bringing tv to life issue v...pay tv providers are seeking to protect their exiting customer base...

Bringing TV to Life Issue V

There’s a new wave of disruption sweeping over the video market. We’re starting to see clear signs of strong momentum towards new digital platforms. Digital natives are flexing their considerable muscles to try and secure a dominant position. Telcos are looking to capitalize on their customer insights and raise their profile in digital video. New entrants continue to innovate with eye-grabbing digital propositions and content.

How should traditional content providers respond to make sure they can ride the wave, compete in this rapidly changing market and secure their place in the fast-configuring digital value chain?

2 | Bringing TV To Life, Issue V

At a GlanceAs digital devices continue to proliferate, with multiple IP devices per hyper-connected consumer increasingly the norm, and the TV just one point among many for digital video consumption, we’re seeing a new wave of disruption starting to break over the video industry.

Bringing TV To Life, Issue V | 3

Disruptive Threats

Digital natives are marshalling their uniquely digital heritage that givesthem inherent understanding of howdigital consumers behave and what they want, alongside mastery of the capabilities to target and serve them effectively.

1. The rise of the digital natives

While the TV set remains the principal device for premium content, overall viewing is rapidly fragmenting across multiple devices and formats.

2. A decisive consumer shift

Industry players, including content providers, traditional broadcasters and telcos are looking for new ways to respond to and capitalize on shifts in consumer behavior.

3. M&A to acquire digital capabilities and scale

In line with accelerating changes in consumers’ viewing habits, new content windows are opening up.

4. New content windows and strategies

Key Challenges that Video Companies Need to Address

Video services must continually learn, improve and customize the experience they offer to increase their relevance and appeal.

1. The data-driven video market

What choices will content providers need to make and what actions will they need to take in order to maintain relevance, market share and profitability in the digital future?

2. Learning from the digital natives It’s imperative that before content

providers decide on the business models that they will pursue to compete in a digital world, they first need to implement strategies that will allow them to acquire sufficient scale.

3. Acquiring scale

For digital content providers and broadcasters, balancing the interplay between the algorithmic and creative aspects of the business requires them to break down the barriers that have traditionally stood between two worlds.

4. Science and art—making an ideal marriage

Riding the Next WaveEarlier in our Bringing TV to Life series we identified how the first wave of digital disruption in the video market, driven by the rapid proliferation of IP devices and fragmented audiences, signaled a clear shift from the dominance of free to air (FTA) linear channels. Today, as digital devices continue to proliferate, with multiple IP devices per hyper-connected consumer increasingly the norm, and the TV just one point among many for digital video consumption, we’re seeing a new wave of disruption starting to break over the video industry.

FIGURE 1 | Recent investments in original programming

This second wave looks to be much more powerful, and its reach more pervasive, than the first. OTT services such as Netflix,Amazon and Hulu are commissioning their own content, with Netflix outspending traditional broadcasters, such as the BBC, HBO and Discovery1 (Figure 1). They are expanding their global

reach and harnessing advanced digital capabilities to address how they manage everything from personalized programming to customer churn. The online video market is expected to reach $38 billion by 2018.2 Players in the ecosystem are competing fiercely to capture the greatest share of that value.

To date, traditional broadcasters have responded to disruption by creating and licensing content to give them greater leverage in the value chain. The migration to digital put traditional broadcasters’ business models, based on growth from advertising and carriage agreements, under severe pressure. In response,

Netflix Hulu AmazonNetflix spent $3 billion on TV

and film content in 2014 and planned

to spend more than $6 billion

over the next 3 years

Hulu plans to quadruple

investment in original programming

in 2015 to expand its slate of

original programming

Amazon’s Prime Instant Video is

estimated to have spent more than

$100 million on production

of original series in Q3 2014.

