Data-driven hardware and its role in driving new revenue for pay-TV operators

Posted On: 4th October 2018

The nature of competition in the pay-TV industry is changing. Now more than ever, tier-1 operators risk losing revenue and relevance to new entrants like Google, Apple, and Amazon. To succeed, operators need to enrich their service offerings and evolve their business models. Provisioning of content will be key, as will be the effective use of data to generate new ARPU. This article examines major trends happening in the pay-TV industry and innovative technologies that are supporting operators rise up to ensure secure, efficient and accountable delivery of content and services to the home.

The Future of the Set-top Box
For decades, set-top boxes (STBs) have been operators’ link to the home. They’re important for rights management and conditional access – in other words, preserving the security of content. Yet a few years ago, operators began questioning whether STBs were still relevant. Some operators were even looking into reducing the hardware quotient in the home. Why? Because they noticed that the nature of video consumption has changed. Today, consumers like to watch content anywhere, anytime, on any device. Operators were unsure if customers would continue accepting and investing in this type of hardware.

Just as operators were contemplating the future of STBs, new market entrants like Amazon and Google began aggressively introducing their hardware into the home. Consumers are excited about having a fresh next-generation device in the home to access content more easily. Initially, these devices were used for simple tasks, such as running a music playlist. Since then, they’ve evolved to deliver video content and more services are being planned.

The notion that hardware is unfashionable has therefore been completely invalidated by companies like Amazon and Apple, as well as the recent rise of new form factor Android TV boxes in general. Amazon is controlling the threshold to the home. Fire TV stick is essentially a STB by another name. Whether you’re using an operator’s STB or an Amazon device, they’re both a way to discover and consume content. Moreover, Amazon’s entrance into the video market is nearly akin to a Trojan Horse strategy. Not only is Amazon providing hardware, they’ve also got a video store where movies and TV series can be purchased, making it an easy, one-stop shop for consumers.

As these new entrants continue to invest heavily in hardware and successfully get consumers to pay for it, operators need to re-evaluate the value of the STB and gain control over how content and other services are consumed in the home.

It seems tempting to just ride on this wave and package the operator’s TV offering as just an app, available on these hardware platforms. But this means that the operator is betting their business and technology strategy on aligning with Google and Amazon, which instead are unpredictable by definition. This might be dangerous. One day the operator’s app may not be supported anymore on this “consumer hardware” (for whatever reason, from hardware obsolescence to a change in vendor strategy) and suddenly the operator may not be able deliver their services anymore! Controlled service delivery in the home, by means of controlled/supported hardware, is still key.

The Role of Data in the Pay TV Environment
Going forward, data will play a pivotal role in helping operators combat new market entrants. Using an independent stack, emulating the features and functionality of next-generation devices like Amazon Fire TV, operators can stay competitive. Amazon has always been very good at using data to make informed business decisions. Operators need to emulate that approach to reinvigorate their business too.

Owning and acquiring content is one step towards becoming a successful pay-TV operator. The next phase involves increasing the amount and diversity of content, followed by providing effective search, discovery and content recommendations. Netflix has mastered this approach.

Ultimately, operators need to utilize data in a much more radical way than they currently do. They need to get to know end users’ likes and dislikes in order to optimize the content presentation and offering, explore ways to reduce churn, perform A/B testing and improve content consumption.

By collecting and using data to make informed decisions about content consumption, operators can, for example, deliver personalized content to viewers, negotiate carriage with networks and create ad inventory. The key is to successfully reach specific audience segments with targeted advertising and entertainment content to drive new revenue streams, deliver incremental ARPU and provide relevant insights.

Conclusion
The shape of competition for pay-TV operators has changed profoundly. Unless they emulate the success factors of their new competitors, there is a risk they will cease to remain relevant and attract new customers.

Data is at the centrepiece of everything pay-TV operators do today and needs to be utilised to the greatest extent possible. Technology companies like Zenterio, a leading television, analytics, and advertising solutions provider, will play a critical role in enabling the secure and efficient delivery of content and services to the home, driving new revenue for operators through the efficient use of data and their inventory capabilities.

Operators need to be part of the pay-TV future and even work together with companies like Amazon without losing control of viewers, data and business. At IBC2018, Zenterio was demonstrating voice control of Zenterio TV, with Amazon Alexa as an example of a mainstream solution that is not under the operator’s control, but also with another technology chain (based on partners) which can be 100% under operator control. Flexibility is key, the TV client solution must allow an operator to make flexible choices to quickly respond to consumer’s new habits and what they are happy to pay for.

 

Written by Jörgen Nilsson, Chief Executive Officer at Zenterio.
Published on Videonet

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