A.T. Kearney’s recent global study on the disruption in the video and television industry shines the spotlight on a new role of content navigator developing in the value chain.
More than a half of industry executives and experts (53%) expect transformational shake-up in revenue distribution over the next 5 years according to the new A.T. Kearney global study on the changes in the video and television industry: production houses and Internet companies providing OTT video could be the major winners (Netflix, Google, Amazon).
Based on interviews with C-level executives from pay TV providers, telecoms, cable companies, broadcasters, and online video providers, 64% of respondents expect broadcasters to market their own OTT platform and estimate that 75% of consumer paid revenues in OTT will be from subscription vs. 25% from pay per use.
Three Middle East countries feature in the top 15 countries in our TV Disruption Index. Saudi Arabia ranks highest in the Gulf, boasting the world’s highest YouTube consumption per capita, relatively cheap mobile data, and one of the youngest populations in the world.
CommsMEA spoke to Christophe Firth, A.T. Kearney principal and co-author of the report.
CommsMEA: What’s the most interesting observation from the survey according to you?
Christophe Firth: If I had to pick one recurring topic that caught my attention it was the respective views of Netflix versus Amazon. Broadcasters often see Netflix as a massive threat, while platform owners see them as potential partners. Indeed we have seen a growing number of distribution deals between Netflix and distributors such as Liberty Global, Comcast and BT.
By contrast, Amazon, with its scale, richness of customer data, and proven go-to-market capabilities is seen as the main threat by service providers such as satellite pay TV and telecom operators. They see Amazon as potentially taking the aggregator-distributor role in the market.
CommsMEA: If we were to measure market maturity on a scale from 1 to 10, what will be the score for the Middle East and Africa on that scale?
CF: There is unfortunately no single answer for this. The Middle East is a hugely diverse region when it comes to media consumption, even more diverse if you include North Africa (to make the MENA Arabic-speaking region), and more diverse still if you cover the rest of Africa. Our global TV Disruption index had three GCC countries in the top 15 on expected shift in viewing to online video, while Egypt was in the bottom five of the 50 countries covered.
That said, Egypt has the biggest population in MENA so even the relatively small percentage of their population that are shifting at similar rates to the GCC make up a substantial market in absolute terms.
CommsMEA: We have lots of VOD platforms operating in the region- has that led to a decrease in piracy?
CF: Not materially but I am hopeful on this. Video content piracy in MENA costs the pay TV sector $500 million in lost revenues every year. Although a 'stick' approach through litigation, fines, and imprisonment will be a deterrent to some distributors and consumers, this can only go so far and is ineffective when online video piracy can originate from a server anywhere in the world.
Bite-sized online video services with small payments on a flexible, no-commitment basis, supported by strong distribution through telecom operator channels, will get more people into the mindset of paying for legal content. Starz Play has shown that this model can work in this region, when well executed.
CommsMEA: How active do you see telcos when it comes to competing in this space? Are they doing enough?
CF: Telcos can play a pivotal role as distributors. They have strong distribution networks, trusted brands, and a need to monetise the data that is increasingly flowing through their network. More collaboration is needed between content service providers and telcos to drive growth, such as on data sharing. This was a key theme on a mixed telco-OTT panel that I chaired at CABSAT earlier this year.
Of course many telecom operators are also actively looking to go upstream into developing their own content services and even original production. This is more challenging as it is further from their DNA. But there are success cases globally, such as in Korea and Brazil, where the telecom operator has actively changed its business and operating models.
CommsMEA: Could you elaborate on the concept of content navigator? Tell me about the content navigator models- how should one choose which model to go for?
CF: The Content Navigator is a concept that we developed when assessing the limitations on the market and the demands of its stakeholders. Think of it as a supercharged aggregation platform, driven by world-class data management. It is based on the principle that the market has become overwhelming. For consumers, who have a plethora of video content and services to navigate. For advertisers, who are finding it increasingly difficult to find their target audience in a fragmenting market. For content owners and service providers, who are facing audiences questioning the value of what they pay for.
Choice is good for customers but convenience must also not be overlooked. Even on Netflix the average American takes 18 minutes per session finding something to watch. Regardless of all the changes to the market, the one constant is that there will always only be 24 hours in the day.
The Content Navigator cuts through these issues and provides value to all stakeholders, enabling them to also skim a share of that value. We have developed five Content Navigator models, differentiated based on the level of integration into content production and technology-led advertising. There is no 'best model', and there is a trade-off between risk and potential returns while the market conditions also need to be factored in. The details are in our newly-released report.
CommsMEA: Do you think higher prices for high speed data are hindering the widespread uptake of video in the region? What do you suggest?
CF:In some countries, yes. Beyond high prices the quality of the network is also a factor. But this is a short-term problem. Data costs are falling everywhere, and Saudi Arabia already has some of the cheapest data in the world. Networks are improving, with 5G coming in the UAE in the next two years, for example. More is always needed, and the regulators play a key role in spectrum allocation and licensing, but I am confident that we are heading in the right direction.
CommsMEA: With the increasing preferences for on-demand viewing, what future do you see for linear/traditional broadcasts?
CF:"Linear TV is dead" is a line that I hear all too often. Yes there is a trend towards on-demand. Certain genres such as movies lend themselves to that mode of consumption and we have been conditioned to watch movies on demand ever since the first cinema opened, a mindset that was then reinforced when the video recorder was invented in 1972.
At the other end of the spectrum sports will always be best-viewed live, especially when we have access to the results at our fingertips.
There are three important considerations -
First, the desired experience matches the mood. Sometimes after a hard day people don't want to make a decisions. The average adult human makes over 30,000 decisions per day, consciously and subconsciously. That taxes the brain. Instead, they just want to sit back in the couch and be entertained. This means that there will always be a market for a lean-back experience in entertainment content.
This also means that it is critical for broadcasters to both position their channel brands clearly as the go-to choice to meet that mood-based need, to select and curate their content to meet the brand promise, and to manage their grids in a smart, data-driven way.
Second, in a world where we increasingly have advanced knowledge over everything in our lives, from the weather in our holiday destination to the gender of our baby before birth, surprise is a powerful tool. Turning on the TV and seeing a scene from your favourite movie or a feature on your favourite sports team provides a powerful emotion, especially if the viewer is then offered the option to rewind or watch the piece of content from the start. This is a far more powerful emotion than actively going online and finding the same content on demand. Think about suddenly hearing your favourite song on the radio while driving versus selecting it from your library.
Third, data-driven personalisation will redefine what linear actually means. Service providers such as Netflix and Amazon have enough data on their users and their preferences that they can create a personalised online TV channel, like a playlist that they choose for you. The viewing experience could be linear, but not in the traditional sense. I expect increasing experimentation with type of model.
CommsMEA: The report talks of disruption by ‘’democratization"? Is it all good- doesn’t it have its share of problems? (fake news, low-quality content, need to run through not-good-enough content to find something really nice?)
CF:It is good in the sense that it adds massive efficiency to the market. This is the key to the massive unlocked creative potential in the world. The Middle East is full of talented young Arabs, and now they have a outlet. Take UTurn Entertainment and Telfaz11, both fantastic examples of what is out there, and there is more to come.
Yes it adds to the content volume. There are over 1400 online video services globally. And we have all read the statistics on the number of hours of YouTube videos uploaded every minute. This reinforces the need for Content Navigators to help people on their journey through the ocean of content.
CommsMEA: You have compared countries by disruption index in the report- how has the comparison been done though?
CF:The A.T. Kearney TV Disruption Index was based on a broad range of metrics hider three categories - the technology landscape, the TV market, and environmental factors (such as demographics, the prevalence of credit cards and language factors).
Many GCC countries scored highly, due for example to fast-improving and affordable connectivity and a young population.
CommsMEA: What are the main capabilities providers need to invest in to keep up profitability in the dynamic ecosystem?
CF:Great question. Too often the focus is on what content to buy and what services to launch. Classic capabilities, such as in content acquisition and curation, remain although they need to be enhanced given the rising cost of some genres and changing viewing habits.
But that is not enough. Our study highlighted that service providers need to master data and analytics, technology integration, and partnership management. On that last point, 'going it alone' will become increasingly challenging. Strong and well-managed partnerships for content development, technology management, and distribution, to name a few, will increasingly become not an option but a requirement for success.