By Ivan Verbesselt, Senior Vice President Group Marketing, NAGRA
At this year’s IBC conference, I was invited to speak as part of a guest panel on the topic of VOD services, along with a number of pay-TV executives.
The question posed to us was simply: “VOD – how hard can it be?”
On the face of it, of course, VOD, is more achievable than ever. The entry barrier has been lowered significantly. Financially, IP has levelled the playing field, enabling all manner of VOD services to crop up that otherwise would never have been able to.
That said, the question posed at the beginning of the panel discussion prompted a list of challenges facing operators who want to enter the VOD space. And with IBC now well behind us, I felt it was appropriate to put some of these challenges into perspective.
First, there are financial constraints; not everyone can be BskyB or Canal+. Thanks to traditional advertising revenue heading elsewhere, the threat of piracy and myriad other factors, most operators have tight budgets for new products and innovation – and implementing VOD isn’t cheap.
In turn, once a service is launched, we still see many platforms struggle to become profitable – Netflix, for example, is still in debt because of the associated costs of investing in new content and streaming obligations (although it contested the exact reported figure). And although the basic service is simple, providing quality that can differentiate you in a crowded marketplace is tough.
Finding the right content is key to this, but it’s no mean feat. Audiences are fickle and have high expectations – your service will always be compared with the major services like Netflix and Amazon.
So far the outlook may seem bleak, but let’s look at the positives.
Pay-TV operators can claim certain advantages. They have the user base, the skills and the experience to build and monetise a VOD service.
In a period where the concept of the bundle is in flux, the fundamental question we have to ask ourselves is: how many brands can consumers realistically deal with? Do they really have the capability to successfully self-bundle all by themselves?
We’re amidst the swing of a pendulum, and there must be a return to integration at some point. Building on a strong track record of service bundlers, Pay-TV operators are very well-placed to re-aggregate that fragmentation.
This is the “entry barrier paradox” of IP VOD – while it may initially mean a huge smorgasbord of content where unique offerings can thrive, the eventual reality is that consumers can’t keep up with such a fragmented content landscape. Inevitably, this will lead to a new form of bundling, much like the handful of channels people actually watch from a 200-channel line-up. In that scenario, new power players will emerge again, not the niche offerings. And there you have it – what was promised to be the ultimate diverse platform becomes overly concentrated, and may even end up killing diversity and variety.
So what are the key takeaways for operators?
Well firstly, they should seize their opportunity to defragment the inevitable fragmentation that comes with unbundling, bearing in mind that if they don’t play the card of integration and content defragmentation, then others will.
Secondly, in response to the issue of producing content that will help differentiate from competitors, they should think about the value of local content. Under the old distribution model, original local content was able to thrive and proliferate – this isn’t the case so much today. And operators need to act on that.
We may assume that every consumer out there wants the same big-budget shows (Orange is the New Black, Game of Thrones et al) but this isn’t always true. Consider this analogy – if you travelled on holiday to Italy, surely you’d prefer to try the locally-made gelato over a ubiquitous big brand like Ben & Jerry’s? This point perhaps pertains to issues of cultural difference and globalisation, insofar as supplying the same content everywhere you go in the world may bring people together in a shared experience, but it often comes at the expense of variety.
And finally, in the context of “VOD-ifying linear” content, operators should consider the potential impact of “linearising VOD” – i.e. flipping it around to create an intuitive user experience that combines linear and VOD seamlessly as a new form of personalised content recommendation (we’re calling this user experience “EPG 2.0”). This could prove a key differentiator for operators, creating a unique integration between linear and VOD content.
So, to the original question posed to us; how hard can VOD be?
Well, as we look ahead towards 2018, I think the answer will ultimately depend on how willing operators are to embrace innovation, new approaches to the user experience, and the value of a unique service – the key will be in standing out, not fitting in.
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