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Randolph Nikutta, Interactive High End Media, Telekom Innovation Laboratories, on the evolution of the European pay-TV industry, benefits and use cases of artificial intelligence, and more
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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, Dr. Randolph Nikutta, Leader of Interactive High End Media at Telekom Innovation Laboratories, shares his views on the evolution of the European pay-TV industry, benefits and use cases of artificial intelligence, the growing importance of personalisation, and key technological priorities for pay-TV companies.

What do you see as the main trends currently impacting the pay-TV industry?

Customer and market trends show that linear TV is further declining, as fewer people watch live TV. Customer demands and expectations for content and service experiences are growing, so you have to serve a wider range of use cases and user needs. Personalisation is on the rise, and we also see more experimentation with business models – for example, skinny bundles, hybrid subscription and free models, Amazon Prime-style memberships. On the technology side, we see further drive for cloudification of the infrastructure, where the key buzzword is cloud-native. Another trend is around the use of smarter data analytics. There's also a growing focus on faster broadband, especially mobile, and low latency streaming. Immersive content is also becoming more important, while, in the next few years, we’ll also see the form factor of devices becoming more convenient for the user and prices coming down.

How can pay-TV operators utilise artificial intelligence (AI)?

We are very interested in AI, particularly, deep learning and visual recognition applications. AI can help deliver smarter data analytics as well as better personalisation and prediction of user behaviour. This will help us serve more tailored and relevant content, while also allowing the user to pick out content as conveniently as possible. Multi-modality will also play a significant role in the future – voice is just beginning, but it will be complemented by gesture and mood prediction, for example, in the next few years.

Content is the biggest cost item in TV operations, so it’s natural you look how smart analytics can improve economics there too. When you buy new content, you can use advanced video indexing services like those from IBM Watson to test the generated rich metadata that describes that content against the preferences of your user base, to calculate if the content will be of interest or not. This type of analytics can help to optimise your content portfolio.

What role will personalisation play in improving the user experience?

We are currently seeing the limits of recommendation engines. The model of ‘you saw that, you might want to see this’ is not really improving the user experience anymore when it comes to content choice. Personalisation is a lot more than just recommendation. It could also mean that your user interface is much more adaptive, displaying only what is relevant to a specific user. Looking ahead, a lot of different contextual factors will have to be taken into consideration, including mood, needs, standards of living, day of the week, and time of the day. These all come into play with more radical personalisation.

How is Deutsche Telekom using technology to further develop its pay-TV offering?

We’ve seen the first phase of cloudification but now we’re seeing the more advanced version of it, called cloud native. It has four foundational layers: microservices, containerization, orchestration and automation. The aim is that TV delivery becomes a virtual appliance and is totally modularised. Then it becomes easier to mix multiple components in your back-end and to introduce new service features quicker.

What does that mean for the future of set-top boxes?

Operator-controlled set-top boxes will stay relevant but they will be complemented more and more by additional options like connected TVs and other connected devices when ‘the customer brings his own device’. We need to be prepared to deliver services to these ever-growing device ‘zoos’, which means a streaming-only future. We already deliver our services to Android and iOS devices. At the end, I think we’re heading into the future where we will be predominantly serving various consumer-owned devices. This could create significant savings to a pay-TV operator as CAPEX costs of set-top boxes are high. However, content costs still remain the biggest cost.

What should be the priorities for pay-TV providers in the next five years?

From a user perspective, I’d prioritise an immersive media experience, delivered all in one place, aggregating content and services on a very personalised user experience level. On the technology side, I’d suggest a complete cloud-native production model and using AI as a key enabler to improve business analytics and personalisation as well as other elements of the TV delivery chain. For content, you have to become more selective, and carefully monitor that content investments are paying off. I doubt content costs will go down.