Slovak Telekom: Building OTT Services for Local Markets

Building a successful pay-TV service in a smaller market creates its own challenges. And in today's complex video market, when you have to deal with millennial device preferences and cord-cutting behaviors, finding the right balance without scale can be extremely difficult.

Slovakia is one such market, with just 1.5 million households and basically saturated pay-TV penetration. With Netflix launching in the country, there's now a world-class OTT service competing with local pay-TV providers.

Telco Transformation discussed major trends in the Slovak market with Luana Alexe, senior product and service development manager at Slovak Telekom . She is tasked with driving product development and innovation for the operator's digital video services.

In part I of this interview, we discussed the market for pay-TV services, the services that Slovak Telecom is currently offering, its strategy for doing so, and the benefits of collaboration with parent company Deutsche Telekom AG (NYSE: DT). (See Slovak Telecom: Pay-TV Strategies for Smaller Markets .)

But we also wanted to look at OTT and its impact on the Slovak market, and the genres of content that were most valued by customers in Slovakia. We address this in part II of the interview below.

Telco Transformation: What kind of content is most important in Slovakia -- do Hollywood films and TV shows do well?

Luana Alexe: So the most important content is local. It's very important for ratings, viewership. But not just Slovak, Czech as well. They used to be one country and the cultures are very integrated still to some extent. So Czech TV is popular, and also the national broadcaster is well funded. It produces good TV shows, and also quite a few, so there's both quantity and quality.

Some of that is available here in Slovakia -- some through legitimate channels and through not-legitimate sources also. And there are some strong local content providers as well, both in terms of developing content and acquiring it.

The second important content format is sports. And we are seeing it become more popular recently. In Slovakia, it's not just football [soccer], though that is growing and catching up in ratings. But it's ice hockey that is the biggest sport here. The Continental Hockey League, which is the European league, is number one here in terms of ratings.

But football is also growing in importance. The local league is well watched, but also the Champions League, which we have almost exclusively. There is a Slovak channel that offers some but we get most [of the games.] It gets some of the highest ratings, and also La Liga, the English Premier League, etc.

For Hollywood content, it's mostly about the movies. For TV shows, people mostly prefer local content. But even films… they are big, but not at the same level [in terms of demand] as other countries in the region.

TT: What made you decide to launch an OTT service?

LA: I think we are on a learning curve, like everyone else. All operators are trying to better understand how things are changing. Originally we launched it purely as a value-added service -- basically did what others were doing, following the direction of the market.

At the time, use cases, consumption patterns weren't even known clearly. But we have learned, and things have changed in the past few years. We have decided to offer services on a standalone basis, for example. Basically, for us it's all about evolving -- we have to balance features, content, interactivity, traditional TV distribution channels, pricing… we need to juggle [all these things.]

We are seeing some changes in the type of consumer [for pay-TV services]. Initially, when we launched this, it was used by IPTV subscribers only. And we found it was being used for viewing when another member of the family was viewing the main TV or to watch in another room or even out of the home. It was used as a type of second screen.

But now it's not necessarily that way. Millennials in particular are doing this. We aren't seeing the kind of strong cord-cutting trends as you see maybe in the US, for example, but we are seeing people just moving out of university, getting their first job or young families -- they are not willing to subscribe to a full TV package but want entertainment and information options.

We find they also prefer OTT. They aren't tied to a set-top box, they can just watch it on any computer. They can just log in -- there is no setup as such. And they can take it with them if they move, or watch even when they are not at home. This is all very easy, and that kind of mobility is an important need for this demographic.

They are also more adaptive -- tend to adapt very quickly to new use cases almost as they appear. And it also helps us in some ways, because it allows us to be more adaptive as well, to be more flexible.

As I had said, it's about balance across features, functions, pricing -- all those variables.

— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation