Pay TV operators are facing myriad challenges that are posing an increasing threat to their traditional business. This includes the significant changes in consumer viewing habits and an explosion of over-the-top (OTT) multiscreen streaming services led by the fiercely competitive Netflix and Amazon Prime Video. Consumers no longer are satisfied with a passive experience of watching a linear TV program in their living room. Rather they want to watch content on the device of their choice at the time of their choice - whether it be a phone or tablet when on the go, or a streaming set-top box, connected TV, or their laptop when at home - and engage with content on a tablet or chat about their experiences on social media sites.
However, the old adage goes that every dark cloud has a silver lining, and indeed pay TV operators have a silver lining here, whereby these challenges can be transformed into tangible opportunities. It comes down to how each operator chooses to respond to these changes in viewing habits and expectations. The way the operators manage these challenges will have a direct impact on their competitive position in the market and influence their ability to capitalize on generating new potential revenue streams.
The Shifting Winds of Consumer Viewing Habits
The "one pay TV subscription fits all family members" model does not work any more. Pay TV operators now have to focus on building an ecosystem of products and services that appeals to each member of the household. They not only want but expect varying experiences on each platform, different flavours of content, and they want it all on their own personal schedules.
Customers are changing too quickly for comfort. Consumers rule the market using a wide variety of channels and devices that allow anytime, anywhere content consumption. They are well-informed, diverse, demanding, cost sensitive and value driven. They are also looking for a great interactive experience. Digital consumers are now empowered with wider access to information and choices and are willing to simply change providers if their expectations are not met on their terms. This means that operators need to ensure seamless convergence, not only in terms of networks but also devices and services. In this shifting environment, operators must adopt a whole new strategy to attract the new digital consumer and keep them engaged and satisfied. This means providing the right content and effective search and discovery at the right time on the devices of their choice.
While market trends and technology innovations are posing significant challenges to the operators, they are also creating new growth opportunities. Operators can create opportunities for growth by digitizing customer interactions and by investing in a new wave of digital innovation. Operators need to integrate customer interactions across all digital touch points to gain a 360-degree view of the customer - their usage, service interactions, preferences and social behaviour - through a full suite of digital customer-facing tools and fully integrated digital channels.
OTT - The Formidable Challenger
As the old adage goes, "If you can't beat them, join them." It is clear that OTT is here to stay, and those operators who are incorporating OTT offerings within their own services will fare best. In addition to meeting the "content anywhere anytime" needs of their existing customers, by extending offerings to broadband-only customers, operators can attract "light" pay TV consumers and cord cutters, offering them content through OTT services. This means reaching a new, typically younger demographic. Sky in the UK recently announced it will be doing just that, offering consumers in the UK access to Sky content without the need for a satellite dish. Another example is Sling TV in the United States, which provides a select number of popular channels (including ESPN) for a base price with the option to add genre-specific packages of channels.
By offering an OTT service alongside linear programming, and by making the user experience dynamic, integrated and truly engaging, pay TV operators can meet the growing expectations of consumers and truly compete with the pure OTT providers.
Leading Indicators of Success
The key factors that will determine the success of a pay TV product will be content quality, followed by user experience and ease of navigation, with an emphasis on personalization, followed by quality of delivery.
Pay TV operators have two primary goals: Firstly, to transform their video services to meet rapidly changing consumer viewing habits and consumers' increasing expectations of personalized content available anytime, anywhere, and on any device; and secondly to explore new opportunities to monetize OTT video distribution. Both of these goals will help the operator maintain a leadership position in the market and drive a high level of customer satisfaction.
Content is King
Consumers have become much more discerning with respect to their tastes for content and increasingly seek out new content from the Internet. Pay TV operators need to pay much greater attention and work much harder than before if they want to retain existing customers and to attract new customers. Operators will need to make increasing investments in content in order to offer exclusive or premium high-quality content, personalized to customers' unique and varying tastes. By monitoring and analyzing viewing habits and patterns, operators can determine preferences and anticipate trends in order to recommend personalized, contextualized content to increase engagement and hence retain/grow their customer base. Other content strategies may include providing themed content and premium VOD content with early release windows to attract consumers. The ultimate draw card for operators and a key area to defend to retain their pay TV subscribers is live sports due to the operators' investments in long-term rights deals despite the escalating cost of these deals.
Apps are the 'Last Mile' - First Impressions Are Lasting Impressions
Native client-based applications are paramount to consumer engagement because they enable an operator to provide a consistent TV experience on every screen, but tailored to the specific form factor of the device. For operators to be successful and maintain a leadership position, it's imperative that they invest in a platform that will bring personalization, interactivity and socialization to their service across all viewing devices.
Innovate, Innovate, Innovate
What differentiates one operator from the next is the level and rate of innovation they bring to their service offering. Operators need greater control, as well as the ability to easily and cost-effectively add new features and functionality in order to deliver an exceptional viewing experience and advanced services. This capability and flexibility is fundamental to being able to keep viewers engaged with the TV service and enable them to increase existing revenue streams and develop new sources of revenue.
Adapt or Die
They say that "change is a constant." For operators striving to thrive in the ultra-competitive and ever-changing TV industry, they need to adapt, be flexible in their business models, and monitor trends to be proactive to the ever-changing industry. By offering innovative and engaging apps, exclusive or premium content, exploring alternate revenue opportunities (for example, targeted in-app advertising), experimenting with attractive new pricing models, and adapting their services for an ever-growing range of devices, operators will be well-positioned to adjust to market demands and evolving consumer viewing habits. This will enable the operators to serve their customers' increasing expectations, drive increasing levels of engagement and ultimately achieve higher levels of customer satisfaction.
Ashley Desatnik is the sales director of Accedo.
