Under the banner of the International Content Summit, a panel of broadcaster types discussed ‘Strategies to win the OTT competition.’ Unfortunately, the talk seems poorly titled, as most of the conversation centered around the premise that pay TV operators were going to have a hard time of it in the coming years.
This is a view that Faultline shares, and so it was music to our ears when Wolfgang Elsasser, from the Swisscom subsidiary Blue Entertainment, the largest media and entertainment firm in Switzerland, said that pay TV operators will continue to suffer, while consumer confusion will continue to increase, and therefore you need to pursue an aggregation strategy like Blue to have any success. Blue has gone as far as owning a cinema chain, which might be a unique trait among operators.
In what was a very congenial panel, none of the other speakers refuted that assertion of pain, which implies that the rest of them agree with the logic. Elsasser said that Switzerland was almost back to normal, and that Swisscom is seeing a decline in lockdown-related traffic that peaked a few months ago.
To that end, in a return to normalcy, Swisscom’s Blue Entertainment is adamant that being an OTT aggregator is the only way to ensure success. Elsasser said that Swisscom is seeing requests from dozens of OTT platforms, to be natively integrated into Swisscom’s CPE environment, but that he believes only a handful are going to survive long-term. He added that the Amazon-MGM merger is not going to be the last major OTT consolidation.
This would suggest that operators are going to become the dreaded dumb-pipe – delivering third-party OTT content to viewers. However, they already deliver plenty of third-party linear content that they didn’t produce, and based on the jovial nature of the panelists, it sounds like there might have been a shift in operator thinking on the matter. Historically, hosting Netflix meant admitting defeat. Now, there doesn’t seem to be much egoism in the decision – just pragmatism.
Nicole Agudo, from ProSiebenSat’s Seven.One wing, said that lockdown proved the importance of TV. However, the disparity between device usage in younger groups is stark, with such target groups using a TV for 50 minutes per day, and smartphones for 112 minutes. To that end, ProSiebenSat is running targeting campaigns to try and bring more of those consumers into the fold.
The firm says it has come to realize that a particular kind of content is key to this aim. Live, local, and relevant is the most important, Agudo stressed, with ProSiebenSat focusing on German content with recognizable German figures, to keep viewers inside the ecosystem. Sports, news, and political election coverage are also important, but Agudo’s point is a sound one – domestic firms should have an advantage over global OTT rivals, but that doesn’t always pan out.
Discovery’s Susanna Aigner added, saying that there are three trends in content currently playing out. The first is a growing demand form premium, exclusive (and often expensive) content, which the OTT platforms are competing for to best position themselves to consumers. This has caused some upheaval on the production side of things.
The second is Aigner’s position that there is no fight between digital (OTT VoD) and linear, rather that it’s a coexistence, providing different offers to customers in different situations. To that end, Aigner believes the abandoning of linear by young viewers has been overblown, as only a tiny sliver don’t use liner at all – something like 15% of 20 to 29 year-olds. The third point is that data is key, for marketing, but that’s barely worth mentioning these days.
Next up was David Bouchier, from Virgin Media in the UK – another firm that is in the midst of consolidation – with Bouchier saying the past couple of weeks have been somewhat hectic, after the confirmation of the merger with Telefonica’s O2. In Bouchier’s view, the biggest change in the past couple of years has been the accelerated move towards non-linear content. The first three months of lockdown, he said, shifted that needle as far as they would normally have expected in a year.
Bouchier gave a conflicting statistic to Discovery’s Aigner. In his view, up to half of under 35-year-olds don’t connect with the established major video networks – watching an entirely different kind of content, drawn from user-generated content (UGC) and the likes of YouTube. Thus, finding the audience is the hardest part for Virgin, never mind trying to position the main household screens. Virgin did spot a big spike in sports viewership, however, when that returned.
So, while they might disagree on the habits of young people, Discovery and Virgin are on the same page for most of the rest of the panel points. Yassine Bouzoubaa, from Canal+, argued that traditional consumption of television is far from dead. Cable is declining, but DTH and IPTV are either stagnant or growing, which is far from the rosy outlook that many PR firms would like to portray.
Bouzoubaa did emphasize that US OTT platforms still dominate the market, but that there are some local platforms emerging – leveraging the rising number of OTT subscriptions per household. However, the race to invest in original content is getting faster, and there is more need to repatriate content to your own networks. This is not such a concern for content that isn’t filmed in English, admittedly.
Sky’s Charli Kumar, who leads the Sky Ticket business in Germany, built on the content investment point, saying that Sky had doubled its investment in producing original content through 2024. However, Kumar warned that there has to be more nuance these days, as edgy dramas used to be enough to make a name for yourself. This is no longer the case, she warns, and to that end, Sky established its Crime and Comedy wings, to try and address those niches.
As mentioned above, the panel members were very agreeable with each other in tone, even if their statements conflicted. However, there is no shying away from the fact that a live audience would have tried to pit these contradictions against each other, but there was no such recourse.
The conversation turned to aggregation, suggesting you are already an aggregator (of content) or you are about to be aggregated. Each OTT platform, at sufficient scale, will become an aggregator, and Virgin’s Bouthier agreed – saying that aggregation is the inevitable response to saturation in mature markets. Operators, he said, need to find other ways to grow, and pointed to rival Sky’s approach of bundling a Netflix subscription with its pay TV services by default, as a sign of the changing times.
Bouzoubaa touched on Canal+’s TV Brick offering, which is a service that its M7 Group division offers to operators – effectively a bundle of content, channels, and back-end systems and support. The idea here is to bundle the likes of HBO and Fox with the content that M7 already has access to, so that operators can offer a more attractive pay TV package. This, Bouzboubaa says, allows the likes of MNOs to offload the work of running a video service, and focus on their core offerings, and of course extends M7’s viewership further.
To round things off, the panel looked at UHD, and asked whether it was a distinct standalone market, or merely a situational expansion of regular video services. We’ll save our usual rant about mixing up 4K and UHD, but here, please note that the panel means 4K when they say UHD. Across the board, it seems only live sports is interested in UHD for linear content, but that UHD is very important to OTT content.
Some 4 million UHD devices have been sold in Germany, to date, said ProSiebenSat’s Agudo. Virgin’s Bouthier added that there was a 75% increase in TV sales in the UK during lockdown, and that nearly all of those were UHD. For VoD and movies, Bouthier said UHD is essential, with price differentiation. Elsasser suggests that Swisscom has had more luck shifting UHD options, including in drama.