed. The launch of new globally-distributed online video services by companies including Apple and Google, the expansion of mobile connectivity and bandwidth globally, and the development of converged offerings by large services providers are the trends likely to have the biggest impact on the digital video business over the next two years, according to the survey.
Maintaining Viewer Engagement
A clear majority of respondents have faith that the pay TV business will continue to prosper over the next couple of years, but the majority of these – 46% of the total – believe that it will experience only moderate growth, with some modest negative impact from competitive pressures such as OTT and price erosion.
Fridman commented on the point that 46% of those surveyed believe that pay TV businesses will experience only moderate growth, that currently, “pay-TV providers still have the upper hand over OTT offerings due to their significant investment in content”. She added: “But in order to survive in the future, pay-TV providers cannot continue to only rely on content. They will need to focus on maintaining viewer engagement with their service as well as opening new revenue streams.
“To keep viewers hooked on their content, pay TV providers will need to further invest in delivering a contextually rich viewing experience. Leveraging the power of the internet, they can provide viewers with an experience that is more relevant, enhancing content through a wealth of contextual services such as data enrichment; personalisation; and advanced social and viewer engagement capabilities on every screen, including TV sets, smartphones, and tablets,” she noted.
She added that in order to create new revenue streams, pay-TV providers, “should look at expanding their offerings into new areas”. One example she named is TV-commerce, where they can offer merchandise which is, “intelligently connected to the viewed content and encourages impulse buying by enabling a one-click purchasing process”.
Only 12% of those surveyed believe the pay TV business is set for continued strong growth and will experience little negative impact from these factors. A third of respondents believe that pay TV is set for very modest or zero growth over the next two years, as competitive pressures begin to bite, while a further 9% believe the business is set for negative growth, with pay TV operators facing serious challenges.
Meanwhile, views on the types of services that are likely to succeed was informed by views on emerging patterns of consumer behaviour and broader industry trends. Asked to assess what impact seven key trends will have on the pay TV business over the next two years, the survey gave a broadly positive assessment of the overall impact of these.
Survey respondents give a broad thumbs up to growth in demand for multi-play bundled products combining TV, broadband and phone services, which are seen as having a ‘very positive’ impact on pay TV by 25% and a ‘moderately positive’ impact by 42%. The onward march of bandwidth is also seen as good news for pay TV, with 41% saying that growth in high speed networks capable of delivering high quality video over the web will have a ‘very positive’ impact on pay TV.
Other key trends that are likely to benefit pay TV operators include growth in the sale of 4K/UHD TV sets, with this seen as ‘very positive’ by 21% and ‘moderately positive’ by 42%.
At the other end of the scale, growth in non-linear, on-demand viewing is seen as ‘very positive’ by 21% and ‘moderately positive’ by 36%, meaning that a clear majority still view this as positive. Even growth in demand for more flexible ways of paying for content is seen as positive for pay TV providers, with 22% viewing it as ‘very positive’ and 38% viewing it as ‘moderately positive’.
The survey looked at the views of 375 industry leaders and experts on a range of key topics.