1 Digital TV Europe.net. “OTT to grow massively, Netflix now “outspending BBC” on content.” Retrieved March 2015. http://www.digitaltveurope.net/336561/ott-to-grow-massively-netflix-now-outspending-bbc-on-content/#.VQLjaN0y2uw.twitter2 PricewaterhouseCooper’s Global M&E Outlook, 2014–2018

Source: Accenture research analysis, company data


2010

2011

2012

2013

2014

Not advertising

Total CAGR +5%Advertising CAGR +2%Non-advertising CAGR +10%

ITV revenues and percentage of non-advertising revenues

£2.33M

£2.43M

£2.55M

£2.75M

£2.96M

36%

38%

41%

44%

35%

2010

2011

2012

2013

2014

United Kingdom

Total CAGR +11%United Kingdom CAGR +6%International CAGR +19%

ITV Studios’ revenue

£554M

£612M

£712M

£857M

£933M

62%

67%

63%

57%

53%

38%

33%

37%

43%

47%

International

2010

2011

2012

2013

2014

Not advertising

Total CAGR +5%Advertising CAGR +2%Non-advertising CAGR +10%

ITV revenues and percentage of non-advertising revenues

£2.33M

£2.43M

£2.55M

£2.75M

£2.96M

36%

38%

41%

44%

35%

2010

2011

2012

2013

2014

United Kingdom

Total CAGR +11%United Kingdom CAGR +6%International CAGR +19%

ITV Studios’ revenue

£554M

£612M

£712M

£857M

£933M

62%

67%

63%

57%

53%

38%

33%

37%

43%

47%

International

FIGURE 2 | ITV’s new revenue streams

they’re developing new revenue streams by licensing their content to multiple platforms on a global scale. As an example, ITV in the UK (Figure 2) has made strong progress in rebalancing its revenues, increasing the contribution of its international business by 19 percent over the last five years. This was achieved

by considerable investments in ITV Studios’ development of a large and high quality portfolio of successful series and formats, showcased on local linear channels before being licensed across multiple platforms in the UK and internationally.

In general, to achieve sustainable scale, traditional broadcasters are likely to continue placing their premium content on as many devices and platforms as possible, which is why their content has been, and continues to be, available on streaming platforms such as Roku, or Apple TV, or on pay on-demand services such as Vessel or Hulu.



FIGURE 4 | Revenue impact of HBO Now on HBO and Time WarnerAdvertising impact is calculated as a straight percentage difference based on the decline in MVPD subscribers.

Pay TV providers are seeking to protect their exiting customer base but are also reaching out to new “cord-cutting” customers by launching standalone OTT brands and direct to consumer propositions built on ‘skinny’ bundles, that offer a selection of popular channels at a low price (for example Dish Sling TV).These services aim to capture new audiences or recapture those that have migrated away and to mitigate churn without cannibalizing the core pay TV business. For example, Sky UK has launched Now TV, an unbundled internet video service offering non-Sky households pay-as-you-go access to

selected Sky content, movies, sports and TV shows. Sky’s achieved this without significant impact on its Pay TV customer base, showing little impact on subscriber growth (Figure 3).

Other video content providers, such as HBO Now and Showtime, are experimenting with direct to consumer models—and in the U.S., FFC rules also now allow broadcasters to offer direct OTT services—in order to find a way to capture the attention of new and elusive consumer: the cord cutters, those who’ve never had a cord to cut, and the millennials who don’t subscribe to

traditional pay TV services. Achieving a sustainable direct-to-consumer content proposition requires finding a balance between the loss of traditional revenues and new subscription-derived income.

As the HBO case highlighted above shows (Figure 4), greater than 20 percent uptake of direct to consumer subscribers is required to balance the loss of traditional revenues. This target appears even more challenging with only limited content offerings, in an extremely price sensitive consumer market.

FIGURE 3 | Sky UK subscribers

Revenue impact of HBO Now on HBO and Time Warner (in $M)

MVPD subscribers -5% (1.68M subs) -10% (3.35M subs) -15% (5.03M subs)

HBO MVPD ($171) ($342) ($513)

Turner MVPD ($87) ($174) ($260)

Turner ad ($66) ($132) ($198)

HBO Now $10.49/sub $211 $422 $633

($324) ($648) ($971)

Broadband-only subscribers +5% (0.55M subs) +10% (1.09M subs) +20% (2.18M subs)

HBO Now broadband $10.49/sub $69 $137 $274


2011

2012

2013

2014

Launch of Now TV

Sky UK subscribers

10.2M

10.3M

10.4M

10.7M

Source: HBO, SNL Kagan, Variety, Accenture analysis

Source: Accenture Research Analysis, Company Data


Achieving a sustainable direct-to-consumer content proposition requires finding a balance between the loss of traditional revenues and new subscription- derived income.

