Can super aggregators offer Pay TV and SVOD a route to survival?

The TV model has definitively flipped from appointment viewing, to streaming on demand but the concurrent trends of cord-cutting and SVOD stacking is benefitting neither consumer, operator nor OTT provider. 

The industry is on the verge of significant change which will see the major SVODs morph into channels and pay-TV providers become giant curators of SVOD bouquets. 

“Self-curated SVOD services are only an intermediate step in the ground-up transformation and reshaping of the industry that is happening right now,” declares Kai-Christian Borchers, Managing Director, 3 Screen Solutions (3SS). “The big pay-TV providers are finally beginning to listen to, understand and act on the desires of their subscribers. The new breed of pay-TV channel is a Netflix, or an Amazon.” 

There is already evidence that cord-cutting has grown as a global phenomenon during the first half of this year. Demand for OTT services is unprecedented with consumer downloads of platform apps far exceeding any analyst estimates.  

The only strategy left open for operators “is to prioritise OTT and SVOD to make up the lost revenue and build a new foundation,” says Bill Admans, consultant for Ownzones Entertainment Technologies. 

In Europe, as elsewhere, broadcasters and pay-TV providers are coming together to create bundled SVOD services that add value through their combined brands. Examples include the BBC and ITV partnering to create BritBox and the Freeview app which unites all the UK’s terrestrial broadcasters on Android and iOS. 

“It’s not unreasonable to predict that these bundled services could replace traditional cable and pay-TV entirely,” says Admans. 

It’s not all rosy for SVOD businesses either. Economic pressure during the pandemic is forcing consumers to make hard value decisions. As quarantines are lifted, services that enjoyed usage and subscription bumps from housebound consumers will find out whether they have what it takes to make a lasting impact. 

• Read more: Dawn of the Super Aggregator 

SVODs need loyalty too 
“For the streaming industry, the hard part starts now,” warns Paul Pastor, chief business officer of OTT platform, Firstlight Media. “To continue to build market share in the post-quarantine world, services in the shadows of the ‘Big Three’ (Netflix, Amazon Prime, Disney+) need to look past the fish-in-a-barrel viewing environment of the past few months and examine how they can maintain their holds on audiences in the months ahead.” 

In February, just before COVID-19 upended viewing norms, the Nielsen Total Audience Report cited 42% of consumers as saying that they cancelled paid video subscription services because they didn’t use them enough to justify the cost.  

“The sheer number of SVOD services makes it likely that not all will survive and those that do will need to have scale and/or branding of unique content to thrive,” says Peter Docherty, founder and CTO, ThinkAnalytics. “The challenge for these new services is that it means yet another subscription for viewers who are already juggling multiple subs and an abundance of content fragmentation, making it harder to search and navigate. As the costs of all of these services mount up, consumers will become more selective.” 

Having cut the cord, the viewer is yet again becoming disillusioned. “Consumers are beginning to tire of all the work it takes to assemble a pool of desirable content and the aggregated cost of all the services you need to sign up for is steadily creeping up,” says Borchers. “The once-spurned pay-TV operator has a golden opportunity for redemption.” 

Pay-TV + OTT = Super Aggregator 
Pay-TV operators should be able to capitalise by onboarding SVODs to their platform and giving consumers the convenience of content all in one place. 

In February, just before COVID-19 upended viewing norms, the Nielsen Total Audience Report cited 42% of consumers as saying that they cancelled paid video subscription services because they didn’t use them enough to justify the cost.  

“With smartly integrated apps, operators have the chance to become aggregators, bringing together OTT services with studio content and thematic channels alongside trusted consumer relationships,” says Anthony Smith-Chaigneau, senior director marketing at Nagra. “Operators can also offer SVOD newcomers a platform to reach a large audience and, in return, invest in content that enables them to be a single point of entertainment.” 

In sports, for example, the pandemic has altered the content landscape with paywalls coming down and discounts or additional fatter bundles being offered due to the lack of live content.  DAZN, for example, pivoted from a pure online proposition to explore being part of a more churn-proof pay-TV operator environment.  

“If integrated as a channel and part of an overall subscription the problem of ‘per tournament’ or ‘per fight’ take-up and churn goes away,” notes Smith-Chaigneau. “SVOD companies benefit from a more stable managed pay-TV environment.” 

At the same time, it allows pay-TV providers to increase advertising rates per spot because of the ability to specifically serve spots to target audiences.  

“Some services provide free access to consumers in exchange for advertising with paid tiers for exclusive content as well as premium pricing for first-run content, such as movies and special events. In this model, AVOD, SVOD and Premium VOD are all on the same platform.” 

• Read more: The future of TV is aggregation 

Borchers argues that customers want world-class content that is curated but the operator needs to figure out how to add value in order to win them back.  

That added value can take the form of managed, curated subscription, creation of skinny (SVOD/AVOD) bundles, and devising and delivering other differentiating extras that make it attractive for the viewer to sign up.  

“Pay-TV operators who cling on to the old model, who do not adapt, are doomed,” he says. 

Strategic challenges 
However, shifting to an aggregator model requires considerable investment to ensure integration between the different services and with back-end billing systems. Alex Wilkinson, Head of Sales and Marketing, Accedo believes this means super aggregation is likely to be limited to the leading ‘Tier 1’ providers. 

