In the converging pay TV and over the top (OTT) video era, leveraging cloud technology is essential to the next generation of content delivery. Everyone from Hollywood studios to live sports broadcasters must now make use of the power of OTT and cloud technologies to distribute content over IP networks.
In parallel, many pay TV service providers have ramped up their OTT and multiscreen TV services. Operations are beginning to shift onto an IP-based delivery model of OTT unicast, IPTV multicast or a mix of both.
Why the shift?
Why are operators migrating? Well, the general, overarching goal for operators is to enrich their content offerings and deliver more value and convenience to their subscribers. However, if we unpack that response slightly, we can observe five key motivating factors behind the increasing cloudification of the pay TV industry:
1. To respond to consumer demand
With more than 500 million hours of YouTube content alone being watched on mobile devices per day and more than 130 million viewers subscribing to Netflix worldwide—all driven by increased access to high-speed broadband, 4G/5G networks and smartphone capabilities—consumers today increasingly expect smart, on-demand TV services on any screen.
Similarly, consider the findings from the latest Pay-TV Innovation Forum, which indicates that operators are experiencing strong demand for multiscreen from their subscribers.
Recent findings showed that more than 86% of the top 233 services providers worldwide (that’s 93% of the pay TV market outside China) have deployed multiscreen TV Everywhere services as of April 2018—a 4% increase on 2016. On that note, we can observe the second key motivating factor for operators.
2. To increase screen reach
By delivering TV services on any device at home and on the go, operators can also increase their perceived value. This includes retail consumer electronics devices, such as smart TVs or streaming set-top boxes (STBs), thereby reducing traditional CPE investments.
The next generation of content delivery is an all-screen play. Facebook, Twitter, Google and other global and regional Silicon Valley giants are trying to capture eye share on smartphone, tablet or laptop mobile devices and extend their presence from the big screen. Operators are now realizing that they can’t afford to let this movement pass them by.
3. To broaden market footprint
Inextricably linked with the previous two, broadening market footprint enables operators to go off-net and deliver content in a true OTT subscription video on demand (SVOD) and multiscreen TV Everywhere model.
4. To take advantage of lower costs
Leveraging elastic, efficient, scalable cloud, IP and data infrastructure means lower operating costs, innovative services and more agile systems—this is something all operators are clamoring for in the age of digital transformation. It’s all well and good chasing consumer habits, but operators should also consider what the cloud can do for their own back-end systems.
5. To target new consumer segments
By proposing more flexible OTT business models with low customer acquisition costs—say, the often-lauded skinny bundles, SVOD packages or pay-per-view—operators can tap into consumer segments who would have never otherwise considered their service. Cord-nevers, for example, are defined by their reluctance to dip their toes into traditional pay TV offerings. However, if operators can offer these more tailored services that suit this group’s consumption habits, we may see a significant change in the coming years.
Operators are challenged to rethink their pay TV strategies. What steps can they take?
Next steps
There’s undoubtedly clear motivation for operators. So, what are the next steps?
At the risk of tempering optimism—not to mention stating the obvious—getting heads in the cloud isn’t a straightforward transition. Right now, pay TV operators currently find themselves at a crossroads between broadcast and OTT distribution models, facing digital transformation in its purest sense.
We’ve reached the stage where the lines between pay TV and OTT are increasingly blurred, but it’s nonetheless a stage where many are struggling to adapt to this new world.
Pay TV revenue growth is slowing worldwide, and many operators are still mainly reliant on legacy broadcast systems, finding themselves trailing in the dust of digital disruptors like Netflix and Amazon. Pundits have been declaring the death of the traditional STB for years, and regardless of whether or not that forecast will come to fruition, many operators have realized that they need to adapt to the changing environment.
However, let’s not forget some operators have already taken the leap, but with mixed results.
Many service providers went multiscreen but failed to get their subscribers to fully embrace the experience. This was either because of the content (only long form, no premium content), the service offering (no on-demand features and a limited catalog) or that the features were missing or insufficient (no multi-audio, no subtitling, a poor user interface). As a result, there are plenty who saw it as a dead end.
Past traumas aside, if operators do invest in smart multiscreen solutions, the opportunities are considerable. Properly executed, multiscreen will open new revenue streams and potentially attract that new mobile-first customer base.
But, if we’re currently living in an in-between phase—not quite legacy, not quite post-digital transformation—how can operators ensure they make it through this tricky interim?
The answer lies in becoming what we call “smartly digital.”
That is, embracing cloudification, actively claiming the content aggregation role and leveraging data-driven principles to define and evolve consumer propositions. This way, providers can ensure continuous solution renewal and enable the next phase of growth. Not that we should underestimate the task at hand.
Questions to be answered
Migrating even a small part of a TV distribution network onto a new system is never easy. Changing the media delivery method means examining every part of the business model—and raises a number of questions in the process.
The first of these is whether to use IP-only streaming devices and smart TVs or hybrid STBs. This decision will be driven by business objectives and the existing technology in place. Pay TV operators already have broadcast or IP multicast infrastructure in operation.
And, considering consumers want on-demand TV and VOD services as well as high-quality linear channels, the challenge is working out which parts of the back-end and network to upgrade to IP to address these needs.
IP is both a simple technology and a complex ecosystem quite different from the delivery structure familiar to most pay TV operators. Migrating to IP not only involves evolving to a new end-to-end infrastructure, but also integrating new features, such as cloud DVR, addressable advertising, adaptive bit rate (ABR), just-in-time packaging, content distribution network (CDN) and device management.
For example, a cloud-based business and security services platform could prove invaluable to operators, providing a true multi-tenant solution that leverages new technologies delivered “as a service” to pay TV operators from the cloud and supports the Android TV ecosystem. This could also include cloud-based direct-to-TV security, off-the-shelf and flexible content protection technologies as well as anti-piracy services and watermarking.
The inevitability of IP
In this uncertain, rapidly changing landscape, it can be difficult, and often unwise, to make any firm predictions. However, if there’s one conclusion we can draw with any certainty, it’s that when it comes to the future of television—all roads lead to IP-delivered TV.
The biggest challenge for operators is that they're all setting off from different starting points. Different strategies are suitable for telecom, satellite and cable operators—there is no one solution. Rather, companies should find a path to IP that works for them. But whichever path is chosen, as consumer habits continue to evolve, this is increasingly a journey worth taking.
Ultimately, managing the transition to cloud requires two things: an in-depth understanding of the technologies and products involved, and management expertise in delivering mission-critical projects—all while optimizing value, cost and time-to-market.
To be successful, it will be crucial for operators to marry the flexibility, network and device reach inherent in OTT technology to the TV-grade reliability people expect from their TV services.
Whether it’s a gradual evolution or closer to an overnight revolution, delivering on the immense promise of digital transformation and cloudification takes careful consideration on the part of the operator. And those fully going “smartly digital” have already shown it’s better to leverage expert help to shorten the path to success.
Simon Trudelle is senior director, product marketing, at NAGRA.