1. The rise of the digital nativesBut it’s much more than a two-horse race between traditional broadcasters and their OTT representations/rivals.

“Born digital“ players such as Google, Amazon and Facebook are also vying to become “go-to” providers for the new digital video ecosystem. They’re marshalling their uniquely digital heritage that gives them inherent understanding of how digital consumers behave and what they want, alongside mastery of the capabilities to target and serve them effectively. These digital natives can deliver digital experiences and enabling capabilities at global scale. They’re adept at highly personalized targeting, analytics and actionable insight, retail transactions, aggregation and optimized distribution, and can use

those capabilities far more effectively and efficiently than (most) video content providers today.

Telcos, too, are ramping up their interest in the digital video market and taking innovative steps to secure a commanding position. They are looking to support or complement their aspirations around monetizing high-speed connectivity and seeking ways to exploit their existing strong networks and extensive customer relationships. As BT’s recent spending on sports rights and M&A activity such as AT&T’s acquisition of Direct TV demonstrate, telcos are prepared to make

major investments in rights in support of their business goals and to become key players in the digital video market.

New entrants are using video content to drive the growth of their non-video businesses, which changes, yet again, the business value of video content. Amazon’s Prime Instant Video and Japanese e-commerce giant Rakuten’s Wuaki seek to deploy video content in order to persuade consumers to interact with their other services.

And there are future disruptors now emerging (Figure 5) whose impact is not


FIGURE 5 | New entrants who have leveraged technology to their advantage are stimulating The Era of Disruption.

• Public broadcasters• Commercial FTA broadcasters• Cable pay TV• Satellite pay TV

• New entrants• Broadcasters (OTT catch-up services)• YouTube and user- generated content• Telco IPTV

• Netflix 2.0• Broadcasters (Stand-alone OTT)• Multi-channel networks

• Social media and Snapchat• CPE and device manufacturers• New fiber players• Superplatforms• Telco 2.0

The Players

Incumbents First Generation OTT

Second Generation OTT

Future Disruptors

• Licenses and regulations• Exclusive premium content• Proprietary and secure device• One for all (mass audience) for advertisers

• Broadcasters: Controlled rights in conjunction with linear broadcast• OTT players: Long tail library content (cheaper to acquire) powered by technology innovation and B2C digital relationship

• Broadcasters: Stand-alone OTT services as a defensive movement to avoid churn• OTT players: Strongly invested in original programming, analytics driven to get global scale

• B2C skills• Direct to consumer proposition• Innovative content monetization models• Scalability

Key Success Factors


3 Business Insider. “You think Snapchat is for sexting, but it’s actually a giant threat to Google, Facebook, and TV” Retrieved March 2015. http://uk.businessinsider.com/snapchat-threat-to-google-facebook-tv-2015-2?r=US#ixzz3WqwspYwe4 2015 Accenture Digital Consumer Survey

yet totally clear but who will undoubtedly deepen the complexity and ratchet up the competitiveness of the fast-developing digital video ecosystem. These include innovations on social media platforms, such as Twitter’s launch of live content “broadcasting“ through Periscope; innovation from consumer premises equipment (CPE) and other device manufacturers; new players in the fiber market and OTT communications players such as Snapchat. The latter, in particular, appears to have a powerful appeal to

the new digital millennial customer base. For example, a Snapchat video aboutNew York’s “Snowpocalypse” captured more than 24.8 million views on theevening of January 26, 20153 andnext 24 hours—topping NBC’s “Sunday Night Football,” which averaged 21 million viewers per week during the 2014 season.

However, as Figure 6 shows, traditional content providers such as cable and broadcasters still, for the time being,

command a hefty slice of consumer loyalty. Consumers in our survey4 trust broadcasters and cable companies more than others to deliver a quality video over the internet service to their TV screen. That loyalty is very important. But it can’t be taken for granted. As digital developments are happening so quickly and consumer behavior continuing to evolve rapidly, traditional players still have no time to lose in acquiring and develop-ing the new digital capabilities they’ll need to compete in the longer term.


FIGURE 6 | Most trusted providers for a quality video-over-the-internet service on TV screen

515%22%26%31%

58%

Overall Response Response by Region

Your TV broadcaster or satellite operator

Your cable TV company

Telecom/broadbandprovider

Internetvideoprovider

Socialmediaprovider

North America Western Europe Asia Pacific

Middle East Latin America

57%

57% 55%

54% 57%

Source: 2015 Accenture Digital Consumer Survey

2. A decisive consumer shift?

So what are the consumer preferences and behaviors driving this second wave of disruption? While the TV set remains the principal device for premium content, overall viewing is rapidly fragmenting across multiple devices and formats. Accenture’s research shows that the diversity is growing, with more than half of the devices in use for video consumption today being either PCs, tablets, smartphones or other multi-platform devices (Figure 7).

Video will make up 70% of all global internet flows by 2018. In that time, internet TV will increase fourfold and account for 14% of all consumer internet video traffic.5 Video on demand over the internet will double by 2018 and be the equivalent of six billion DVDs each month. One in three millennials now watch more online video than traditional TV. Frequent online content consumption is now the norm for most consumers (Figure 8).


FIGURE 7 | Preferred device when accessing different types of digital content

TV shows/movies

Video clips

Sports

Desktop /laptop

29%

53%

17%

38%

54%

23%

2014 2015

5%

23%5%

8%

8%

25%

2014 2015

Smartphone

4%

11%3%

8%

6%15%

2014 2015

Tablet

65%

22%

53%

52%

19%

43%

2014 2015

TV screen

-26%

+16%

+11%

+8%


5 Accenture Research analysis based on Cisco Visual Networking Index Global IP Traffic Forecast and Service Adoption (2013–2018)

FIGURE 8 | Percentage of users who are accessing content daily and weekly

The set-top box is no longer the sole or even main point of entry to Pay TV and other digital video content. New devices and apps are providing the same functions, with storage and processing moving to the cloud. But more importantly, the cloud provides video companies with the flexibility and scalability to add more services and offers the agility that is needed to constantly evolve, add and innovate new offers and propositions that meet digital consumers’ needs.

The shift from single set-top box to multiple IP devices also offers telcos the ability to gain a strong foothold in the fast changing market. They can support video companies with the ubiquity of content delivery over IP that they need to achieve the quality and speed of service that consumers expect as they switch from device to device.

From set-top box to cloud

Overall

North America

Western Europe

APAC

Middle East

Latin America

78%

73%

73%

79%

89%

86%

Overall

North America

Western Europe

APAC

Middle East

Latin America

76%

73%

75%

75%

76%

81%

Video clips

Overall

North America

Western Europe

APAC

Middle East

Latin America

91%

89%

90%

90%

93%

96%

Social networking

TV shows/movies

Overall

North America

Western Europe

APAC

Middle East

Latin America

59%

61%

54%

61%

64%

65%

Sports



3. M&A to acquire digital capabilities and scaleIndustry players, including content providers, traditional broadcasters and telcos are looking for new ways to respond to and capitalize on those shifts in consumer behavior.

In the last year, for instance, between them they invested $1.6 billion in Multi-Channel Networks (Figure 9)— businesses that work with video platforms such as YouTube to create, promote and monetize content and channels in exchange for a share of revenue.

Studios have been among the biggest investors in MCNs, with Disney and Dreamworks both making large acquisitions in 2014. These demonstrate studios’ keen interest in new ways to distribute material other than premium, high-cost content.

However, and perhaps more significantly, MCNs and similar propositions could open the way for studios to position themselves for future growth by shifting their position in the value chain closer to

direct interactions with the consumer in a B2C relationship. MCNs leverage the services from companies like YouTube that we have previously identified (Bringing TV to Life IV) as possessing the capabilities critical to success in the new digital ecosystem. By becoming experts in optimizing these new platforms rather than having to build their own, studios are discovering how to raise their profile and enhance their position in the B2C game.


FIGURE 9 | In 2014, traditional TV and telco players invested $1.6 billion in MCNs

Content Providers

(Disney, Maker)

$500M Telco

(AT&T, Chernin Group, Fullscreen)

$200M–300M

Traditional Broadcasters

(Sky, Whistle Sports)

$11M

TraditionalBroadcasters

(ProSiebenSat.1 Media AG, CDS)

20% of capital

Content Providers

(DreamWorks, AwesomenessTV)

$33M


MCNs are evolving from pure aggregators to becoming original/premium content producers and distributors (Figure 10). They’re moving beyond simply achieving scale and harnessing their ability to produce premium web content. MCNs are creating niche programming that aims to attract loyal, engaged and hyper- specialized audiences, and doing so at a much lower cost compared to traditional models (Figure 11).

To counter these disruptive threats, some broadcasters are pursuing consolidation strategies that are driving the creation of new broadcast ‘behemoths’ (for example Sky Europe6). There is little perceived benefit in maintaining traditional, vertically integrated models because as many distribution channels as possible are now required to maximize the returns available from investments in content.

Recent M&A activity has aimed to secure the large digital footprints of global audiences that will sustain digital video services. We’re seeing distinct strands of this activity in a growing polarization of players across two areas of the value chain: the first is to control access, by building a huge B2C organization that focuses on consumer service and owning distribution and the second is the control of content, as exemplified by Fox’s ambition to acquire Time Warner.

FIGURE 10 | MCNs monetize advertising investment on digital platforms, aggregating digital channels which target specialized audiences, mainly on mobile


MCNs Model and Monetization

Source: Accenture Analysis

Hyper-specializedniche audiences

Digital PlatformsChannelsMCNs

• Invest in digital advertising or branded content

• Deliver digital channels• Certify MCNs

• Consume video content, mainly niche videos and storyteller, not “hits”

Role

Advertisers

$100 Adv Investment $16.5 $38.5 $45

• Aggregate channels under a credible brand• Manage programming, monetization and audience engagement

• Produce channels content• Interact and engage with the audience

Monetization Model

MCN

TV

Movie

75

100

1,500

Full Content

Minute

MCNs Content Production costs are extremely low compared to traditional content production [$K ]

MCN: for minuteTV: for full contentMovie: for full content

FIGURE 11 | MCNs’ content production costs are extremely low compared to traditional content production (in $US thousands)


Source: www.mediaredefined.com, Accenture analysis

6 Advanced Television. “Sky Europe: Italy and Germany to drive growth” http://advanced-television.com/2015/05/06/sky-europe-italy-and-germany-to-drive-growth/. Retrieved June 2015.


There is little perceived benefit in maintaining traditional, vertically integrated models.

4. New content strategies

In line with accelerating changes in consumers’ viewing habits, new content windows are opening up. A higher proportion of consumers are paying for a video service over the internet (Figure 12).

Rights holders are increasingly willing to experiment. Such innovations cover a wide array of strategies including new ways to make prior season content available; using subscription video on demand (SVOD) as the main distribution model; recommissioning shows cancelled

by linear broadcasters and OTT SVOD players making the complete episodes of original series they have commissioned available for all devices at once. As Figure 13 shows, consumers express a mix of sentiments about their willingness to pay for different models, with no clear preferences emerging.

Other rights are also being repackaged in novel ways. Some sports franchises are going direct to the consumer. Broadcast-ers are making live sport available through dedicated OTT offerings and

others are offering OTT sports packages for a restricted time window to cover a particular event. Some providers, including Amazon Prime and Netflix, are making exclusive content available as a way to drive new subscribers to their main subscription products. In other words, they’re investing in premium content as an acquisition cost to attract consumers onto their platform. But simply having the right content is only part of building a successful digital video service.

FIGURE 12 | A higher proportion of consumers are paying for a video service over the internet

FIGURE 13 | Preferred ways to pay for video services offering over the Internet on any screenPercent of consumers that already pay for an online video service, preferring the following subscription modes


Paid online video service offering subscriptionPercent of consumers paying for a video service offering over the internet on any screen

Top 5 facts that will encourage users to pay for a long-form video content service over the internet

+4% Availability of most recent releases

Fewer advertisinginterruptions

Guaranteed audio and video quality

Availability of HDprograms

Wider range of video-on-demand content

North America

Western Europe

APAC

Middle East

Latin America

24%

18%

26%

19%

36%

Overall 22% 29%

28%

21%

19%

18%

China42%

India34%

Japan19%

South Korea30%

Australia14%

Indonesia19%

Live events33% 19% 31% 16%

31% 30% 23% 17%

29% 24% 33% 14%

27% 25% 30% 18%

18% 18% 18% 18%

Most recently releasedmovies on demand

Most recently releasedTV series on demand

Catalogue of movies on demand

Catalogue of TV series on demand

Full subscriptionRegular price/no ads

Mixed subscriptionLower price/some ads

FreeFull ads

Pay per useNo subscription/no ads

Preferred ways to pay for video services offering over the internet on any screen% Consumers that already pay for an online video service, preferring the following subscription modes

Source: 2015 Accenture Digital Consumer Survey.


