One of the biggest issues at IBC -- and across the TV industry -- has been understanding what kind of organization is best positioned to be the video provider in the future. Clearly OTT is disrupting the video value chain, but how will the business evolve, and who holds the best cards in this multi-billion dollar poker game? (See IBC CEO Highlights Top Trends for This Year's Show, IBC 2016: What Do TV Audiences Really Want? and Top TV Trends Heading Into IBC.)
One of the best attended panel sessions at the show discussed the impact of OTT, who was best positioned to benefit from the resulting disruption of the TV business, and why.
One of the panelists, Efe Cakarel, founder and CEO of boutique video site MUBI, started off by saying that building an independent OTT platform is extremely difficult. Speaking as someone who had done it, he said MUBI's business had only stabilized after many years. And while there's the example of Netflix Inc. (Nasdaq: NFLX) -- an independent player that has done incredibly well building off its DVD rental business -- most success stories in the OTT world are from Sky , Amazon.com Inc. (Nasdaq: AMZN), the telcos (and cable operators), i.e., companies with existing scale businesses that generate substantial revenue and can fund the acquisition of content.
MUBI had to develop its own very specific model for the classic and independent films that it provides to its customers. It offers subscribers a library of just 30 films. As a customer sees a film, it is removed from the library and a new one takes its place. MUBI only maintains a film license for 30 days and only has 360 films. This was the only way it was able to build a financially viable business.
Jeroen Doucet, managing director of TV app developer Coming Next TV, questioned whether broadcasters are well positioned to provide OTT services even if they do have large libraries and scale. He felt that they are not only late to the game but that they are not in a position to collect data on their viewers to offer more targeted and insightful applications and services. This is where OTT providers and even MSOs are better equipped.
William Linders, director of content products at Dutch MSO Ziggo B.V. , said that OTT has forced changes from network operators, and he felt that they have changed and evolved as a result. He stressed that consumers would always want an aggregator. Customers may want different content and business models but they want a consistent experience. The idea of different apps and different web destinations is not appealing to them.
As might be expected, Linders agreed with Doucet that MSOs are better positioned than broadcasters to take on this aggregator role, since B-to-C services are not in a broadcaster's DNA. Aggregators need data and marketing expertise, and broadcasters do not have those capabilities in his opinion.
Martin Guillaume, head of strategy and business development for Ericsson AB (Nasdaq: ERIC)'s Broadcast and Media Services division, felt that the shift to OTT is driving a top-line problem for broadcasters. In particular, mobile video is growing, and it now comprises 60% to 70% of all mobile traffic. He felt OTT has brought about a race for content, with sports rights (as an example) simply exploding. Broadcasters are now less interested in investing in infrastructure, and would rather use the revenue to buy premium content.
Francesco Venturini, who heads the global media and entertainment business at Accenture , felt that SVoD is not such a profound transformation. In fact, he felt that it is the web-scale players -- Google (Nasdaq: GOOG), Facebook and Amazon -- that are affecting the broadcast world. There has always been an advantage to vertical integration, where one player would create, package and distribute content. But advantages such as frequencies and licenses are becoming less of an entry barrier now, and therefore less of an advantage in an OTT world.
Venturini felt that the large web-scale players would develop their own content and would aggregate content. He felt they could also offer social feeds with UGC content, particularly well-targeted towards mobile devices and younger viewers. He also felt niche content --such as MUBI -- would do well as long as it is clearly differentiated from more mainstream services. Lastly, he saw a clear differentiation between creating your own content and licensing it. Licensed content is a commodity, but if you own your own content, "you have IP, you have something."
The moderator, Nico Waesche from GfK AG , then asked who the customer relationship would be with in the long run, i.e., who would be the video "merchant of record?"
Venturini felt it would be with someone like a cable operator, but not as we know it. He felt the relationship would not be about content but about technology, and features such as single sign-on, billing, etc. would be the critical determinants of the customer relationship. He felt new players would emerge to take on this role.
Ziggo's Linders disagreed only in that he did not think it would be new players. He believes that it is the telco/MSO's game to lose. He accepted that operators need to evolve but felt they were best positioned to do it. But scale is critical -- he doesn't see smaller operators being able to hold their market position for very much longer. Ericsson's Guillaume agreed with the scale argument, but he felt partnerships would be the key to success in future.
Both Cakarel and Doucet think that the web-scale players are best positioned. Doucet felt search, navigation and discovery would be challenges, and the social networks are the best at this. Cakarel felt that the evolution from web to video has been amazing for companies such as Amazon and Netflix. He pointed to recent wins for Amazon content at the Cannes awards and Netflix's House of Cards, which he thought was the best TV series ever across a range of criteria. According to him, these companies are new, but have the funds, are investing in the business and are growing fast.
The panelists had conflicting opinions about emerging markets, with Doucet pointing out that they have low ARPU potential so are likely to be followers. But Venturini pointed to Star TV's Hotstar streaming service in India, which is growing very fast, as an example of people getting the concept of OTT very quickly and a market with rapid population growth. Guillaume talked about a new service being offered in an emerging market where content is downloaded to the device overnight via a 3G network during times of low utilization. The service costs $3 to $5 per month, so delivery costs need to be low. He felt that emerging markets with rapidly growing populations are good opportunities for these kinds of disruptive services.
It did seem from the discussion that the battle for the TV is going to be between the web media players (Google, Facebook, Amazon and others) on one side, and network operators on the other. Success will depend on who can evolve faster from their current positions, and add on the features and capabilities of the other side. This list includes the billing, aggregation and subscriber relationships offered by operators, and the social features, improved search and navigation and owned premium content from the web players.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation