A report from Capgemini on the state of TV subscription services forecasts that OTT/SVoD services will overtake conventional pay-TV operators before the end of this year.
The report is blunt and says that OTT is inevitably becoming the main form of content consumption.
Indeed, the report’s facts are undeniable. The reason that just about every major media house has launched compelling OTT services is obvious, and Capgemini states: “Media and entertainment companies of all shapes and sizes, regional and local, are looking for ways to establish their own OTT streaming services and searching for answers about how to survive and thrive in a fiercely aggressive market.”
With Netflix dominating OTT globally and Disney+ making strong gains, the key question is to what extent can Sky (in the UK, Germany and Italy) survive this onslaught? You might answer: “Because of its sports rights, stupid.” And that’s a fair and reasonable answer, but not everyone is a sports fan despite back-to-back advertising and promotional enthusiasm from the now Comcast-owned Sky.
There are other worries. Disney has removed channels from Sky (Disney Channel, Disney XD, and Disney Junior) and while its other channels (Nat-Geo, Nat-Geo Wild and Fox) stay on board Sky, one would ask for how much longer? The removal of channels inevitably placed pressures on parents with younger viewers to question whether to continue with a Sky subscription.
Then there’s Discovery. There have been carriage rows between Sky and Discovery for some years. Back in 2017 there was a well publicised spat between Sky and Discovery with Discovery arguing that Sky was not paying a “fair price” for Discovery’s bouquet. An agreement was reached at the 11th hour on January 31st 2017, and calm was somehow restored.
Since then, Sky has stepped firmly onto Discovery’s turf and launched Sky Nature, Sky History (with A&E) and Sky Documentaries in May 2020. Whether Discovery sees this as some sort of threat from Sky rather depends on its own plans to launch its own OTT bouquet. During Discovery’s Q4/2019 results call with analysts (in Feb 2020) , CEO David Zaslav said his company no longer licenses its best material to third-party streaming platforms. He said there were ways that Discovery can work together with Charter, Comcast, Cox, AT&T and Dish Network to create more value. Since then Discovery has revealed its own OTT streaming service, Discovery+.
Zaslav said that Discovery would be focused on leveraging the company’s global footprint and localising depending on the market the service is operating in. This is well worth remembering: Discovery is a highly-regarded global brand and its influence is huge. And Discovery owns Eurosport, and has immense distribution rights to the Olympic Games.
So, what must Sky do to regain its high ground? Launching Sky Arts on Freeview (a UK free-to-view platform) gives it a few useful eyeballs and advertising revenue. But as for the existing pay-TV platform it must – in this author’s view – do much, much more.
Breaking into programmes, especially high-profile episodic drama (the sort you see on Sky Atlantic) with advertising must stop. Paying more than £100 per month for services that can carry 3 or 4 interruptions per hour doesn’t sit well with this viewer. Give me Netflix, Amazon Prime Video and even Apple TV+ any day of the week.
The Capgemini report says that viewers are increasingly confused by the proliferation of OTT services. That’s a reasonable comment, but the report also admits that this will deliver real competition. “There will be higher pressures for pricing and delivery of OTT services that take into account an increase of service hopping, accelerating the battle for subscribers,” states Capgemini.
“The crowded market will see OTT players appear and disappear, depending on their popularity. Thus, aggregators need to be agile to quickly integrate and partner up with the right platforms. Choosing and adapting to partners will be a key differentiator for aggregators; however, it will be made difficult because OTT platforms have highly fluctuating content and brands,” adds Capgemini.
Inevitably, content remains king, but the report says that data – and understanding that data – will be the “Key Success Factor” and be business critical for survival. One cannot argue with that summary. But the advice here to Sky is to dump the commercial breaks and fill the missing minutes at the end of a show with highlights packages, promos by all means, or a 10-minute news broadcast. Easy peasy!