Pay-TV operators are currently placed in a dynamic, yet complex market where they face a dual challenge of maintaining control over their operational costs while providing innovative services to stand out from the competition.
How can they best optimize their strategy?
The proliferation of streaming apps and content, alongside pay-TV services, has given consumers a choice, but while this diversity enriches the viewer’s experience, it also introduces significant challenges. The abundance of options can lead to confusion and subscription fatigue.
This sense of overwhelm and frustration arises from the challenge of navigating many subscription services and the financial burden of paying for multiple platforms. Offering more content while ensuring that the services are more accessible and affordable therefore becomes both a challenge and an opportunity.
Cost management is a top concern for pay-TV operators especially in terms of building, operating, maintaining, securing and growing their platforms across multiple regions and devices. These costs quickly add up, particularly if they opt for a full ‘build it yourself' strategy.
High competition and churn are more intense than ever as pay-TV operators now have to compete against each other and streaming services. Subscribers are also more inclined to prioritize OTT services that offer more affordable options and access a wider selection of content.
According to our survey, nearly half of the participating operators go with a strategy that mixes components from multiple vendors with internal developments. Meanwhile, 33% of operators employ some or all of the technology stack from multiple vendors. These approaches create fragmented ecosystems that are more complex to maintain and scale up, extending launch times and increasing operating costs.
Market maturity breeds limitations on development opportunities. Many operators are reaching the maximum penetration rate in their local markets and having difficulties diversifying the revenue from existing services.
Piracy remains one of the biggest challenges for all parties in the video entertainment industry. The illegal abuse of premium content due to insufficient security measures leads to severe repercussions for pay-TV operators, including financial loss, substantial reputational damages, loss of content access and potential difficulties in future negotiations with content rights holders.
Pay-TV operators need to balance new content with the increasing user need for features and convenience. This makes it challenging for legacy/rigid systems and technologies to keep up with market and audience preferences, let alone enable service providers to test out new features or business models.
Super aggregation is a strategic imperative that has the potential to reshape the entire industry. Despite its myriad benefits, our research confirms that super aggregation remains a work-in-progress, with only over half of our respondents currently integrating third-party apps into their own service offerings. It is a far less common practice than operator-licensed video-on-demand and local and international linear channels carrying traditional pay TV content.
Is super aggregation still a priority in the pay-TV sector?
Yes! Super-aggregation remains a core strategy for operators to address the users’ challenge of navigating a multitude of subscription services. The path to super aggregation, however, demands a holistic approach that involves constant investment in software platforms and infrastructure, strategic partnerships and new technology.
To overcome the aforementioned challenges and build an optimal video platform that can enhance the user experience, other key elements need to be taken into account in addition to super aggregation.
Becoming a super aggregator involves more than just grouping all available content and apps under a platform. It requires an open, certifiable platform that empowers operators in three key areas: controlling the platform, enhancing the service and growing their business.
In implementing super aggregation, striking a balance between the variety of content and simplicity in the user experience is highly necessary. A winning content strategy encompasses a rich variety of formats (free, ad-supported streaming, linear channels, on-demand) and involves a nuanced blend of local and global content offerings. This helps service providers cater to a wider spectrum of viewer preferences and ensure continuous engagement.
Furthermore, the content should be organized in an intuitive and user-friendly way, ensuring that new content types and sources do not worsen the issue of choice overload but instead enhance the viewing experience. By doing so, operators can effectively reduce churn and maintain a loyal viewer base.
The strategy needed for operators extends beyond mere cost-cutting and is about saving where possible and reinvesting in core competencies. This way, operators can package and promote their services more effectively, catering to the fast-paced demands of modern consumers.
With that said, it is crucial to adopt a convergence strategy between broadcast and streaming workflows. By building and maintaining multiple platforms in partnership with various suppliers, operators end up paying more for their ecosystems while causing more fragmentation. Converging multiple platforms into one across all regions and devices brings more efficiency and ease of both automation and use, minimizing total cost of ownership for broadcasters.
Embracing cloud technology is also prioritized by many operators; facilitating the transition from hardware-intensive infrastructures to fully virtualized environments, physical equipment costs are reduced, Time to Market (TTM) is accelerated and greater customization is offered.
Strategic partnerships with content creators, producers and other streaming services, as well as outsourcing certain operations, enable operators to address monetization challenges by enriching content libraries and streamlining their operations, reducing operational expenditures and maintaining a competitive edge. Integrating live events and e-commerce capabilities can also facilitate the platform's move toward long-term financial sustainability.
In addition, adopting a hybrid monetization model, blending advertising- and subscription-based strategies, is also a trend that merits attention. With subscription-based revenue models, operators can offer a variety of payment business models that meet the needs of different market segments. Meanwhile, implementing targeted ads according to user preferences and behavior can enhance engagement and revenue.
Besides that, extending the reach of features is necessary to attain a high level of user engagement. In advancing markets, access to fast and reliable internet connectivity means that pay-TV subscribers can enjoy a greater breadth of both features and services, some of which include gaming, voice control, online shopping and utilizing the internet of things.
Content discovery frustration for subscribers presents a unique opportunity for operators to better personalize the search process. To provide a frictionless search and content access process for customers, service providers need to analyze user behavior, enhance metadata and present content in a pertinent way to their target audiences. Viewers are more likely to remain longer and become loyal subscribers if access and search is tailored.
At the same time, excessive commercial breaks considerably diminish viewer enjoyment. The challenge here for operators is to meet the needs of their ad-partners without sacrificing the quality of audience experience. Incorporating non-intrusive and interactive, contextually relevant ad formats can be an effective solution to keep viewers satisfied.
The ability to capture, analyze and act upon viewership data will go hand-in-hand with the aforementioned cloud transformation. Utilizing their subscribers’ viewing habits, preferences and purchase behavior can be a game-changer in developing personalized content packages, offering advanced search and discovery capabilities across multiple platforms, curating the content more efficiently.
Making good use of data is also the only way for operators to gain insight into the performance of their set-top box or platform, determining which models are working and which are not, as well as how users are interacting with their platform.
The challenge service providers face today is that while it is possible to ingest metadata from multiple sources, it’s generally not formatted the same way, nor does it use a consistent ID schema. It is therefore crucial for operators to find a metadata aggregator solution that enables them to aggregate, normalize, enrich and publish data from multiple sources.
Protecting your platform means safeguarding the foundation of your business. This also means maintaining a positive user experience by shielding subscribers from malware and both pirated and buggy apps. To achieve this, operators need to employ security solutions that can cover security requirements, consumer insights and platform performance.
When looking at premium content, studios and sports rights holders exercise extreme caution over their distribution. Pay-TV providers, as a result, must meet a series of security requirements by thoroughly analyzing the vulnerabilities of their platforms and developing an end-to-end anti-piracy approach throughout the content life cycle.
Moreover, prioritizing the integration of artificially intelligent content security measures into platforms is also highly recommended and can help address threats by identifying irregularities in streaming patterns, ensuring a robust defense against piracy.
Putting together a comprehensive strategy that can enable operators to streamline operations, enrich offerings and enhance platform security is not a simple task. Underestimating any of these elements can lead to suboptimal solutions, higher costs and unpredictable TTM. Carefully choosing the right strategy and technology with trusted allies can help pay-TV providers navigate the intricate challenges.
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