The Pay-TV Innovation Forum is a new global research programme for senior pay-TV executives, developed by NAGRA and designed to explore and catalyse innovation across the pay-TV industry, at a time of unprecedented change. As part of the programme, we are publishing a series of interviews with leading pay-TV industry executives from around the world to explore their views, perspectives and experiences of innovation in the pay-TV industry.
In 2016, the Pay-TV Innovation Forum identified multiscreen TV Everywhere services, new types of content offering and content pricing and packaging as the three key areas of innovation for pay-TV operators to focus on over the next five years. 76%, 73%, and 72% of global industry survey respondents, respectively, identified these three areas as the most commercially attractive areas of innovation opportunity.
In this interview, Alexander Sacher, CTO at HD PLUS shares his views on the importance of bringing these three elements – namely, seamless multiscreen experience, innovative content offerings and new ways to package and price pay-TV services – together to deliver the next-generation service to consumers.
What are the key trends and developments shaping the global pay-TV market?
The pay-TV market is developing rapidly and becoming increasingly more diverse. Growing competition and changing consumer demand mean that both established and new pay-TV providers need to find ways to optimise their content offering, find new ways to package and price their services, and ensure that they can deliver a high quality user experience across multiple consumer devices and apps. We’re seeing a major shift towards on-demand TV viewing, including traditional VOD services offered by pay-TV providers, recorded content, and SVOD aggregator services, with on-demand becoming an important add-on to the conventional broadcast TV offering. Today, the ability to integrate rich broadcast TV and on-demand experiences into an easy-to-use user interface, such as the backward EPG functionality offered by Freesat in the UK, gives pay-TV service providers a significant competitive advantage. User experience and the ability to offer services across an ecosystem of user devices and apps are more important than ever.
How is consumer demand for pay-TV services changing and what does it mean for pay-TV providers?
The most worrying trend in consumer behaviour is younger audiences preferring to watch or, I should say, surf through YouTube-style short-form video clips instead of linear TV channels. This creates challenges for pay-TV providers to transport part of their content offering into a short-form video format or, possibly, to interweave this short-form video offering into an overall pay-TV offering, with all of it being offered as part of an attractive commercial package, such as Amazon Prime. Finding a way to bridge the gap between traditional pay-TV and consumption habits of the younger generation is still a hard nut to crack.
Do you see OTT as an opportunity or a threat to pay-TV providers?
The ability to offer OTT services as part of the product and services portfolio has become vital for pay-TV providers globally. Today, most traditional pay-TV providers have all the assets, skills, and capabilities required to provide OTT streaming services. However, the key question they have to answer is whether they will be able to compete against the major global internet players like Amazon, Google/YouTube, Apple, and Netflix in their region or territory. Unfortunately this is an area over which traditional pay-TV providers can have little influence.
Is innovation becoming more or less important for the pay-TV industry and why?
Innovation has always been and will remain very important for the pay-TV industry, as only by innovating can pay-TV providers maintain their competitiveness, reach new audiences, generate demand for new products and drive growth. However, we need to distinguish between two types of innovation. The first type is new inventions, which are rare and are very difficult for companies to deliver in a formulaic way. The second type is incremental improvements, which are more mainstream, accessible to and delivered by many companies in areas such as content, technology, and business. These types of innovation can be planned and are predictable, but require a lot of focus in order to develop a new or improve an existing product or service. When it comes to the second type of innovation, external partners - including technology vendors and content providers - are very important to the delivery of these incremental improvements. However, we often see these partnerships struggling to innovate, because some partners do not share the same vision or do not understand the bigger picture.
What do you see as the most attractive areas of products and services for pay-TV providers to focus on over the next five years?
To succeed, pay-TV providers will have to deliver an integrated and seamless user experience across a variety of consumer devices, combined with rich content offering that encompasses traditional linear TV, on-demand content and YouTube-style short-form video clips. However, pay-TV operators will not be able to deliver this on their own and will have to embrace close partnerships with content providers.