Key digital capabilities for a new competitive landscapeAs we highlighted in Bringing TV to Life IV, there are a number of key capabilities that will all be decisive sources of competitive advantage as video continues its shift to digital and the value chain reconfigures accordingly.

These include:

· The need to manage the cost of technology, implementing lean operations, learning to fail fast and test new business models;

· The need to manage the cultural change involved in becoming a digital-first business, is equally important, creating clear engagement strategies to gather data and then driving value from the data once collected;

· IT needs to step up with agile and integrated architectures, build the right skills and reshape technology and delivery organizations to work seamlessly together; and

· Operating with broadcast availability and broadband flexibility is key. Transforming legacy video platforms so that their costs reduce in line with declining content revenues is a fundamental step to support a sustainable business.

If they don’t acquire or find ways to access these new digital capabilities quickly to operate as web-scale busi-nesses, traditional players run the risk of becoming marginalized and losing their relevance. They could see their relationships with consumers taken on by other, more digitally adept, players. Next, we look at four key challenges that video companies need to address to make sure that they retain their relevance in the fast-moving digital market.


Manage the Cost of Technology

Competitive Advantage Learn to Fail Fast

Implement Lean Operations

Test New Business Models

Source: Accenture

1. The data-driven video marketFundamental to digital consumers is the expectation that services will learn their personal preferences and continually update, customize and improve the experience they offer.

And that’s exactly what video services must do to increase their relevance and appeal. In the same way that the super-platforms constantly mine cus-tomer data to enhance and target offers, TV and video services need to engage consumers with predictive suggestions based on past behavior and real-time interactions that create a genuine sense of customer intimacy for every individual.

The collection and interrogation of data can also unlock the power of a creative workforce: a key source of differentiation in the digital market. Data can —and

should—be harnessed to better inform decision making about content. Gathering together analysis of viewing data, user preferences, recommendations and ratings—as well as data from social media and other sources—can greatly increase the accuracy of decisions to, for example, recommission a second series or new season and support decision making about curation as well as content strategies.

The factors that underpin successful digital marketing are all grounded in the ability to gather and use more data more intelligently. Extending digital reach,

engineering higher loyalty and elongating the time consumers want to spend on each visit to a digital channel, site or application depend on constantly mining and analyzing for fresh insights, improved offers and new suggestions. And as Figure 14 demonstrates, the ability to harness data across multiple, integrated capabilities and services will become increasingly critical to successfully support multiple organizations across a video business, including marketing, thus driving consumer engagement and loyalty.

FIGURE 14 | The ability to harness data across multiple, integrated capabilities and services will become increasingly critical


“Service Layer”

Strategy & Vision

Engaging Audience Experiences

Marketing Analytics Services

Direct Marketing & CRM Services

Identity & Profile Management

Policy & Governance

Technology Capabilities

Business Units / Activities(not exhaustive)

Digital Product

Programming& Scheduling

Rights Acquisition

Advertising & Operations

Editorial

Business Units / Activities(not exhaustive)

Marketing& Promotions

Content Commissioning

Branding

Digital Channels& Sales

Customer Service

Learn to Fail Fast

Test New Business Models

2. Learning from the digital natives

Given the decisive shift to digital—and the considerable headstart enjoyed by the digital natives in the relevant critical capabilities we’ve already identified, what choices will content providers need to make and what actions will they need to take in order to maintain relevance, market share and profitability in the digital future? They can certainly look to those digital natives for lessons about how to embrace that future.

