Why OTT market consolidation will spark a wave of success!

The TV market has experienced a rapid transformation over the last couple of years. In fact, all sectors experienced a change as the Internet widened the existing global market, altering how users behave and ultimately, replacing legacy technology stacks. For audiences consuming TV this has been a revolution, both in terms of the quality and amount of content on offer, as well as the overall experience. More content than ever is now being produced and made readily available via several streaming services, while traditional TV providers are offering channel bundles and including streaming services to maintain a relevant proposition.

However, from a provider perspective, this has introduced several challenges.

Internet transformation

TV markets used to be constrained by geographical country borders as well as the limited reach of distribution technology. The network that was used to distribute the content inside a region, often exclusively licensed content, was also focused locally.

Some of the more obvious examples are the coaxial networks for cable TV or terrestrial networks for broadcast, which are technologies with limited reach due to technical constrains. The only technology with a more global reach was satellite TV, but this presented several cost barriers for smaller locally based channels. This brought about a small pool of competitors per market, both in sense of distributors, as well as TV channels. As the distribution technology stacks were exclusively used for TV distribution, the budget for technical investments was restricted, meaning that TV business was primarily about sales and marketing, fostering a status quo culture of slow innovation.

The rise of Internet and Internet distributed TV, as well as streaming, completely changed the game. First, technical and financial barriers to get viewers access are now gone. As the Internet is now global, barriers related to local distribution technology are effectively removed, inviting global competition. Moreover, as the Internet is a platform that stimulates innovation, fostering new ideas and concepts, TV has also started to face increasing competition from other types of services that we might not immediately refer to as television, such as YouTube, Twitch and TikTok. From a user perspective, this offers a new alternative for consuming video and naturally, new ways of distributing it. However, in order to stay competitive in this new reality, all providers must adopt not only the technology stacks used to distribute on the Internet, but also the innovative culture and methodologies.

The opportunity

Today, we have a Pay TV market that is very fragmented, with smaller local players that cover specific regions. This presents many challenges for building, operating and evolving a service and its underlying technology. For example, in Europe there are more than 200 Pay TV providers, and most of them have less than 500K subscribers. It’s clear that this scale pales in significance with other territories such as APAC and North America.

At the same time the Internet presents a big opportunity for these small to mid-sized Pay TV providers. For decades now, a common practice has been to make use of managed services as part of an operational model. This focuses efforts on the core of the business, with a third-party specialist handling everything else. The problem here is that in the traditional model there’s limited ability to scale. While the managed services provider might argue that they can be more effective due to market expertise, running this on premise integrated and often customized, means having a lot of people physically inside the organization. The customization itself brings a need to understand other aspects of that integration rather than a wider industry expertise.

But, the same way the Internet helps to reduce distances and blur borders, it also enables new efficient models for operating and cooperating. This means that the one developing, installing, and operating a system, doesn’t have to physically be in the same place as where the service is based. With SaaS we introduce another abstract layer as the functionality is offered as an API and the user doesn’t have to think about configuring or managing the actual software behind the deployment. This offers a much smarter way to increase collaboration and achieve better scale advantage across many areas where running operations locally hinders efficiency. While there are components that may not be optimal to place in the cloud, like caches deployed near the edges of the ISP network, much of the logic also for those applications can still be executed in the cloud. This cloud-assisted or hybrid cloud model also enables anon-prem deployed infrastructure to be offered and operated in SaaS, drastically simplifying management and operations.

Its operational capacities, technical expertise, and successful integration means it can advance in the consolidation of the European Pay TV and streaming market enabling the value of scale in technology and operations. By unifying the world of content and broadband, the full potential of Pay TV and VOD services can be realised for telecom operators, with content owners equipped with monetization opportunities and the power to reach a wider audience.

This article was originally published in TVB Europe.


Johan Bolin

by Johan Bolin

Chief Business Officer, Media and Broadcast of Agile Content