The Future of OTT Business Models: Localisation and Personalisation

As recently as 2020, an Ofcom paper suggested as many as 85% of all people in the UK aged four or older continue to watch as least 15 minutes of terrestrial television a week.

The bluntest observations about the future of how the public will consume content are rarely the most insightful, but figures inside the OTT industry met at an IBC panel to discuss how the face of mainstream content consumption may change over the coming years and decades.

However, the perennial question was unavoidable. When might traditional broadcast TV as we know it come to an end?

The coda of traditional broadcast TV?

“One of our largest media customers, who is Australia-based, said to me yesterday, the government thinks that they’re going to have a say in when the death of free-to-air happens. It’s not going to be the government,” said Karen Clark, Head of APAC at Telstra Broadcast Services. “It’ll be the broadcaster deciding the cost of maintaining that infrastructure and that stack will be just not worth it anymore. We’re the ones who will switch it off.”

“Because, of course, we don’t have 100% population coverage with the Internet. The government’s never going to switch it off and force them off because obviously there’s that great digital divide that just wouldn’t go down well politically. What I could see is the first brave broadcaster, that big one that said ‘that’s it, I’m out’ will potentially trigger a domino effect… [I] see that real escalation in OTT becoming all pervasive,” continued Clark.

The ability for broadcasters to realistically do so without assent will vary by country, of course, but the pressure to maintain minimally profitable or unprofitable systems can only hold for so long.

“I’d say it’s probably in the 10-to-15-year mark. I think there’s a long tail with terrestrial television, across the region,” said Clark. “And I also say that because of some of the geographical challenges that we have. Across Asia, for example, where you have those broad islands nations, with a country like Australia where you have you know, a very expansive and rocky landscape, it’s not easy to be continually rolling out the fibre networks that’re required.”

A significant part of this relieving pressure to maintain traditional terrestrial broadcast as the default method of content delivery is down to changing demographics, as Chris Welsh - SVP of Broadcast & OTT (EMEA) at Aptitude Software explained:

“We’re becoming a younger population. And [for] these digital natives, that’s the only way they know to consume TV. There’s not a teenager in the world that owns a triple player quad play cable subscription. They are digital first. They’re consuming content via the web, and that’s what will drive the change.”

Adapting to change

However, he stressed that the image we have of OTT content delivery today cannot work in expanding out to new and changing markets, particularly those without a base of wide OTT uptake already.

“It’s really, really important that you don’t adopt a one size fits all approach to expanding into global markets,” said Welsh. “If you take a Western European service into Africa, it won’t succeed. It’s very much important to nail the localisation in terms of the content offering, the communication strategy, the business models that you can implement, and the mechanics for transactions.”

Once key factor in Africa is the prevalence of unbanked people, meaning they can’t take part in the payments systems most in the west take for granted. “There’s a lot of low card payment penetration in many markets,” said Welsh. And that’s not the only issue OTT operators looking to expand.

“Let’s look at India, for example… India has its own sort of bulk banking framework, which makes it really difficult even for some of the really big organisations in the world to actually get into India and succeed. They have limitations, for example, on recurring business models. You have to always opt in to renew your subscription for a new service. And obviously, that’s a nightmare for anybody that cares about churn,” said Welsh.

“Some of our clients that are working in India, the business models they’ve had to implement are pre-pay three months, six months, 12 months subscriptions with 100% failure at the end of that term, because they don’t renew. Then it becomes an expensive marketing task to communicate those users and inform them their subscription is coming to the end and trying to get them back into an acquisition funnel.”

New markets come with new challenges, but the panel also agreed on some priorities when looking to adapt to the future movements in OTT. One of these is the importance of personalisation and discovery of content.

“I really care about content discovery,” said Welsh. “If you centralise the content and apps then you can introduce things like universal search personalisation, better recommendations and discovery in sort of centralised user interface.”

This is in part because of the increasing numbers of players in OTT, which will otherwise make surfacing content to the right viewers even more difficult than it currently is. One other future route to combat this is consolidation, a contraction, following the expansion in the number of available services seen at present.

A view of the future

“Think about that world in five years where there’s 30 Paramount Pluses, Discovery Pluses. I think it’s unsustainable. So I think that we will see greater content, a sort of bundling and aggregation,” said Welsh.

He suggested this proliferation will come in the form of “lot more A-VOD in combination with S-VOD over the next few years.”

Pepijn Tijhuis, Global Account Manager at Unified Streaming, maintained there are even bolder ways to get more people to buy into the OTT future.

“You can actually do it more dynamically,” he said. “What stops you from having a fast channel but giving people the option to buy to switch off the ads for the next hour, or to actually choose today that I don’t want to spend any money on this? Or I do want this P-VOD asset and I actually I have a subscription but I’ll double up.”

He calls this concept “density”, painted as a radical approach to content personalisation that might be compared to the “order anything you like” expectations AI is currently establishing among certain enthusiasts.

“[Density] is interactive because, say, today I decide this thing should be 12 minutes. Tomorrow I want to watch the same race in three hours because I’m lazy, I’m lying in bed I have a hangover… I think that’s the next level of personalisation where you’re really giving people the content in the form they want,” he said.

The best method to achieve this kind of dynamic content scaling is up for debate. But as the options the viewership have continue to expand, the race is certainly still on to tackle it, as well as manage the business repercussions.

The IBC2022 panel discussion on the changing face of broadcast and OTT was hosted by Ian Nock, Principal Consultant at Fairmile West. Its speakers were SVP of Broadcast & OTTT (EMEA) at Aptitude Software Chris Welsh, Telstra Broadcast Services head of APAC Karen Clark, and Pepijn Tijhuis, Global Account Manager at Unified Streaming.

Watch more Where does OTT go next?