As a child I would visit a remote farm where my friend Scott lived. The shared ‘party-line’ phone, with a ring pattern for each home on the line, seemed primitive and made a city kid like me laugh – until he leapt up to answer it one day, knowing it was a call for him. He and his friends had each made up their own ring pattern, so he had a private ring tone - well before mobiles were common.
As Netflix tops 75 million subscribers globally, and more and more competitors emerge daily, the traditional operators are hitting back – and Scott’s idea might apply.
It’s been fascinating to chart the steps in the evolution of the business models:
STEP ONE - KEEP YOUR ENEMY CLOSE
The first move – and still a successful one – was of course to enfold the OTT offer. After all, in our experience a winning formula for a large chunk of pay-TV consumers is about choice, ease of use with a familiar UI, and a sense of ’not missing out’ – so a deal with an OTT provider made sense for all. The front-end simply got more comprehensive, and of course from a single screen and remote control a viewer could assess say Netflix options versus linear, catchup and movies from a more established operator. They also paid one charge, not two.
STEP TWO - LAUNCH AN OFFER TO APPEAL TO THE CORD-NEVERS
The next of course was the NOW TVs HBO Now and others – operators setting up and running instant-access, ‘no contract’ offers. One stunning statistic - 90% of Sky’s NOW TV subscribers apparently ‘never considered’ Sky TV. Operators who play this segment well should gain brilliant marketing learnings – probably around brand perceptions, low acquisition costs through snappier marketing, or speedy and novel ways to customise bundles. It would be fascinating to hear about rates of cannibalisation between the two offers.
So far of course it’s probably all old news. But here’s a few other things we’ve seen…
STEP THREE - SHORT TERM A LA CARTE
Rather than pay hefty ongoing fees to a content-provider in the blind hope that viewers will use it and make it worthwhile, some operators have used technology advances to offer the HBO style OTT as a short-term option within a premium package, some even offering terms down to days - letting people customise an ongoing subscription billed via their usual provider.
Again, one remote, one bill – and now a choice to opt in short-term.
To prepare for this, operators have to invest and drill down on who actually uses their expensive OTT partner and when. Spending on strong analytics may be warranted in negotiating better deals.
Obviously this approach can tip people into becoming OTT subscribers just around a premium sports event, or another occasion – incremental revenue that didn’t exist before.
The latter two approaches will reframe the relationship between operator and owners of key content, and again be popular with the consumer who simply wants a slight variation on the familiar billing and UI, and wants to avoid the nagging sense of 'missing out'.
STEP FOUR - THINK 'ME TV'
A seismic shift in the household, which might shape future thinking, is the concept of 'me TV'. Here the 'household TV' is an anachronism and customised offers – more sophisticated than a basic Netflix profile - are delivered via shared infrastructure to each member of the household, just like Scott’s ring tone.
Clearly this needs multiple screens, customised UI’s and recommendation engines, and high-speed wireless streaming - but in so many homes this is becoming the norm. One could see that social media customisation as particularly important as part of this.
Although Ovum predict this degree of customisation to be a decade or more away, we feel the early vestiges are here and at Amino we are thinking hard about our roles in ‘me TV’ propositions that could bring out a winning set of offers for a smart operator.