- Accenture report outlines challenges digital TV industry needs to address
- Engagement is key to driving long-term loyalty
- ‘Important’ that industry breaks down silos between technology, product and operations
Standalone investment in digital video is looking economically unsustainable with challenges being compounded by commoditized and undifferentiated experiences which are common in the Digital TV industry.
This means Digital TV businesses must shake of the short termism of product only based offerings which drive sluggish ARPU and rely on bundling and pricing levers to maintain economics.
These are some of challenges that need to be addressed by the industry, according to Accenture’s 9th annual Bringing TV to Life report.
“Short-termism is driving an obsession with trading KPIs, rather than customer lifetime value (CLV) and engagement,” the report, which was released this week, says. “The outcome? Flat revenue-generating units with high churn. Companies are running to just stand still. For businesses, faced with high acquisition costs (+30% since 2015) and escalating content costs, the standalone investment case in digital video is now looking unsustainable.”
That the landscape is shifting is nothing new and Accenture advises that engagement targeted at driving long term loyalty is already being pursued by the disruptors. It says: “The traditional video industry knows if you lose engagement, you lose the consumer. Video consumption is growing – but not always through well-monetized channels. PayTV is still strong in older demographics, but growth comes from younger consumers who favour pay-lite and OTT services. They help the numbers but deliver weaker margins and lower CLV. These consumers expect flexible business models, cheaper bundles and more engaging products.”
Yet video does drive huge engagement, even compared with social media channels. Attention equals money – both to an advertiser and because people will pay for things they enjoy most.
Approaches to finding growth include combining product and commercial efforts to think long term engagement and understanding that engineering is done better in a close collaboration with product. Technology engineering investments, including platform investments to support immediate goals can be designed so they can drive longer-term strategies. Content supply chains, entitlements services and multimedia ad platforms are examples.
It says: “[Telecom] operators and broadcasters have both had challenges with product launches: either offerings that arrive before their time, or bolt-on products aimed at retention. They’ve often been unsuccessful.”
- Read more: PSBs future jeopardised by VOD
Successful approaches span data strategies which are designed into products, moving into new businesses and deeper engagement through the successful building of partner ecosystems.
Approaches to ecosystem build-out will differ, the report says, and some are purely content-based: sharing or hosting content to/ from partner platforms. Some are more technology based: providing a foundational core platform that others can augment, offering centralized capabilities for identity and billing. The most advanced are go-to-market/channel focused, thinking of product as a channel in its own right. With such channels you can partner to share platform, marketing and even customer care.
Case Study Briefs
Sky has introduced pay-lite propositions (NowTV) in its European operating companies that segment the pay TV market and provide new routes to customers that they might not otherwise attract. Sky has kept a careful eye on the risk of cannibalization such services present. NowTV UK has progressed from an OTT video service into offering broadband – a new commercial approach built, in part, on their knowledge of their customer base.
Hotstar is India’s largest premium streaming platform with more than 100,000 hours of drama and movies in 17 languages. It also covers every major global sporting event. Hotstar has built a platform that broke the internet record for the maximum simultaneous concurrent users for any LIVE event: 10.3 million. Hotstar could do this because of a well-architected, cloud-based platform built on open standards which are modular and highly-scalable. This allowed them to leverage their top data-driven product management and engineering teams.
UK Channel 4 has built a state-of-the-art Digital Delivery Service to support its flagship video product, All4. The team delivers customer-facing apps and micro-service based architecture which enables rapid deployment of new services. Changing their delivery model delivered agility and flexibility for the business – with a focus on transparency, accountability, quality and velocity. Establishing value-based prioritisation and institutionalising feedback loops has driven a rapid iteration cycle.
Source: Accenture BTTL 9 Report
It’s most important to break down the silos between technology, operations and product by building multidisciplinary teams. Creating and growing pools of digital skills is vital. More widely, organizations need to create a data-driven culture. The change in approach is encapsulated by how projects might be run. Traditional businesses, especially ones with a technology focus, have an “on time, on budget” approach to delivery. Typically, they aim to minimize disruption and keep operational costs down.
Instead is it advised that digital disruptors prefer constant revolution, and use Digital Factory models to help deliver rapid, controlled change using Agile methodologies. They can provide a 5%-30% reduction in team cost, and a 10%-20% rise in feature delivery. This model drives a developing, engaging, flexible product.
Relying on product standalone approaches do not amount to a long-term engagement strategy says Accenture. Instead, thinking in an interconnected manner about product and engineering, product and culture, product and commercials and ecosystem building is where the journey should start for broadcasters and operators.