What’s more, the flexibility of adding or cancelling SVODs and their cheaper basic costs has critically exposed the lack of value in traditional pay-TV, according to Shan Eisenberg, Chief Commercial Officer, Netgem TV. 

“The threat is quickly eroding the appeal of pay-TV and limiting it to their incumbent base of inert viewers,” he warns. “If you want your family to be able to watch kids’ programs, is your only option to buy a kids add-on package and commit to it for 12+ months? 

“Even if the main streaming services are available, consumers question why they should pay for them on top of a £30/month entry package when it is precisely those add on services that they are wanting to watch. The extreme example here would be that of US cable TV, which is experiencing an increasing rate of cord cutting. But a similar trend can be increasingly observed in the UK on Virgin Media and Sky TV.” 

Importance of the UI 
There are other keys too. Operators need to understand how to integrate apps - via app stores like Google Play or Metrological; or in integrating individual apps like Disney+ or Amazon Prime Video or YouTube. 

The other challenge is in developing a user interface that not only showcases available content, but also creates an engaging experience for consumers.  

A recent report from PWC  that user experience has become more important than content for keeping viewers engaged and subscribed.  

“The biggest benefit of pay-TV to consumers is simplicity,” says Erik Ramberg, VP, Head of Global Business Development, MediaKind. “One bill, one activation, and ideally one way of discovering content.” 

“Pay-TV operators who cling on to the old model, who do not adapt, are doomed,” - Kai-Christian Borchers, Managing Director, 3 Screen Solutions  

“Consumers should be able to simply switch on the TV and find something to watch without thinking about where that content is housed,” Wilkinson agrees. “An aggregated SVOD service should therefore by tightly integrated so that consumers login once and get access to all content, regardless which service it is from. This should include billing, which is arguably the hardest part but something that all providers are striving to get right.” 

A perfect example is AppleTV, the roadmap from Apple is very clearly to force content providers to comply with Apple’s aggregation scheme which will result in Apple being the default SSO and billing interface to all services. 

• Read more: The second streaming revolution 

“We are increasingly visual in how we search and select content, but we also want the related metadata that describes the video,” says Jamie Mackinlay, SVP Global Sales and Marketing at Amino. “The interface must present both visual and textual elements in an appealing manner - of course while also maintaining the operator’s brand identity.” 

Another aggregation challenge is the sheer mass volume of content required to satisfy all of consumers’ preferences. Sophisticated digital supply chains need to be in place to manage the thousands of titles being delivered by content creators and owners. New formats for exchange, like SMPTE’s IMF, allow for flexible automated delivery and processing of media files. This can be managed by content service providers using cloud-based technologies.  

A lot of the current challenges facing service providers are around business issues; for example, Netflix doesn’t want its competitors to look into their library and disaggregate them from their content.  

“If a service provider does want to go down this route, they have to understand why they are being circumvented from a direct to consumer point of view - both in terms of the consumer and the content provider,” says Ramberg.  

“Service providers can also harness the power of data to better understand their consumers and to share audience data to the content providers. While they are notorious for never doing so, sharing data is one of the most valuable things they could do. One way to do this would be to share it appropriately to enable the service provider to work with content providers so they can ultimately make better content. This means they can also become more efficient in making decisions.”  

New model, same as the old?  
As pay-TV operators reform their offering what risk is there that this will simply be a repackaging of the old pay model which consumers deserted? 

“They are deluding themselves if they are somehow thinking they can achieve both the super aggregator model — which none of them is truly embracing — whilst protecting their existing ‘channel bundles’ approach,” says Eisenberg. 

 “The main difference is not live versus on demand, it is about flexibility and metadata aggregation which is not in their technology DNA or commercial DNA. This leads to, at best the BT and Now TV model which is indeed resurrecting a pay-TV bundle, only with a more disjointed experience.” 

Eisenberg identifies a huge opportunity for large telcos (or smaller telcos who can rely on a third-party service like Netgem TV) to get more involved in their customers’ connected lives.  

“Traditional pay-TV cannot play that role because they are associated in consumers’ minds — rightfully — with the old model,” he insists. 

While the pay-TV operator may want to aggregate, they have to prove to the SVOD provider that the integration effort is worthwhile, says Smith-Chaigneau. He adds: “It is after all a subscriber game and if there are not sufficient gains for the SVOD provider or the market is not on their target list due to content catalogue reasons, then they may not be willing to be part of the operator’s desire to aggregate.” 

Courage to change 
The consumer shift online is inexorable. The major SVODs are steadily morphing into channels built around their own exclusive content and dedicated to every sport and hobby,” says Borchers.  

He predicts that that the pay-TV provider of the future will be a curator of SVOD bouquets, “providing whole theme-specific SVOD bundles to subscribers hungry for a meaty offering of truly relevant programming - uncluttered by the noise of content that is of no interest - conveniently packaged and priced.” 

 Eisenberg urges operators to give up the “age-old reflex” of counting on “customer inertia” to payback investment in content. “Operators should be courageous and have confidence in their content and the renewed investment in it to allow customers the flexibility to freely choose,” he says. “This is the only way to really revolutionise the customer experience which at the moment remains very fragmented, whether that’s account details, passwords, billing, or presentation of content.” 

“There is too much money at stake to blindly operate business as usual,” says Admans. “Like any change process, there are early adopters and those that stand back and take their strategy from lessons learned. There is still a place for terrestrial broadcasting and pay-TV, but it would be arrogant to predict just how that will look in ten years’ time.”