What we learnt about the future shape of Pay TV and broadcasting at Connected TV World Summit 2015

Connected TV World Summit 2015 lived up to its billing and provided some clear insight into how Pay TV operators and established broadcast groups must transform themselves in order to remain at the centre of consumer lives in a world where younger consumers increasingly drive the entertainment innovation agenda. The biggest question discussed at this conference, and the hardest to answer, was how Pay TV platforms remain relevant in a world where more content experiences are available over-the-top and outside of the traditional Pay TV bundle, and when there is increasing pressure for a more a la carte approach when signing up for video content. 

Strategies are still being formed but one thing was clear: Pay TV operators (and cable and IPTV providers in particular) are ready to welcome more content onto their platforms from selected third-party OTT services. Two models are emerging. First is the ‘simple’ apps integration so you can include a service like Netflix, and this approach then splits into two – with or without metadata integration and the universal search and recommendations capabilities that go with it (so the third-party SVOD content is surfaced alongside content found elsewhere on the platform). 

The second model is a much bolder partnership that involves apps integration, universal search and recommendation and then the Pay TV operator adding the SVOD offer to their monthly bill and also taking responsibility for customer care issues related to the SVOD service, using their own call centres to handle customer questions or problems.

This second, all encompassing model, starts to put an SVOD service on the same footing as any other premium ‘channel’ you find on Pay TV. Given that companies like Netflix want to increase their reach by working with Pay TV operators, and given the ongoing evidence that Pay TV subscribers are among the biggest users of online SVOD services without ditching their Pay TV service, treating the best online services like another channel makes a lot of sense. 

How you handle online SVOD – whether you bring it into your curated garden or not – is central to the debate about how Pay TV positions itself. At Connected TV World Summit we heard a whole list of different phrases to characterize the future Pay TV operator. ‘Experience provider’ was the most notable phrase, summing up the idea that you guarantee the Quality of Experience for all services, you make it easy to find content and navigate, you fulfill the role of a super-aggregator, curator and discovery engine.

In relation to the user interface specifically, there was an acceptance that Pay TV operators may have to become a shop window to more content, including OTT content. Maybe operators must provide the umbrella UI that leads to a dozen other user interfaces, one for each of the app-based content universes from a broadcaster or online service provider. Operators would then become a kind of apps bundler but provide a holistic view of everything on the platform. 

Underpinning these discussions was the wider assumption that, in their role as triple and quad-play providers, platform owners with Pay TV can perform a holistic role as experience and service provider across our wider lives, from broadband provision to future smart home services including connected medicine. In this wider role as the experience provider, platform operators guarantee that the Internet of Things (IoT) works, keeps working and remains consumer-friendly, something that includes protecting our private data and securing our homes against cyber attacks.

The IoT is a fascinating and nascent market opportunity for network owners who reach into our homes with software and hardware platforms, whether it is a broadband gateway, router or a set-top box. Pay TV operators have so much going for them in the race to provide or at least manage IoT services and functions, not least because they are companies that people can trust. I cannot help but think that the racy and cutting edge image that Google and Apple portray will be less of an advantage in this market, where quiet, conservative, steadfast and trustworthy could be the brand values that people look for. We are going to need companies who can absolutely guarantee that everything that happens inside our home stays in our homes, and that we choose what data is shared, with whom and when.

The IoT conference session touched upon issues like protecting the cyber integrity of homes and the video camera images that may be collected and stored, and protecting privacy. There was an acknowledgement that the Pay TV ecosystem has important skills that will be needed. After all, this is an industry that successfully manages gateways, clients, embedded apps, data gathering, content security, user interfaces, interoperability, QoE, billing and customer care today.

The big question is where the money is in the smart home and IoT. The inference at this conference was that this represents the fifth-play and is a natural extension for a network owner that once offered television but then added telephony, broadband and mobile (or did that in a different order!). Under the IoT umbrella there will be a bunch of new services that need to be sold, cross-promoted, managed, billed and supported. So while the exact role of the Pay TV industry in the IoT must be determined, the general value proposition seems fairly clear. And it was suggested that the connected car would be a good place for service providers to set their sights, albeit an already competitive marketplace.

Across many of the topics discussed at the London event, you got the impression that Pay TV operators (many of them triple-play providers) know what they need to do next, but not necessarily how they do it. The roadmaps are still being defined, like how to bring more OTT and streaming video onto traditional platforms. But there are no arguments about the need for change.

The days when OTT would be partially dismissed, and people would talk about the benefits of having exclusive content and large subscriber bases with regular meaningful revenues, and how difficult it is to appeal to consumers without a linear offering, are gone. These are all good points but the television industry is now choosing to put them in the drawer and instead focus on competing with OTT providers as if they did not have these advantages to comfort them. This has focused the mind and created, in some organisations, an attitude towards self-disruption.

