1. What will the effects of changing consumer habits have on existing satellite and cable subscriptions?
2. How can payTV providers use OTT to reduce churn?
3. How can an OTT service transform the TV experience by incorporating the best elements of an existing, successful model?
The pre-eminence of Cable and Satellite providers as the dominant force in broadcasting has, for a long time, been undisputed. However, the growing popularity of OTT TV might suggest that the industry is experiencing the beginnings of a fundamental change. Somewhat predictably, there are mixed feelings about what the burgeoning success of companies such as Netflix and Hulu means for the market. Plus, there’s a general lack of consensus about what is the best way to manage these newcomers to the industry.
For consumers, OTT TV provides much needed flexibility. OTT TV allows them to select what content they want to watch and when, where such will be viewed, and on what particular consumer device the content is to be enjoyed. In an age where convenience is so highly valued, and where consumers are averse to relying on programming schedules, it is easy to see why OTT is flourishing.
In some circles, OTT has been viewed as a threat for several reasons; some providers believe OTT will encourage users to cut the cord (or “drop the dish”). Others see the viewing patterns established by OTT as fragmented and worry such will adversely affect their advertising model. OTT is a disruptive technology, especially for the satellite industry. Embracing OTT, however, does actually represent a huge opportunity for the satellite industry.
Some innovative satellite broadcasters are already ahead of the pack, using elements of OTT to drive their strategy. BSkyB in the UK recently added OTT TV to its existing subscription model with the launch of NOW TV, the Company’s proprietary platform that leverages its vast content rights to deliver on-demand video, such as movies and, eventually, live sport, across a multiplicity of devices. The appeal of such a service to some consumers is that it is there is no need for a commitment to a full subscription of the full Sky package, and consumers are given far more choice over the type of content they access and how much they pay. In response to the gradual slowing of growth in subscriber figures, Sky’s strategy is to target households who haven’t yet subscribed to what can be expensive payTV bundles, and to target those consumers who are increasingly watching content on mobile devices.
Embracing OTT
By incorporating OTT into a satellite distribution model, service providers can considerably extend their reach and open up new revenue opportunities, all the while attracting new customers. By acting quickly to get ahead of the game and by looking at the demands of its existing subscriber base, BskyB, to continue this example, has anticipated the future and strategically pioneered a move into the OTT environment.
The logic behind the thinking, as mentioned before, is that consumers will be increasingly inclined to pay for a more flexible and often less expensive service. A similar shift was seen in the early 2000s as students and others began to give up the traditional phone service in favor of mobile phones—10 years later, one in four US homes does not have a landline (US Centers for Disease Control and Prevention (CDC), 2010).
There will also be consumers who, for whatever the reason, have not paid for a subscription to a satellite bundle but will still be part of the satellite provider’s customer base through an OTT offering, whereas without the OTT offering, they might not be so inclined to access such a satellite service. Importantly for existing customers, OTT TV provides a premium service in addition to what is already being paid for, so providers are not cannibalizing their own user-base for new business.
An important goal for any provider is to reduce churn as much as possible. Having the ability to deliver content to multiple devices goes some way in helping achieve that objective, extending the reach of the service. Instead of OTT being deployed as a method of defense, it should be looked at as a key component of the company’s ecosystem and a way of driving significant return on investment (ROI). It holds a two-fold advantage; it has the potential to lure new customers, while simultaneously reducing churn within the existing customer base.
One of the best routes whereby Satellite broadcasters can become part of, and succeed commercially in, the OTT environment is by moving towards a personalized, user-centric approach to content delivery; enabling consumers to watch the content of their choice—based on their preferences or their friends’ activities—on any device, at any time of day. This is an issue at the moment, as delivering content to multiple devices and delivering the interactivity that consumers are increasingly expecting, is difficult to provide via DTH signals.
The solution to this problem does not have to be an aggressive switch from broadcast to an OTT infrastructure. However, it does make sense to take advantage of and incorporate IP as a method of delivery into a satellite offering.
Satellite does not offer the same capacity, or capabilities, as IP; without elements of OTT being incorporated into the model, second screen viewing (mainly via tablets) and interactivity is not easily achieved for operators. Satellite companies can look to mirror their channels and programs over OTT in order to reach second screen devices, or offer a hybrid service where bundles of the more niche channels are delivered over the top to the TV; this would have the additional effects of clearing space for other premium channels and allowing operators to reduce broadcast costs.
With the right tools and commitment, satellite broadcasters can use OTT to create a relevant and cutting edge TV service, and this is the future of the TV industry. OTT is not only a new method for satellite broadcasters to offer their content everywhere, but also an opportunity to transform the TV experience by providing a new TV viewing experience through the incorporation of the best elements of OTT to an existing, already successful model.
In order to really transform TV, an inherent part of the satellite TV service should include “OTT 2.0” capabilities by creating an experience that truly uses what the intersection of web and TV has to offer, and provides consumers with a completely intuitive and personalized TV service.
OTT 2.0 differs from earlier generations in several key ways. The most important is that content consumption is now an entirely personal experience. A tailor-made viewing experience for each member of the household is created by the facilitation of personalized recommendations, interactivity, and complete integration with a multiplicity of companion devices. It is a native system, fundamentally designed to meet the challenges of newcomers to the OTT industry and those operators branching out of traditional TV.
Tvinci’s OTT 2.0 platform integrates the second screen seamlessly within the TV service, targeting each user individually within the household and allowing true personalization. Tablets and smartphones are used for direct viewing (first screen) and for playing with while watching TV (second screen), to provide complete synergy within the entire ecosystem.
By changing the way we discover and interact with selected content, OTT 2.0 is shaping the future of content consumption and enabling the personalized, user-centric service that consumers want and need. Satellite already has the benefits of being reliable and able to deliver unique live programming to the living room, but as it expands to additional Internet connected devices, delivering the content alone is not enough: Viewers use these devices differently, and the viewing experience should use each device’s capabilities and the array of new monetization possibilities the medium (Internet) offers.
Satellite and OTT are not mutually exclusive; if used correctly, OTT can provide a complementary technology, working in harmony with Satellite broadcast to deliver a blockbuster service to viewers.
Once Satellite operators take this leap forward, OTT 2.0 will reach every tablet and smartphone owner, offering unprecedented interaction, social content discovery and personalisation, and television really will be revolutionized for everybody.
About the author
Ofer is a seasoned Internet entrepreneur with a background in IPTV services, selected by Forbes as one of the 300 most promising young entrepreneurs in Israel. As a senior project manager at CoolVision, Ofer successfully lead the development and deployment of an international video chat operation. Ofer was a partner at Frido, a boutique provider of creative Internet solutions and co-founded Tvinci in 2007 with Ido Wiesenberg.