The Pay-TV Innovation Forum is a new global research programme for senior pay-TV executives, developed by NAGRA, in partnership with leading research consultancy MTM, 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 this interview, Ariel Dascal of Oi, the leading mobile telco in Brazil, shares his views on how the pay-TV industry is approaching innovation.
How would you describe the state of the Brazilian pay-TV market today?
There is a clear generational divide in terms of how people consume TV and video content. Under 35s have very distinct viewing habits: they are very technologically savvy, they prefer streaming videos - either on subscription OTT services, YouTube or pirate sites - and consume a lot of content on mobile devices. Selling pay-TV packages to them is difficult. They do not see much value in packaging, they want freedom to watch content whenever and wherever they desire. And then we have the older generation who consume TV in the traditional linear way and who are used to buying traditional pay-TV services and triple-play bundles.
Although pay-TV service providers need to respond to this new market reality, the pay-TV industry still has huge growth potential in Brazil. There is a large untapped market, with less than half of the households subscribing to pay-TV. Even among the high income households, where penetration is just over 80%, there is still a significant base of potential users that pay-TV companies could go after.
However, there are three key barriers to further expansion. First is the price of pay-TV - most households that do not subscribe to pay-TV services simply cannot afford to at the current price levels. Second, subscribing to pay-TV used be a status symbol, but with the economic crisis many subscribers are dropping their pay-TV subscriptions and keeping only their broadband subscriptions. Third, some consumers are leapfrogging pay-TV and going from free-to-air TV to non-linear OTT services.
How are Brazilian pay-TV companies approaching innovation?
Many of the pay-TV service providers in Brazil are telcos, whose business models rely on the long-term value of their infrastructure. However, broadband services are a highly competitive market In Brazil: consumers constantly demand more bandwidth without wanting to pay extra for it, making it difficult to recover investments in infrastructure. In order to provide more customer value, Brazilian telcos have expanded into pay-TV services. However, now they are facing increased competition from various OTT offerings and the growing threat of their subscribers dropping pay-TV services in favour of “broadband+OTT” packages. As a result of this, these providers are innovating in order to strengthen their pay-TV offer and are also developing new revenue streams in areas such as OTT, e-commerce, and advertising.
What are the innovation priorities for pay-TV companies in Brazil?
The number one priority is the digitisation of the pay-TV experience in terms of delivering a better end-to-end experience to our customers and reducing our costs of operation and customer acquisition. We need to bring our services into the 21st century. As consumers are comparing pay-TV services to Netflix, pay-TV service providers need to deliver an interactive digital user experience across all consumer devices.
The second priority is acquiring great content, particularly for various on-demand and streaming propositions. Pay-TV service providers face a major challenge in relation to the content industry, which is slow to respond to changing market realities and still follows the traditional approach of managing release windows and selling packages of channels. The content industry is highly susceptible to disruption driven by large Internet businesses, such as Apple and Google, which will allow consumers to get whatever content they want whenever and wherever they want it.
The industry also needs to look for opportunities beyond pay-TV and OTT services in areas, such as e-commerce, advertising, innovative pricing, new types of content, second screen applications, mobile-first solutions and home automation and security solutions.
What are the key factors that will determine the success of next-generation pay-TV propositions in Brazil?
It will be a combination of seamless connectivity and content, allowing consumers to access content whenever and wherever they desire. And it is not only video content, it can be a variety of services that consumers might want to have access to, such as home security. That is a killer value proposition. And OTT services cannot deliver that today, because they do not provide connectivity, they rely on the Internet service providers.