In the cord-cutting, digitally disrupted U.S. pay TV market, what areas of innovation can operators capitalize on?
This question was explored recently at this year's Pay TV Innovation Forum, the global research program for senior pay TV and content executives, in a series of interviews conducted across the United States to explore their views of the current landscape - especially the multichannel video programming distributor (MVPD) angle.
Digital Video Technology and Product Executive Scott Boyarsky addressed content choice and its impact on consumers in the market.
"There's almost too much (content) choice, and too many levers for consumers to pull," he said. Although this won't necessarily be detrimental to the industry.
"That may, in the next 18-24 months, present some new opportunities for the MVPDs - if they can get their act together - to become a single source of content choice for consumers."
As a result, consumers are increasingly moving to smaller and more targeted content packages and new over-the-top (OTT) video services.
Ben Grad, head of Content Strategy and Acquisition at fuboTV, said: "People don't want to pay for 300 channels if they're only ever going to watch fewer than 20. This has been an issue for a while now, but there has been a real acceleration of people moving away from big bundles over the last 12-18 months. This trend is driving consumers towards new (OTT) video service providers."
In addition, he pointed out that consumers are increasingly questioning the value of proprietary set-top boxes from legacy players, asking, "We already have multiple devices at home that can support video services like Netflix, so why should we spend an additional $12 per month to get yet another box?"
This may cause problems for some. Grad said, "While some legacy businesses are starting to offer more options for consumers to use their own devices, most rely on that extra $12 to support their technology investments."
But what opportunities lie ahead for operators?
Firstly, the major MVPDs are increasingly focusing on being the data highway - the Internet service provider (ISP).
Boyarsky said: "There may be a point in time where some of the major MVPDs exit the pay TV business and instead focus all of their energy on just providing the delivery experience. Some may shift their focus to offering a distribution platform similar to Apple TV that offers third-party OTT apps."
"That's certainly something all major MVPDs have to think about in their long-range plans, where they consider future scenarios, including what would happen if they exited pay TV businesses or stopped investing in them."
There are also areas where pay TV providers are focusing on diversifying their businesses.
According to Boyarsky, the most obvious one is content.
"Content is still king," he said. "AT&T recently buying Time Warner, and both Disney and Comcast showing strong interest in acquiring Fox are a sure sign of growing focus and value placed on content."
But content isn't the only avenue being explored.
"There's also Smart Home, which is a Wild West market today, with a lot of disruptors, such as Apple, Google, and Amazon, making major in-roads in that space," Boyarsky said. "However, MVPDs already have a lot of equipment in consumer homes, and there's no reason why they can't become providers of smart home automation, security, and energy management. The big challenge is whether MVPDs can do it in a way that is relevant to the mass market consumer."
However, Boyarsky and many in the industry believe pay TV might have the upper hand when it comes to customer service. He said, "Smart home services require more of a consultative approach, while, historically, customer service has not been a strong suit of MVPD businesses, with many of them often found at the bottom of customer satisfaction surveys."
In addition to content and smart home opportunities, becoming a next-generation virtual multichannel video programming distributor (vMVPD), an "OTT MVPD" in other words, could be a viable option.
FuboTV, for example, started in early 2015 as an international soccer streaming service. But in early 2017 it switched to a vMVPD model.
Grad said: "The market was stale and stagnant, with traditional MVPDs having some of the lowest net promoter scores and customer approval ratings of any industry in the USA. With rapid evolution of our technology platform, our ability to compete with traditional MVPDs went from being a pipe dream just a couple of years ago to a real market opportunity."
But there are, of course, criteria for making the switch work.
"Having a world-class platform with world-class picture quality is critical," Grad said. "Secondly, it's about delivering personalized experiences to our customers. We've been doing more in terms of having a custom user interface and have always been mindful of how we can deliver more relevant regional and local content to our customers."
Also critical is continuing to provide more options to customers.
"We serve a growing variety of tastes and preferences, ranging from someone who's happy with a basic package to someone who wants more entertainment and movies to someone who's a super fan of NFL or Bundesliga."
Ultimately, the issue returns to content.
Boyarsky said: "Consumers have more choice than ever to get the content they want. MVPDs see this as both a threat and an opportunity. While no one has the winning strategy on how to remain relevant in this space, it's clear that they all recognize the need to change and adapt to the environment in which consumers have much more choice over content and who will provide it."
Simon Trudelle is senior director of product marketing for NAGRA.