by Sam Debuse
by Sam Debuse
*This blog post first appeared on the Massive Interactive blog. Massive was acquired by Deltatre in November 2018.
We all enjoy an underdog story. Watching a David conquer a Goliath is always entertaining and often a spectacle; most of us know where our loyalties lie. But how do our loyalties shift when David becomes a Goliath, or Goliath a David? New behemoth content aggregators like Netflix, Hulu, and Amazon, have undergone a rapid transition into Goliathdom. As a result, maintaining audience loyalty has become the number-one challenge for legacy pay-TV operators, globally.
It is well-known that some pay-TV operators are struggling to stem the flow of cord-cutting worldwide. In fact, there were 415,000 cord-cutters across the largest US pay-TV operators in a single quarter earlier this year. Audience migration away from legacy linear pay-TV operators has primarily been the result of an en masse attraction towards OTT services. These players are armed with vast on-demand content libraries and live streaming, personalised multiscreen video experiences that can be updated in real-time, and importantly, significantly cheaper subscription costs.
The encroaching threat posed by OTT aggregator giants may only be growing, although some reports suggest that subscriptions to either pay-TV operators’ video services or content aggregators are not mutually exclusive; most US households will engage a combination of the two. However, new standalone OTT services continue to appear, and more established players are maturing, innovating and integrating, and consolidating their market positions.
The enormous success of powerhouses like Netflix has meant that across the video entertainment space, OTT players who seek to capitalise on the high-growth precedent have stopped knocking on doors and started kicking them in- and they are officially in the house. A focus group study found that the number of US households with a standalone OTT subscription matched that of all cable subscriptions combined, at 73%.
Increasingly, tier 1 pay-TV operators – Dish Network, DirecTV, Bouygues Telecom, LG UPlus, and Airtel, to name a few – are turning to Google’s video OS, Android TV Operator Tier, for a solution to their cord-cutting dilemma. These operators have changed their technological and business model strategies to one of effectively inviting their competition in; a single environment, enhanced control of the user experience, and with the presence of the entire Google Play Store to boot.
The strategy is simple – aggregate the aggregators and create a single go-to space for video.
The core consideration for legacy pay-TV operators is whether the creation and control of a single go-to space for video will be a source of competitive advantage culminating in audience loyalty, or a source of their competitors’ advantages and further cord-cutting.
Some of the features and benefits of Android TV Operator Tier are well recognised: faster time-to-market, quick evolution to IP-based video architecture without significant in-house development, and next-generation STB software that affords newfound flexibility to move between linear and OTT offerings.
Driving audience loyalty and the bottom line is about enhancing your audiences’ experience: innovative convenience and flexibility around content, a personalised user experience and competitive pricing. Android TV Operator Tier enables operators to meet all three requirements, partly, by providing unprecedented easy access to third-party applications without having to change HDMI, switch remote, or manage multiple TV-billing relationships.
But while the resulting improved convenience and flexibility around content may reduce cord-cutting, it also extends an invitation to discover and engage with competitor applications. If convenience for the user mostly means access to Netflix and YouTube on the main screen, rather than the operators’ proprietary services, what does loyalty to the operator really mean concerning competitiveness?
Answering that question is relatively uncharted territory for pay-TV operators but doing so will prove essential to ensuring the viability of their new open ecosystem and applications-based strategy.
One of the solutions to this conundrum for operators may be from an industry-wide recognition of increasing demand for tailored user experiences.
Many legacy pay-TV operators have traditionally struggled to react quickly and effectively to dynamic market forces or audience intelligence in the way that some OTT services have been able to. Fortunately for these businesses, one of the capabilities of Android TV Operator Tier is full customisation of the TV launcher across devices, which will help operators stay true to their brand identity and deliver enhanced tailored user experiences.
Google, through Operator Tier OS, has supplied the technological foundations to support an operator strategy of convergence with standalone OTT services. Coupled with a user experience management console, like Massive AXIS, operators can begin to react to new market and audience data by rolling out changes to the video experience in real-time.
From the operator’s perspective, this means being able to offer and manage enhanced user experiences, from presentation to content and application discovery. Operators can prioritise prime visibility of their own video services and manage the prominence of competitors’ applications – to an extent. Control over where installed third-party applications feature on the launcher is restricted by Google requirements. But the critical factor here is that Operator Tier empowers pay-TV operators to deliver what their audiences demand in return for their loyalties: the highest-quality tailored video experiences.
It is a new trust dynamic with Google, and a new commercial landscape which are the final pieces of the puzzle for operators to solve when deploying Android TV Operator Tier. The apparent economic advantage is the potential to leverage new revenue streams through partnership opportunities – one of the most attractive being revenue-sharing through Google Play Store in-app billing. In exchange, operators must give Google the keys to their house and an open invitation to any and all competitors to come and join the party.
As these operators reconsider and reconfigure their technologies and business models, they face an important question: will opening up their front yards to competitor’ applications drive enough loyalty to counter-balance any reduction in engagement with the operators’ proprietary content? Fortunately, the answer to that question for many tier-1 operators appears to be clear. A report released by Ovum found that over 70% of pay-TV operators place Android TV on their roadmap. You can find the report here.