When there were demands at this conference that Pay TV operators stop making excuses and make sure we can access our content on our holidays, out of the country (given that we still pay our subscriptions for the two weeks away from home), nobody objected. Sure, there are practical hurdles, but the general demand that the industry “just makes it happen for me” was accepted. The same applied when operators were told to give us unlimited storage and put an end to recording conflicts forever. “Just make it happen and stop telling me why it cannot be done” was the challenge. Panelists nodded in agreement. Everyone accepts that the consumer is king.

Before this conference opened we identified some key themes, including the need to appeal to a wider variety of television viewer than in the past (which is not easy for an industry that should, in theory, reach out to people of any age, lifestyle and mindset). We noted the way that media companies now have the technology and distribution platforms to do much of what an online start-up can, and that this means the established players are beginning to disrupt themselves. 

It seems the television industry is ready to accept some smaller hits (like losing some channel viewers to SVOD services on a platform that seamlessly integrates both) in order to win the bigger prize, which is the continued role as the gateway to our entertainment (and maybe our wider connected) lives.

It is just as well that today’s TV platform operators are well positioned to take on the role of the uber-service provider who manages our entertainment, our connectivity and maybe our touch points with the IoT. Because there was one troubling discussion in London. 

During a session on Pay TV transformation, nobody had any ideas for where a Pay TV operator will raise an extra EUR 12 per month in subscription revenue, other than from new services not directly related to TV. This figure is the rough equivalent of £10 per month and that is what BSkyB initially charged each month for its Sky+ DVR when it was launched and then initially charged for HDTV. Nobody mentioned ultra high-definition in this discussion as a way to increase ARPU by EUR 12 overnight. 

It has looked for some time as if the days of adding a discrete new TV service worth EUR 12 a month could be over, though we have seen enough surprises in this industry to suggest you should ‘never say never’. But whenever the subject of incremental revenues is brought up today, the conversation quickly turns to loyalty and churn reduction or wider revenue possibilities from monetizing the customer base (like the smart home).

Another point of concern, though less significant,  appeared during the breakfast session about the future of the Pay TV UI and UEX, when nobody could name a ‘hero’ function inside a UI (delivered by the television industry) that on its own would thrill television users and provide significant enjoyment that was supplemental to the content itself. But there is a fair argument that this is not the point of a user interface anyway, and we did hear it suggested that “the best UI is no UI”. 

The most important UI ‘function’ attributed to the Pay TV operator of the future (and indeed today) is that of content discovery agent and trusted guide to the entertainment we want to reach. This means a continuation of what we know, only across more content and services. 

Thought was given to whether the Pay TV UI becomes an umbrella interface that encompasses multiple different universes, all with their own user interfaces (e.g. online service or broadcaster apps) and whether consumers can cope, or want to cope, with lots of different UIs. In a separate discussion, the whole idea that consumers want or need services and content to be aggregated at all was challenged – with a suggestion that they are quite happy to go out and find the different online service apps and navigate between them without someone packaging them in an umbrella UI or providing universal content searches across them.

However, if we assume that a meaningful number of consumers continue to appreciate aggregation and curation, the ‘killer  UI app’ in a world of multiple apps is universal search and recommendation. This means that, if you search for a show, you see all the places and times that it can be viewed, and where it can be purchased or watched free, whether it is on platform operator VOD, broadcaster catch-up, linear TV or online SVOD.

We also heard the potentially exciting prospect of Pay TV operators making the user interface far more flexible, if not completely personalized. It seems realistic that a platform operator will be able to deploy multiple versions of their UI according to the profile of the user (millennial, mid-life consumer, senior, etc.) or provide a default UI that then adapts intelligently to the kind of home where it is used. 

You could be offered the option to have on-demand content on your home page for example, if yours is a home where people love on-demand viewing. The operator could offer the adapted version of the UI and give customers the option to go back to the previous version if they do not like it. Once again, this is about trying to appeal to every kind of consumer as user expectations fragment. 

As we wrote in our conference programme notes (Videonet produces Connected TV World Summit): “Media companies have to embrace the ‘digital-first’ mindset and make it their mission to serve people who either reject TV in any of its traditional forms or just prefer their video entertainment online. And they must do this without ever losing sight of the mass-market, or the lonely 80 year-old widower crippled by arthritis for whom television is a window to the world outside and his only company, eight hours a day. It has become harder to serve everyone in the television market.”

During the two days of Connected TV World Summit, and at the pre-summit TV Pathfinders briefings, there was optimism that Pay TV operators and traditional broadcast groups can successfully reach out to the millennials and to Generation Z who follow them, and to anybody of any age with a ‘digital-first’ mentality. It is taken for granted that for Pay TV operators this means making content available on every screen. It was acknowledged that multiscreen is increasingly important as young adults live at home with their parents for longer and so want some privacy and personal choice when it comes to their own viewing, which may not be possible on the main living room TV set. 

