Service providers need to master data and analytics, technology integration, and partnership management in order to thrive in digital media space.
As the percentage of people going online continues to be on the rise and the requirements of consumers from media providers constantly evolve, the complete digital media ecosystem is under pressure to perform better. This ecosystem comprises telecom operators, TV players, Video-on-demand companies and internet players providing media services. While companies like Netflix and Facebook come up with exciting new offers for consumers, the question that arises is whether the telcos are losing out in this battle to offer the best content experiences to their consumers.
Consumers are not only watching more hours of video content, they are also using different devices to do so. Since 2010, the smartphone has been the main device responsible for this growth – it has more than doubled its share of viewing time since 2010, and now makes up almost a fifth of the time consumers spend watching TV and video, or six hours per week, according to Ericsson ConsumerLab study. The growing mobile centricity is something which telcos can bank upon and use to the best of their advantage. “Data monetisation is one way of generating revenues for telcos - by bundling media consumption to access,” says Fahad AlHassawi, deputy CEO, Emirates Integrated Telecommunications Company (EITC). He adds: “However there are several alternatives - from pay-per-view to standalone subscription models which telcos can apply as well.”
Raising data prices for a select audience might come in handy if operators can offer to the customers an unparalleled connectivity experience, that enables them to see their favourite watches whenever and wherever they wish in the best quality possible. Netflix, for example, raised its prices in the US without much of a backlash.
“The key to Netflix's ability to raise prices is its skill at developing programmes that are based on its insights into customer tastes,” says Peter Cohan, lecturer of strategy at Babson College and author of the book "Disciplined Growth Strategies." As long as Netflix can create compelling, geo-targeted content in different places around the world, “it will be able to raise prices enough to cover the investment,” Cohan says. So, clearly, the key is to provide a compelling offering that consumers wouldn’t mind paying a premium for.
Ericsson’s report reveals that the time spent watching TV and video content has reached an all-time high of 30 hours a week, including active viewing of scheduled linear TV, live and on-demand internet services, downloaded and recorded content, as well as DVD and Blu-ray. However, close to 60 percent of viewers now prefer on-demand viewing over scheduled linear TV viewing, an increase of around 50 percent since 2010. The need for consumers to take their TV content abroad has also grown since 2014, which indicates that content portability will increasingly become a crucial component in any future media offerings.
Another highlight of changing consumer behaviour is the need to watch all episodes of a series at once, without having to wait for days or months. That might be a problem for traditional TV providers. They would need to digitise their operations entirely to keep up with the internet players. 42 percent of consumers say they binge-watch more TV series today than they did five years ago.
Anders Erlandsson, senior advisor, Ericsson ConsumerLab, says: “We can see that consumers are not only watching more video but also changing how and when they do so. This is also shown through the continued growth of mobile viewing, which has been a booming trend since 2010. This year also marks the first time that we have explored the level of consumer interest in VR in conjunction with media consumption, and the findings have been fascinating. VR has the potential to bring together people from all over the world and create deeper, more personalised, and more complementary media experiences.
“As consumer expectations for on-demand, mobile and immersive viewing continues to increase, the TV and media industry must focus on delivering highly personalised services in the very best possible quality available,” Erlandsson adds.
While video-on-demand services continue to soar in popularity, the viewing time varies across age groups. For consumers aged 60–69, where live and scheduled linear TV content still represents almost 80 percent of the total viewing time, which is as much as in 2013. That translates to tremendous potential for telcos, who can provide varieties of content through their various platforms, hence appealing to the wide range of audience they cater to.
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AlHassawi says: “We have observed two key phenomena in pay TV sphere. One is the rise of telco bundles with basic and premium TV, and, the other is the increase of OTT services with more content options available for consumer to follow. Our understanding is that Pay TV will become more affordable but telcos need to re-think acquisition and operational costs in order to deliver better packaging and pricing to drive mass adoption.”
The choice that consumers have in terms of video is at an all-time high. Online video supply is growing faster than demand and creating confusion for the customer; with 53 percent wanting recommendations from their preferred platform, and 55 percent of customers willing to pay for them, according to research by A.T.Kearney. This also brings with it a new way of monetisation. A.T.Kearney research calls this new role as a “content navigator” that streamlines the customer’s search, based on a smart but simple interface, and providing access to all available video.
Telcos can focus on connectivity or become content navigators. Content navigator platforms will evolve into a business platform, simplifying and enhancing the video experience for viewers and adding value for all stakeholders. The revenue streams from this model come from multiple sides: customers pay for subscription fee or one-time payments to watch content provided by the company; advertisers pay to place ads on the service; content producers pay to receive data that will improve their content.
