Matt Cuson, VP of marketing and products at Minerva Networks takes a look at the impact of Covid and other industry anomalies on digital content.

January 5, 2021

Source: TVBEurope

The Covid pandemic will shape the trajectory of every industry across the globe for years to come. The shock waves that propagate through 2021 will be both constructive and destructive. Zoom meetings, synchronised theatrical and streaming release dates, remote and virtual production teams, unused office space, and the tragic economic impact on families from lost jobs or deaths of wage earners. Although much of this will, we hope, soon be in the past, we may never go back to things the way they were, and a new normal will emerge both for businesses and individuals. Let’s examine some old and new trends for 2021.

Price of Content Flies Higher

The cost of content has been on a steady, and sometimes accelerating rate of increase for decades. NFL rights are predicted to jump 50 per cent or more during the next round of negotiations, while Disney Plus, after just one year into the service, will raise subscription fees by 14 per cent. YouTube TV rates are 85 per cent higher than when it debuted. Netflix has also announced another increase. These unstoppable price hikes will put pressure on aggregators and service providers to explore ways to create value wrapped around the content rather than relying just on the content delivery.

New Habits and Preferences

Experiences around interactivity, social engagement, and VR/AR have received more attention during Covid. 2021 will produce a lot of marketware and limited deployments to whet appetites and prove out new technologies. Live sports will likely draw the most attention. Bountiful sources of metadata will allow for interactive viewing, and rabid fan bases, fantasy leagues and betting will provide plenty of new revenue opportunities. We’ve already seen some solid progress in areas of intelligent sports recording services that allow viewers to pick the length of their highlight reel, or focus on a player or type of play. Social viewing has also seen a spike in interest from stay-at-home restrictions. Watch together features have been added to a number of streaming services. Expect more sophisticated social features, especially when merged with live sports. Ironically, the infrastructure to deploy new technologies at scale will also contribute to higher costs. Whether the market will be willing to pay for it is a key question 2021 might help answer.

Get Ready for the Content Cornucopia

As Disney and HBO/Warner push to add to their catalogues, including same day streaming with major theatrical releases, others will be forced to spend more on original or exclusive content too. Streaming will make content even more effective as a driver of secondary sources of revenue: personalised advertising, contextual metadata for deep exploration, AR/VR, gaming, social, and betting. Short form content from social influencers on YouTube, TikTok, and other platforms will become more mainstream as advertisers seek out niche audiences. On demand services will add “live” channels to capture impulse watchers and gain more visibility. One major question however is whether there are enough subscribers, ad revenue, and induced revenue to pay for it all.

Boom, Bust, Bust, Bust

There’s no stopping the non-stop rollout of new streaming services. And in this business, scale matters. But the combination of high prices for subscribers and high costs for content owners, will produce a few big winners and more than a few zombie services. The pandemic pushed the average number of streaming services per household in the United States from five to seven. Cord-cutting will morph into app-cutting as the pandemic growth spike ends and consumers pursue other entertainment activities outside the home. The second-tier players who don’t have predictable access to premium content or haven’t yet achieved necessary scale will be the hardest hit as consumers adjust their limited money and time budgets. Among the also-rans, subscriber counts could fall dramatically along with any hopes of profitability. First tier services like Disney Plus, Amazon, and Netflix will be among the last services consumers will drop and they will leverage their strong brands, quality content, and global reach to solidify their positions. Everyone else will need to develop alternative outlets to survive.

Content Aggregation, Meet Customer Aggregation

With the top tier Direct-to-Consumer players holding the few coveted slots in a consumer’s list of streaming apps, there is a growing need to bring content and consumers together. Aggregators like Roku, Fire TV, Apple TV, Android TV, Smart TVs and others, are a relatively easy way for apps to be distributed, but it is hard, and expensive, to buy awareness and stimulate active use. Traditional pay-TV operators are still an important distribution channel due to their ready-made subscriber base. With OTT friendly upgrades to their platforms, operators can offer more niche and local content that seamlessly integrates with their own live and on demand content. Operators can also help lower app churn through bundles and central billing.

Free? Make It Up On Volume

Content owners unable to rely on a pure Direct-to-Consumer model will look for distribution partners and offer favourable terms for aggregators. As advertising funded business models mature, expect to see more freemium services emerge. New broadband services built on 5G will look to differentiate themselves by bundling a free or freemium video offering. In doing so, the broadband service gains differentiation, and the content owners get low-cost access to a large group of subscribers associated with a sticky service. And viewers get easy access to content they love. Win-win-win.

Putting More Life in Live

Without cinemas, concerts or festivals due to Covid restrictions, content rights holders are improvising new ways to reach their audiences. Expect to see more focus on augmenting basic streaming with complementary interactive experiences. Not only do the fans want access, but the “stars” need the fans’ presence to really bring the thrills and excitement to performances and concerts. Sports leagues, including the NBA, have experimented with virtual fan experiences. And we’ve seen music artists stream micro-concerts to introduce new songs to their fans. Fans are able to send selfies and text messages to their favourite performers while on stage. These live group events can get bigger and more interactive with tiered “access pass” pricing.