Beyond offering multiscreen and more OTT, better UIs and binge-friendly box sets, some Pay TV operators are reaching out to these young adults through their new standalone OTT services. These have lower cost and lower commitment subscription contracts compared to traditional Pay TV. These services should play well with younger consumers. The Pathfinders audience heard how Generation Z are careful about how they spend their money but will pay for things they care about. They will forsake a few Starbucks coffees in order to pay for an online video subscription, for example.

And young adults are subscribing to their own online services while living at home with the rest of their family. We have already reached the point where there are personal subscriptions inside a family unit. This is one of the factors that is prompting more research into how traditional Pay TV services can be individualized. The attraction of a personal online subscription is not just having your own ‘TV space’ – but having the service completely geared to your tastes thanks to personal log-ins and the subsequent personalized recommendations.

The Pathfinders audience was given a profile of Generation Z consumers, who are wary of long contracts and commitments – which again points to a role for the standalone OTT service (Pay TV Lite services like NOW TV from Sky in the UK and Sling TV from DISH Network in the USA). Though only a few Pay TV operators offer their own online SVOD or standalone (OTT) Pay TV Lite services today, many people accept the need to segment the video market more finely into full-flavour Pay TV customers and Pay TV Lite homes (often free-to-air households where consumers supplement their free channels with a modest amount of paid content).

It is worth noting that the online service providers are also evolving their strategies. Maxdome, the SVOD service for Germany and Austria owned by ProSiebenSat1 group, has started to offer linear (IP streamed) pay-per-view wrestling events from WWE and is the exclusive destination for this content in Germany. There was no suggestion that this was an aberration, never to be repeated. The moment SVOD providers start to offer linear sports entertainment [you might argue wrestling is more theatre than sport!], the lines between this kind of media company and a broadcaster start to blur, especially when SVOD services are jumping onto Pay TV platforms. We heard at the pre-conference Pathfinders event how many youngsters in the UK already refer to Netflix as a TV channel, and believe it to be one (they are not just being lazy with their terminology). That is without having any linear TV (or advertising) on the service.

Other new OTT opportunities were highlighted, notably for sports rights holders and existing sports distributors using broadband. Sports fans increasingly want broadcast-grade coverage wherever they are, on the best available screen. But this conference heard some strong warnings that direct-to-consumer distribution for sports rights holders needs to complement and not compete against traditional Pay TV. One major rights holder firmly dismissed the idea that anyone can monetize a major sports league better by going it alone online than by working with a Pay TV platform partner. But there are less popular sports where direct-to-consumer OTT exploitation of sports rights could work well.

Connected TV World Summit was focused on Pay TV transformation and broadcaster transformation this year, as media companies adjust to the demands of younger consumers and other viewers with a digital-first outlook. It was clear that major broadcast groups are repositioning themselves to reach out to younger viewers through any means necessary, without throwing away their established strengths. This means investing in MCNs or the creation of MCNs so there is more special interest content and new talent that appeals to younger viewers. 

These broadcast groups have established sales and distribution structures and they are confident they can monetize MCN-type content as well as anybody can, and so become an attractive outlet for new talent as it emerges. The interest in MCN content is partly about discovering and nurturing young talent that would not make it onto the radar of traditional television companies, then eventually bringing them to traditional TV. The broadcasters know they should be the factory for new talent and not YouTube. 

Commercial broadcasters have great relationships with major brand advertisers who are looking for better reach into youth demographics so there is an instant win-win (and it will not hurt that these brands can trust broadcasters 100% with their brand equity.) There is scope for new sponsorships and native advertising (where the brand is embedded into the programming itself). Broadcasters are putting more emphasis on short-form content to ensure there is content that appeals to ‘video snackers’, too. There is more syndication and a greater acceptance that people can watch content where they are, and not always at the content owner’s mother ship destination.

The way that major broadcast groups are buying into MCN content (in every sense) is one of the most important developments in the broadcast industry. It confirms the convergence of ‘old media’ and new media. It reflects the need to appeal to more kinds of viewer. It is not just audiences and devices that have fragmented (thanks to multichannel and then multiscreen). The consumer mindset has become fragmented. You can now find people at on end of the spectrum who only watch on-demand content and expect online exclusives, and viewers at the other end who only watch five linear channels, zapping with their up/down button. Connected TV World Summit 2015 confirmed that to thrive in the years ahead, broadcasters and platform operators have to be more things to more people. 

More reading

Look out for our detailed coverage of Connected TV World Summit over the next few weeks. The stories below, published last week, also stemmed from the London event.

MTM Survey Predicts Global Boom For Premium OTT

Ericsson: HDR+ Is The Answer – And UHD Needs To Be Re-Positioned

WWE Says Its Direct-To-Consumer Sports Strategy Is Paying Off