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, Scott Boyarsky, digital video technology and product executive, shares his views on the evolution of the US pay-TV market, shifting priorities of the major pay-TV platforms, and key technological priorities and areas of diversification opportunity for pay-TV providers.
What are the key trends and developments shaping the US pay-TV market?
There is no shortage of recipes in play at the moment – all major MVPDs are taking different approaches, but most of them hold the view that consumers still want content choice. What a lot of media pundits describe as cord-cutting should actually be described as cord-shifting, with consumers moving from traditional QAM cable delivery to a new highway, which is IP-based delivery. On that new highway consumers have more choice than ever to get the content they want. MVPDs see this as both a threat and an opportunity. While no one has the winning strategy on how to remain relevant in this space, it’s clear that they all recognise the need to change and adapt to the environment in which consumers have much more choice over content and who will provide it. As a result of this we’re seeing a lot of consumer confusion in the market. There’s almost too much choice, and too many levers for consumers to pull. That may in the next 18-24 months present some new opportunities for the MVPDs – if they can get their act together – to become a single source of content choice for consumers.
How is the growing competition for video services impacting the role that pay-TV plays in the wider portfolios of services offered by MVPDs?
As content costs are growing and consumers have more choice and access to cheaper alternatives, the once incredibly healthy margins that MVPDs had in their core cable TV businesses are eroding quickly. Major MVPDs are increasingly focusing on being the data highway – the ISP. There may be a point in time where some of the major MVPDs exit the pay-TV business and instead focus all of their energy on just providing the delivery experience. Some may shift their focus to offering a distribution platform similar to Apple TV that offers third-party OTT apps. That’s certainly something all major MVPDs have to think about in their long-range plans, where they consider future scenarios, including what would happen if they exited pay-TV businesses or stopped investing in them.
What are the risks for MVPDs of shifting focus away from pay-TV services?
Cable TV has always been a product and experience differentiator, both in the old days, when cable providers were competing with antenna-based delivery, and more recently, when they were competing with satellite and fibre delivery. If MVPDs shifted their businesses to be just broadband providers, the big risk would be that they become utilities. Broadband services are very difficult to differentiate and consumers don’t need brands charging a premium to sit in front of a utility broadband service. Consumers need cost-effective, reliable connectivity, both in and out of the home.
In your opinion, which strategies will help pay-TV providers to remain competitive and grow over the next few years?
It’s difficult to call, but I’m impressed by Charter starting to offer a virtual MVPD solution that runs on Apple TV rather than their proprietary set-top box. This deeper integration with already existing OTT platforms may be the answer. Putting your own service side-by-side with other OTT services, you really start to blur the lines between pay-TV and OTT. All video services are going to be OTT in the future and the investments that some companies are making in their own proprietary hardware and infrastructure might not be the things will drive product and experience differentiation in the future. Running your own technology seems an antiquated model that a lot of MVPDs in the USA are still holding onto because they’ve made a lot of money from leasing and installing all of that hardware and infrastructure. If you look at the future, consumers are likely to have access to the content of their choice – be it a traditional cable bundle of TV channels or an a la carte selection of channels mixed with a Netflix or Hulu subscription – across multiple distribution platforms. In that scenario, owning a proprietary platform might become the Achilles heel of an MVPD as they struggle to keep up with the innovation on larger-scale platforms like Roku, Android, Amazon, or Apple.
What are the most attractive areas of diversification for pay-TV providers to focus on over the next few years?
There’s a number of areas that pay-TV providers are focusing on to diversify their businesses. The most obvious one is content, as content is still king. AT&T recently buying Time Warner, and both Disney and Comcast showing strong interest in acquiring Fox are a sure sign of growing focus and value placed on content. We’ve already seen this example with Comcast and NBCUniversal. Through Comcast’s access to NBC Olympics content, they were able to build unique user experiences on Comcast’s X1 cable TV platform that blended live broadcasts, on-demand content, and rich metadata such as statistics and information on athletes.
There’s also the product and service path to create a smarter and richer Internet experience, so that service providers are not relegated to being a dumb pipe. For example, consumers have appetite for robust Internet coverage both indoors and outdoors, which service providers can cater to by offering hardware solutions. There’s also Smart Home, which is a Wild West market today, with a lot of disruptors, such as Apple, Google, and Amazon, making major in-roads in that space. However, MVPDs already have a lot of equipment in consumer homes and there’s no reason why they can’t become providers of Smart Home automation, security, and energy management. The big challenge is whether MVPDs can do it in a way that is relevant to the mass market consumer. Smart Home services require more of a consultative approach, while, historically, customer service has not been a strong suit of MVPD businesses, with many of them often found at the bottom of customer satisfaction surveys.
Finally, there’s also the path of business-to-business services, where MVPDs can focus on providing various connectivity solutions to businesses, whose requirements in this space seem to be constantly growing.