“For telcos, maybe video adds up to 1% of their total revenue,” says Josep Mitja, our head of Telcos at NPAW and co-founder of Rakuten TV. “In reality, the reason this service is so useful to telcos is bundling it together with broadband and telephone packages.”
Video is used to entice customers into subscribing to bundles that include broadband, phone contracts and video content. The video content included can vary depending on the strategy of the business:
Video is a penetration tool for telcos, meaning the quality of this service must be worth the money for those customers who were acquired based on access to content. Those that are packaging broadband with smaller, or “skinny,” OTT content bundles seem to be weathering the online storm better than their more traditionalist competitors.
“In the past, there were cable operators and telco operators,” Mitja explain. “Now, everything is the same. Telco operators come from a content side of things and used to focus on this. Eventually, they began selling phone packages and internet. Telefonica and Vodafone are examples of companies that made this transition.”
“Even if it’s a small proportion of your revenue, you will still have hundreds of staff dedicated just to video.”
“Even if video is a small percentage of your business, you need to develop a good service. If you use the content as a way to lure customers in and the service is bad, that is a huge problem. Even if it’s a small proportion of your revenue, you will still have hundreds of staff dedicated just to video. So, at the end of the day, it isn’t that telcos aren’t interested in video. If you take a look at it, they will normally operate their own service, whereas the challengers will usually partner. For example, Movistar in Spain has many video services but if you think about Vodafone or Orange, they have a much smaller service and will instead partner with HBO, Rakuten TV and other people.”
The default “minimal spec” for content should be a skinny bundle of essential linear channels with add-ons for premium channels (the model pursued by OTT players like Sling TV). But it’s not enough simply to send content the viewer’s way. Time-shifting functionality and intuitive search and discovery are becoming table stakes for serving a new generation of viewers whose consumption is shifting from big TV screens to mobile devices.
The sustainability of pay TV involves working directly with their competitors, offering hybrid bundles that offer their own telco broadband and third-party OTT video content. This means both telcos and OTTs are able to gain revenue from their main source, internet and video, respectively.
“Movistar’s strategy is to offer our clients the best content possible in one single place,” Domingo Corral, the Head of Original Content at Movistar+ explained to IBC in 2018. “That means that we have to try to get quality content from third parties that our customers enjoy and at the same time produce our own in order to make our offer even more compelling by having content that is both unique, exclusive and differentiated.”
Bringing such content portfolios together is a challenge for telcos – after all, these are 100-year-old businesses that, for their first 80 years, only connected customers to others they wanted to communicate with. The development of new skills, new approaches and new relationships is required.
“Those that are really serious have invested in dedicated teams that sit in standalone business units that are distinct from the wider business,” says technology, media and telecoms analyst, Paolo Pescatore.
“BT, Telefónica and Orange have done this but have taken different approaches. BT, for example, has launched BT Sport and seen fixed line subscriptions rise as a result. It is now obvious that BT has a strategy to push extremely hard with BT Sport to get as many large deals as possible and drive further subscriptions.”
“For an OTT player, video is their entire business,” explains Mitja. “If they don’t make money with this, they disappear. Then you have broadcasters who are slightly more versatile. Content is their main business, but they grow through internet access. Content helps but it isn’t their main driver.”
“The worst thing you can do is upset customers.”
“Telcos use video content to entice customers. For example, Vodafone has started running customer acquisition ads, offering new subscribers access to HBO for 12 months. In reality, what they want is that you buy their entire service, but the hook is the content. They’re not advertising a better connection. They’re announcing that customers will have access to more content with them.”
However, if bringing users to a service based on their partnerships, it’s vital that the business can maintain a good service with best-in-class QoE using video analytics for telcos. “Your video service needs to be good.” verifies Mitja. “You would use an analytics tool like YOUBORA Suite the same way OTTs use it. Let’s say you want to sell more internet connections. You can ask yourself how to make it shine. You could suggest giving away another video service. If this works but the internet connection is poor, that’s not just a lot of customers who will probably cancel, that’s a lot of people who are going to share their bad experience with other people. The worst thing you can do is upset customers.”
“YOUBORA Suite can also help with this. Telcos are interested in content performance and we can help shine a light on which titles perform better than others and why. Additionally, it’s about customer management. This means understanding their viewing habits whether it’s frequency, routine or content discovery.”
To benefit from the most reliable data on the market, speak to one of our team and learn everything about YOUBORA suite as well as how it can transform your video service – email@example.com
Max Gayler on March 27th 2019
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