A New Year

The high price of content is a fundamental and unchanging reality that cannot be ignored. But innovative technologies are enabling new services that can be wrapped around the content to create advertising and upselling opportunities, or simply to help justify the escalating subscription prices. In the end, it is all about helping people find and enjoy the content they love. Game on.

Aggregation, audience engagement should be key areas of focus

December 7, 2020

Source: NEXT|TV

The first TV station in the United States began broadcasting on July 2, 1928, ushering in a new medium for storytelling, news and advertising. Television’s entrance into the mainstream brought together a new business ecosystem made up of content creators, advertisers, distributors and viewers.

Ninety years later, the key roles in the television landscape haven’t changed. But the advent of streaming has inspired new players, new business models and with them, new winners and losers. As the thrashing market nurtures some businesses while starving others, a new equilibrium will emerge. In that new equilibrium, how will operators survive, or perhaps even thrive?

As with many business questions, the answer often starts with a line from a Hollywood script: “Follow the money.” Advertisers historically have been the financial engine behind television entertainment, and their influence is still apparent in spite of the seismic market shift. Back then, as now, content was king and advertisers paid accordingly. Brand managers and ad agencies used to commit a full season’s worth of spending in advance without a clear understanding of how a new show would perform. Advertisers bore a lot of risks and, in return, they got Nielsen reports. On paper.

For a long time, the only thing that changed was the price of content. And with the higher price of content came the demand for higher advertising revenues. Both the costs for ad spots and their frequency increased. High market-entry barriers allowed runaway content-cost increases that were passed on to advertisers and viewers.

Ripe for Disruption

Fast-forward through decades of fossilized business models and you see why the ecosystem was a prime target for disruption by the rise of digital advertising. The explosion of real-time ad markets and troves of audience data significantly lowered ad costs and provided better targeting, tracking and analytics. Three-martini, Mad Men-style lunches became obsolete as advertisers pulled back commitments in favor of web and mobile advertising. To keep advertisers, television service providers need to offer more targeted access to customers, along with better tracking and analytics.

In the meantime, ad-free Netflix burst onto the scene and the direct-to-consumer (D2C) business became a thing. This threw another wrench into the TV ecosystem equilibrium. At first blush, D2C looks like a win-win-win-lose proposition. Content owners win by cutting out the middleman. Advertisers get one-to-one engagement and real-time feedback. Viewers get lots of choices and can cut the cord (and spend it instead on four to six over-the-top apps). Operators, as the distributors, appear to lose out.

So the question becomes, “What problems still exist today that also existed 90 years ago that operators are uniquely positioned to solve?” After all, with hundreds of available apps and subscribers maybe only signing up for four to six, content owners still need access to consumers in order to attract advertisers and subscription revenue. Consumers still want their entertainment to be easy to access and enjoy. This brings us back to our original question: Is there room for operators to survive or thrive?

Operators need to focus on two important areas. First and foremost, they need to embrace the role of master aggregator by providing content from all sources. This goes beyond traditional studio content and includes OTT sources as well as hyper-local and niche content. Television entertainment is now a one-to-one experience, and the content catalog has to be as diverse and eclectic as the community it serves. While there are plenty of contenders trying to be the master aggregator of content (e.g. Apple TV, Android TV, Fire TV, Roku, etc.), none of them can address the local community as effectively as the operator. Operators also aggregate consumers for the content owners and advertisers. It is this second role as an aggregator of subscribers that really gives them staying power in the market. Operators help lower overall distribution costs while lifting retention rates. With churn rates for OTT frequently as high as 50% or more, any pure D2C play becomes very expensive and hard to sustain.

Think Engagement 

The second point for operators to focus on is adopting an engagement mentality. Service providers need to evolve from their role as passive distributor in a one-to-many pipeline to an active participant in the one-to-one marketing model. This is accomplished by creating a more personalized experience that brings people together with the content they love. This approach requires a combination of innovative features and more flexible business models and service bundles. Success can be found with a heightened emphasis on promotion and merchandising to keep great content front of mind and to encourage upselling. And, of course, personalized advertising helps capture every source of revenue to help keep consumer prices low.

At the end of the day, operators still have an important role to play as aggregators — aggregating content on one side and consumers on the other. But in order to maintain relevance, they need to evolve their technology platform and business models and embrace a customer engagement mentality. Content owners want to keep making great content. Advertisers want real-time access to consumers. Consumers want easy access to a variety of content for a reasonable price. Operators will maintain relevance by efficiently bringing all of them together. And so, the dance continues.

– Matt Cuson is VP of product and marketing at Minerva Networks.