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Philip Mordecai, Director of Digital Ventures at Curzon shares his experiences of running a direct-to-consumer OTT service

The Pay-TV Innovation Forum is a global research programme for senior pay-TV and content executives, developed by NAGRA and MTM, and designed to catalyse growth and innovation across the global TV industry, at a time of tremendous change and disruption.

As part of the programme, we are publishing a series of interviews with leading TV industry executives from around the world to explore their views, perspectives and experiences of innovation. In this interview, Philip Mordecai, Director of Digital Ventures at Curzon shares his experiences of running a direct-to-consumer OTT service, talks about consumer preferences, the evolution of the UK TV and video market, the importance of scale and brand in developing a successful video service, and discusses potential innovation opportunities.

The Curzon business model of both producing and distributing premium video content in cinemas is quite rare – could you please tell us a bit more about it?

As far as we know, Curzon is the only three-pillared business in the cinema industry that combines production, cinema distribution and direct-to-consumer (D2C) distribution. Some cinema groups do have production and/or distribution capabilities, some have D2C services only (for example, Cineplex in Canada with Cineplex on demand), but none of them have all three. There are also some cinema franchise-branded on- demand platforms such as Pathe in the Netherlands, but they are not directly linked to the cinema group beyond their name.  For us, it is all about being able to control the destiny of our content. For example, we are able to work directly with partners like Amazon and Netflix to control how quickly the film is released on their platforms.

Could you please tell us a bit more about your direct-to-consumer OTT service?

Our OTT service is called Curzon Home Cinema, and we position it as a virtual cinema for our cinema members. The platform is now five years old – and is available to only our members in the UK and Ireland. It is the first of its kind in the world, and we’re using it to drive the value of our cinema proposition, allowing us to cross-pollinate film audiences. We have pioneered the early release day-and-date model, where the majority of our titles are released in cinema and on the OTT service on the same day. In addition to this, we have a transactional VOD service, where we are pushing a curated collection of premium films – a feature that Curzon is known for. We also have extended the Curzon brand to partner with Time Warner for their launch of FilmStruck Curzon in the UK, Turner’s recently launched OTT service. Turner was keen to build awareness in the UK market quickly to scale the new service, and Curzon was seen as a great partner given our well-known consumer brand.

What do you think is more important for consumers - a strong brand and curation capabilities or a vast library of content?

I think strong brand and curation is more important than offering too much choice. We are competing for people’s times against other entertainment services, sports, gym, family, and work. Everyone is increasingly busy, so we need to put our content on a platter and give customers a great experience. For Curzon, it is also important that curation is done by humans. We have been the first curator of films in the UK from the start, and we are seen as the curator of choice. It is our unique selling point, and we cannot hand over curation to a computer algorithm as that might damage the brand.

How do you see the UK TV and video market evolving? Can small-scale OTT players survive in a crowded marketplace?

Smaller OTT services, unless they have backing from larger businesses, will struggle to build scale. I don’t believe many niche SVOD services are here to stay – they launch, get to a certain number of subscribers and then stagnate to either disappear or merge with another service. The market is going to straighten itself out, and there is going to be only a few brands that will stay around. In this context, Curzon has a strong position, because we have an established audience that knows our cinemas and our films. Our model, which combines physical and digital distribution, is unique – and that allows us to talk to our customers in very different ways.

Churn on pay-TV and OTT services is a major concern for the industry, and the perceived value of services is important. If few people watch Amazon Prime it is OK, because it is seen as a free add-on to an ecommerce delivery membership, whereas if that were the case for other video subscription services, such as Netflix or Sky, their business models would be massively at risk.

More and more traditional pay-TV broadcasters are taking the direct-to-consumer route. What are your views on these services?

Industry participants are very conscious that traditional pay-TV subscribers stick to only a fraction of channels available in their pay-TV packages and are starting to question why they should be paying for big bundles. It is about the perception of value. D2C OTT services offer a few benefits: pay-TV broadcasters can migrate some of their smaller and “+1” channels to OTT, reducing their transponder and uplink bill, they can put more of their content in front of customers and use their flagship channels for promotion. OTT can also be used as an experimental and data-testing ground for true fans and help with the upstream commissioning process of the pay-TV core channel offering. Owning the OTT rights makes it much easier to experiment, but being an aggregator puts you in a difficult position as you depend on rights holders who have become much better at segmenting their rights. Developing a successful D2C service is still very difficult and there are very few brands that can do it.

You mentioned the day-and-date model that Curzon has pioneered. In your experience, are consumers willing to pay to have early access to premium content?

Definitely, but a lot of people are concerned about balancing the price that is charged at the cinema and online. For instance, you cannot make it much cheaper online as you risk cannibalising cinema businesses and you cannot charge £40 as consumers will not understand the value of what they are buying. As a cinema business, we want to shift the conversation away from price and make it about choice that is given to consumers. That said, the industry still needs to educate consumers as to why an early release online would command a level of premium price. Consumer education about the value proposition is paramount.

Selling in-home access to recent cinematic releases provides a potential opportunity for pay-TV providers and rights holders. Do you think we will see more services like that?

I am confident we will, and companies like NAGRA will play an important part delivering these services and preventing piracy. I think Disney’s new D2C service can have a significant impact in this space, given their ownership of top titles. As soon as Disney starts offering early cinematic releases on their OTT service, I am confident everyone else will follow. However, I do not think this will stop people from going to cinemas as it’s a clear event experience – they will still do that, but they will also have the choice of watching at home.