Research: OTT, non-linear transforming European pay-TV  

Research from the Pay-TV Innovation Forum 2017 – a global research programme for senior pay-TV executives that examines the state of pay-TV innovations and strategies that will drive the next phase of growth for pay-TV operators developed by content protection and TV solutions specialist NAGRA, in partnership with MTM, an international research and strategy consultancy – suggests that that pay-TV providers in EMEA have innovated and improved their product and service portfolios significantly during the last year, with OTT services and non-linear consumption transforming the European pay-TV landscape.

According to a panel of European pay-TV industry executives polled in May 2017, as growth in the European pay-TV industry matures, operators are shifting focus – looking to strengthen the core pay-TV offering, while diversifying into new areas to monetise their existing subscriber bases. Although European pay-TV executives are not yet seeing the same levels of disruption anticipated by their US counterparts, they are anticipating a more challenging market environment – future growth will be driven by new products, rather than traditional pay-TV offerings.

The European market is maturing and entering a transitional period. With future growth becoming significantly more challenging, the main objective is maintaining growth in a fragmented market. Industry executives believe that there are two key trends transforming the European pay-TV industry: widespread availability of cheaper OTT services and free content and growing non-linear consumption. To respond to changing consumer behaviours and expectations, pay-TV providers in EMEA continue to invest in improving the consumer experience, by introducing 4K (offered by 25 per cent of providers in 2017, up from 8 per cent in 2016), third-party apps (53 per cent, up from 46 per cent), and standalone OTT services (36 per cent, up from 31 per cent).

As a result of growing pressures on traditional pay-TV businesses, innovation is becoming one of the top priorities for European pay-TV executives and they expect future growth to be driven by consumers taking up new and innovative products and services, such as skinny bundles, personalised packages, and seamless multiscreen experiences, rather than increasing take up or prices of traditional pay-TV packages and services.

Going forward, industry executives highlighted three innovation priorities that will help European pay-TV providers to remain competitive and grow their businesses:

Investing in next-generation content aggregation and discovery: As the volume of content available continues to grow, pay-TV providers will have to deliver a great content discovery experience, using prediction and recommendation techniques that consumers find convenient and acceptable. Industry executives believe that pay-TV providers could play a key role in aggregating these OTT services to become a central gateway to all content that consumers have access to. However, they also recognise that the industry faces significant threats from new device and app ecosystems, such as Amazon or Apple TV.

Developing advanced advertising and data offerings: Addressable advertising and dynamic ad insertion will help pay-TV platforms generate new revenues from advertising in the light of declining subscription revenues. Industry participants argue that advanced TV advertising could potentially be the key area where pay-TV companies are able to challenge digital giants, but they need to act fast. However, in order to achieve success, pay-TV operators will need to find ways to collaborate closely with content owners. Advanced data and analytics is also becoming a much more important priority for the pay-TV industry, with executives seeing significant scope for it to add value beyond advanced advertising in areas, such as optimisation of infrastructure and content delivery, customer service, product development, and marketing, among others.

Building seamless multiscreen TV Everywhere services: Despite the fact that more than 90 per cent of pay-TV operators in EMEA have rolled out TV Everywhere services, industry executives believe that there is still significant scope to improve the TV Everywhere experience by making it an integral part of the pay-TV offering in terms of functionality, user interface, and available content. This is seen as one of the primary ways that the pay-TV industry can successfully compete against OTT services and adapt to evolving consumer behaviour.

“Industry executives acknowledge that the European pay-TV industry is changing, with pay-TV operators asking themselves how and where the next-generation of consumers will view video content, and how they can best meet these needs,” said Jon Watts, Managing Partner, MTM. “There is a strong consensus that future growth will be significantly more challenging across the region, with the exception of a couple of pay-TV markets in Southern and Eastern Europe. Future growth will be driven by new services, as operators look to manage the proliferation of lower-cost offerings. This is an exciting time for the industry – there are multiple opportunities for growth, in a wide range of areas, but diversification is key.”

“There is a strong call to action across the European pay-TV industry to respond to these external pressures by transforming business models and addressing new market segments with specific offerings,” said Simon Trudelle, Senior Director, Product Marketing, NAGRA. “The research indicates that the pay-TV industry needs to learn from the new breed of digital-first and data-led OTT service providers. To break away from the traditional pay-TV mind-set, operators will have to be more agile in their approach to meet consumer demand, putting specific focus on microservices, data analytics, continuous testing and integration.”

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