The year 2017 saw quite a few significant developments in the MEA region targeted at tapping the growing interest of consumers in digital media. Kuwait-based Middle East service provider Zain launched OTT TV service iflix Arabia across its markets. The service currently offers content form over 220 studio and distributor partners, including Hollywood, regional Arabic, Turkish, Bollywood and other content popular in the region. The service is available on up to five devices, and users can download shows for offline viewing. iflix’s propriety compression and adaptive bit rate technology further ensures that users have a great viewing experience, by enabling the service to stream smoothly on low internet speeds. The creation of ‘iflix Arabia’ builds on the establishment of the Zain Digital Frontier and Innovation (ZDFI) business unit in 2014, which is charged with launching Zain into the digital space and the view to growing the company through new innovative business streams that contribute to Zain’s financial viability and market capitalisation.
In yet another instance of successful content monetisation, Mahindra Comviva helped UAE operator du. It banked upon its expertise in collaboration with content partners, content creation and aggregation with deep understanding and insight into consumer behaviour. With its understanding of the digital content services business, Mahindra Comviva helped the operator increase their revenue from the mobile digital content services stream. By efficiently handling financial settlements across the value chain, Mahindra Comviva enabled improved reconciliation, billing transparency and single point charging, and reduced revenue leakage. With Mahindra Comviva’s digital content service and aggregation offering, du achieved 63% increase in ARPU 63%; complaints reduced by 17% while overall voluntary churn reduced by 19%.
Zain Jordan launched an integrated local digital content platform – ZOOM - which stands for ‘Zain Online Marketplace.’ The platform was launched in collaboration with BeeCell; a leading regional content and value added service (VAS) solutions provider and strategic partner to Zain Jordan. The new platform offers a variety of substantial multimedia applications and value-added services including entertainment services such as online gaming, ringtones, video, and music content, which Zain customers will be able to access first-hand.
When it comes to content, telcos have mostly played the role of content aggregators and content delivery platforms. However, things seem to be changing on that front as well. For example, iflix Arabia has already co- produced its first Arabic series, Waklinha Wala, a 30-episode Egyptian comedy series. Waklinha Wala features many of the top stars in the Arab world and is co-produced by Ahmed Helmy’s production company, Shadows, Front Row and the Kuwait National Cinema Council. Zain Jordan also exclusively partners with local personalities (such as stand-up comedians) to produce local exclusive shows to be made available exclusively on ZOOM. An example of this is the Abu El Ghoor Show (Mafe Menno Show).
“Telcos possess the advantage of a trusted brand, customer and regulatory relations, infrastructure and payment gateways that play a key role in connecting telecommunication service users with the digital world. Local and foreign players need these enablers to succeed,” says AlHassawi. That said, telcos need to deep-dive on ways to extract more value from these developments.
All that said and done, one wonders if telcos need to compete with the OTT players or collaborate with them instead. “Telcos are not meant to replace or compete with content players as we need them to enhance the digital economy and participate in creating value. Telcos need to determine where to cooperate and compete only if there’s a gap for better services,” AlHassawi says.
“Moreover, telcos can demonstrate full customer experience in entertainment, from access to content selection, while pure content player will always rely on partners,” he adds.
Christophe Firth, Principal, A.T. Kearney says: “Telcos can play a pivotal role as distributors. They have strong distribution networks, trusted brands, and a need to monetise the data that is increasingly flowing through their network. More collaboration is needed between content service providers and telcos to drive growth, such as on data sharing. This was a key theme on a mixed telco-OTT panel that I chaired at CABSAT earlier this year.
“Of course many telecom operators are also actively looking to go upstream into developing their own content services and even original production. This is more challenging as it is further from their DNA. But there are success cases globally, such as in Korea and Brazil, where the telecom operator has actively changed its business and operating models.”
To enter and monetise content in a big way, telcos must start diversifying their portfolio and create content focussed business units. These can then focus on producing popular content de novo; in addition, content aggregation will need to continue. They can also try pursuing the new role of content navigation in the value chain. All of this needs to be presented to the consumers on a platform par excellence, in terms of fast and uninterrupted connectivity. In this journey, it might be a great choice to invest in strategic collaborations with content and internet players, which will contribute to strengthening the telcos’ offerings.
Firth says: “Too often the focus is on what content to buy and what services to launch. Classic capabilities, such as in content acquisition and curation, remain although they need to be enhanced given the rising cost of some genres and changing viewing habits.
“But that is not enough. Service providers need to master data and analytics, technology integration, and partnership management. On that last point, 'going it alone' will become increasingly challenging. Strong and well-managed partnerships for content development, technology management, and distribution, to name a few, will increasingly become not an option but a requirement for success.”
Moving forward, the successful players in the digital media ecosystem will be the ones who can provide a wide range of compelling content, backed by flexible commercial models and a pro-active and unrivalled customer experience. And again, it might not be possible for a single player to develop all these attributes on its own- so the future might belong to strong collaborations instead. The key for telcos is to make sure they are part of the successful entity.