Advanced Television

Analyst: Pay-TV 3.0 is here

November 3, 2021

By Colin Mann

Analyst firm TDG suggests that its vision of the pay-TV industry evolving through three generations is now becoming a reality, noting that at the recent StreamTV World conference, Amazon announced it was testing data sharing arrangement with Discovery.

Limited to Prime Video Channels and Discovery+ in Europe, general manager of Prime Video Channels Europe, Elisabetta Carruba, confirmed that Amazon and Discovery are evaluating a new solution to aid in data sharing. This solution is not scalable, noted Carruba, but it is the first step towards something larger in the “foreseeable future”.

At the inaugural Pay TV Show in 2018, TDG presented a vision of the industry as evolving through three generations.

  • MVPDs own and operator private distribution networks (legacy cable, satellite, and fibre operators)
  • MVPDs distribute content over the open Internet to connected TV devices (virtual operators);
  • Large streaming aggregators bundle SVoD apps and provide:
    • Integrated ordering, billing, fulfilment, and customer service;
    • Unified search and recommendations across all apps;
    • Easy addition/cancellation of specific services (click and go);
    • A single portal for viewing all your apps; and
    • Multi-app packages with discounts.

“For both the operator and app owner, 3.0 presents a unique opportunity to lock down streaming subscriptions for a specific amount of time, something new to the SVoD world,” notes Michael Greeson, TDG founder and principal analyst. Such guarantees may provide leverage for 3.0 operators in negotiating carriage rates from app owners, savings that in theory could be passed on to the consumer in the former of discounts. “If this sounds familiar, that’s because it is. The 3.0 model is built on the same fundamentals on which MVPD bundles have long been built. Thus, the moniker,” he explains.

While 3.0 operators would not (initially) meet the FCC’s definition of an MVPD, from a consumer perspective the two would appear as close relatives, the key differences being (1) 3.0 is comprised of apps, whereas the first two generations are comprised of traditional linear TV networks, and (2) 3.0 programming would be primarily on-demand as opposed to primarily live.

In one form, a 3.0 service may be a modified a la carte offering, with a base of apps required and options to add apps (and app packages) above that. In another form, a 3.0 service may offer viewers a choice of apps to include in, say, a seven-app bundle. In either case, subscribers would be required to lock in for six or 12 months, after which they could change the assortment of apps they use.

TDG predicted in 2018 that early 3.0 operators would likely be meta-aggregators such as Amazon, Apple, and Roku. Each has a strong position in the value chain (as both distributers and device vendors), as well as the clout needed to forge a 3.0 service. As well, legacy operators with a strong broadband and streaming video position could leverage their relationships with TV networks—many of which have launched their own D2C services—to craft a cost-effective 3.0 service. Comcast, for example, could offer its broadband-only customers a compelling bundle of apps they can purchase directly through their Flex device.

TDG’s early consumer research on the appeal of such a model was informative, as it was equally desired by both cord-cutters and legacy pay-TV users, with more than half ranking the model of “moderate value” or “great value”.

“As the number of SVoD apps per household increases, so too does the appeal of a 3.0 aggregator,” observes Greeson. “TDG research finds those who view the service to be of great value use 50 per cent more SVoD services than those that do not. As Amazon’s announcement indicates, the tech-media giants are already making a move in this direction. Broadband operators should do the same, or risk losing their SVoD viewers to competitors.”









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