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 new types of content offering and content pricing and packaging as the two key areas of innovation for pay-TV operators to focus on over the next five years. 73% and 72% of global industry survey respondents, respectively, identified these two areas as the most attractive areas of innovation opportunity. In this interview, Mike Kerr, Managing Director for Asia at beIN Asia Pacific shares his views on the evolution of the Asian video market and talks about future developments in content offerings and the emergence of next-generation content aggregation models.
As an international content provider, you must have a different view of the video market from pay-TV service providers, as for you, pay-TV is only one of the many distribution channels. How would you describe the video market in Asia today?
As a content provider, we look at the market as consisting of four major segments:
- Free-to-air broadcasters to whom we sublicense content in certain territories;
- Traditional pay-TV operators, which is a very broad segment because it includes both traditional satellite operators and the most advanced telcos that offer pay-TV, and could, in the future, include “virtual” pay-TV providers similar to YouTube TV in the USA;
- Digital content aggregators, such as Netflix, iflix, Amazon and sports specific OTT platforms such as Super Soccer in Indonesia;
- Direct-to-consumer business, which is a pure OTT play that we are launching across the region to ensure we are delivering our content and brand experience to as many consumers as possible. This helps us ensure we are not confined by infrastructure or distribution networks and can be flexible, particularly in today’s market where things are changing so quickly.
What are the key trends and developments shaping the video market and how do they differ between advanced and emerging Asian countries?
First of all, it is very important to understand that Asia is not a single market: there is no single language, no single religion, and no single culture. It ranges from the largest countries in the world to small city states - each at various stages of economic development. However, if you look at the video market in the region as a whole, we are in a period of evolution - some call it disruption, but I don’t think that is correct. What we’re seeing is an evolution of the business model, which is driven by the continued growth in access to and speed of the internet.
Another interesting aspect of the Asian market is that technology innovations usually do not enter our markets at a nascent stage. They are usually first tested elsewhere, providing the Asian market the opportunity to understand the potential impact and in some cases leapfrog certain developments. If you look at fixed-line businesses, there’s vast fixed-line infrastructure rolled out in Europe and North America, but it is very small-scale in a number of emerging Asian markets. However, mobile subscriptions are ubiquitous there. And it’s not like fixed-line providers went out of business in these highly mobile markets. Most of them have actually taken great advantage of mobile, adapting their propositions to the relevant markets conditions and leapfrogging into new mobile opportunities.
I think something similar will happen with content delivery. I don’t think every market is going to roll out massive fibre networks. Instead, mobile is likely to become the key content delivery technology across Asia. This doesn’t mean that TV, as we currently define it, or the big TV screen will be dead. It simply means that smartphones will become more and more important, effectively becoming consumers’ window to the world, which in our industry means that smartphones will become their set-top boxes. There is going to be a redefinition of what we mean by television and pay-TV.
What does this transition to mobile delivery mean for content distributors in the region, particularly those operating across multiple territories?
Mobile delivery means there is going to be more opportunities for everyone. There will be many more players in the market as the likes of Google, Facebook, and Twitter are becoming increasingly interested in content. However, I don’t believe that this is going to be a major threat to the established players. I don’t think these new entrants will become the ubiquitous content providers who provide maximum choice to consumers. They are not in the business of content aggregation or content curation. In this new digital era, there will be many more opportunities for established content providers, particularly specialist providers like BeIN.
How about traditional pay-TV providers – how will this transition to mobile and OTT delivery impact their businesses?
Pay-TV providers are in a more challenging position than content providers and they will have to adapt their business models. They will have to take advantage of new technology and hopefully will be able to reach a broader consumer base beyond their current infrastructure. We work closely with our pay-TV distribution partners, encouraging and helping them to develop their propositions. Even when it comes to very traditional satellite pay-TV operators, we want to see them taking their aggregation, curation and distribution experience, local market knowledge, and customer relationships, and applying them in digital, so that they can reach a much larger audience.
Pay-TV executives who have attended the Pay-TV Innovation Forum believe that content piracy has become a much bigger challenge in the industry over the last year, do you agree with that?
I think content piracy is the biggest challenge that we face in the video industry today. It is very hard to compete against free. Levels of piracy are growing, but the industry is slowly catching up. I think the technology advancement works both ways. The technology that is enabling people to pirate content is improving, but so is the technology that will enable the industry to track pirates down and stop them. There is a lag in fighting piracy in terms of technology and legal tools, but I think there is a lot of progress. There are some encouraging signs from markets like the UK, the US and Australia and we’ve also seen successful initiatives against piracy in Asian countries, such as Thailand.
I think that all parties involved in the video delivery chain have a vested interest in cutting down piracy. There is always an economic argument that if piracy is left unchecked, the whole value chain would fall apart. This is the key incentive for the industry to make sure we are using the most advanced technology and pushing the boundaries of the legal system to the extent that we are able to deal with this threat appropriately.
Some pay-TV industry executives have told us that they believe content owners haven’t been playing their due role in the fight against piracy. What do you make of that?
The pay-TV platforms are at the very front line of piracy and it’s true that the pain takes time to work its way down the value chain. In some ways, digital piracy is a relatively new phenomenon in Asia, but content providers and owners are acutely aware of the threat that piracy poses to our industry and to individual businesses. The video industry has many lessons to learn from how the whole music industry responded to piracy and embraced the new digital environment.
What do you see as the key areas of innovation in the video industry going forward?
I think everyone in the industry is becoming much more consumer facing and consumers will become the key force that drives innovation. They will demand new innovative products, new ways of doing things and we will see a lot of innovation in the user experience. The Internet of Things will start entering our lives more and more, and will define the way we interact with content.
From a sports perspective, VR is a very interesting concept. Sports is perfectly suited, and created for VR, as sports fans are naturally predisposed to immersive and engaging experiences – anything that brings them closer to the live action. It’s a game changer in content production that could gain mass popularity very quickly. The last time we had some form of innovation in terms of content production was 3D, but I don’t know of any content that was materially improved by 3D production and technology. Also, the consumer demand just didn’t seem to be there at that time.
How do you expect the landscape of content distribution to evolve in Asia over the next five years?
We’ll see a new wave of digital entrants and, in the near-term, there will be a scramble to reach the consumer directly, but I don’t think main stream consumers will be engaged to the extent that they will actively use multiple sources, maintaining 20-30 different passwords, accounts, and bills. They will want a simple aggregated proposition for a convenient viewing experience. I don’t think that the two-stage aggregation model of channel brands and distribution platforms is necessarily broken, but it will have to evolve. I think that today’s traditional pay-TV operators, internet service providers and mobile operators are all well positioned to play that aggregator role in the future. Telcos, in particular, are in a very advantageous position, as they have been able to roll out their services to many more consumers. They offer integrated access, have direct relationships with the widest consumer base and they have strong financials and marketing platforms they can leverage.