Digital natives are distinguished by providing one platform for all their

content and by being unafraid to launch new services onto that platform rapidly. At the same time, however, they’re also unconcerned about killing a service or content if it fails to gain traction with consumers. Agile ways of working mean the lessons they learn are then refreshed into new offerings and services. Successful digital businesses capture and exploit data constantly, finding increasingly inventive and creative ways to find out more about their customers’ likes and dislikes, interests and behavior and channeling those insights into

increasingly refined and tailored services, offers and recommendations at scale. So what would that look like when applied to the traditional broadcast industry? We see a feedback loop (Figure 15) that moves from data collection to analysis, feedback and then exploitation, constantly generating and applying insights and new discoveries to test, enrich, segment, enhance and promote new offers, enhance channels and deepen engagement.


FIGURE 15 | A feedback loop constantly generating and applying insights

Source: Accenture

• Integrate with Campaign Management, Loyalty, and other marketing systems

• Create specific insights for content producing and curating departments to enable their processes

• Integrate into the Test-and-Learn systems and processes

Feedback

• Manage digital identity across omni-channel touch points

• Collect usage data based on online promotional, sales, and fulfillment activities (video usage, discovery journeys, interactivity transactions)

Collection

Exploitation

Analysis

• Communicate back to consumers across a number of different channels based on preferences or segments

• Test particular engagement strategies on segmented user community

• Process internally collected and external data to provide different insights and segments based on usage across segments (e.g. content)

• Generate relationships between segments and digital products (e.g. content)


Successful digital businesses capture and exploit data constantly.

3. Acquiring scale Scale is, of course, a key consideration for both subscription and advertising-based business models.

Increasing the number of digital subscribers is important in the face of what is likely to be relatively low average revenue per user (ARPU) and a fairly inelastic market for OTT that makes anything other than marginal price increases unlikely to be acceptable. Scale is critical for ad-driven business models in order to collect sufficient volumes of data that will allow for the creation of meaningfully sized consumer segments to attract marketing budgets.

So it’s imperative that before they decide on the business models that they will pursue to compete in a digital world, content providers first need to implement strategies that will allow them both to acquire and support sufficient scale—for example by harnessing cloud platforms as an enabler. New digital businesses are not necessarily fully predictive. Their investments in infrastructure should therefore be made in a way that allows them to manage large shifts in demand without having to incur significant spend upfront. Cloud capabilities enable businesses to test products and scale those that prove highly engaging as demand increases. Achieving that critical mass—or ‘potential energy’— is fundamental to monetizing content effectively. Creating scale requires finding ways to harness digital capabilities to improve online consumer engagement, making offerings sticky, more personalized and targeted.

It’s an approach that some broadcasters are already pursuing. For example, in the UK the BBC has announced its MyBBC project that will take its digital offerings to the next level by using consumer data to direct its users to relevant content across the BBC’s platforms, shaping a personalized experience for each individual.7 Another example comes from India, where ”hotstar” and it’s “Go Solo” campaign from Star TV, provides free access to digital content and is available as an app on the Android and iOS platforms—and is already attracting millions of users.

Telcos have particular opportunities to understand how they can exploit their ownership of connectivity and large amounts of customer data as a source of advantage in the emerging value chain. One possibility is providing a platform-as-a-service offering to content providers. The services offered on the platform could include a range of capabilities that content providers have neither the capital nor the expertise to build for themselves, such as billing, one-to-one marketing, customer support through call centers and so on. Telcos can also make use of ubiquitous connectivity to create more and deeper one-to-one relationships with consumers, allowing them to move their focus from the household to the consumer—and leverage that relationship to become a provider of digital services. One example would

be telcos offering partners single sign on (SSO) to their platforms in exchange for key services such as Quality of Service (QoS), analytics, billing and targeting services.

Content providers need to explore the options available to them in order to be able to assess whether they will build their own platforms or become more adept at using the platforms that others have created, just as we’ve seen major studios do in their recent MCN acquisitions. If they, and others, can succeed in achieving critical mass, they can become platforms for others to use, moving from B2C models to offering a wide range of content providers the access, services and capabilities needed for success in a digital world. However, with plenty of runners already in the field and some already pulling away, moving quickly is essential.

7 BBC. “myBBC: Transforming the BBC to make it personal.” Retrieved March 2015. http://www.bbc.co.uk/blogs/aboutthebbc/entries/46a896ea-e587-4c63-ae7e-9781bca58dd3


FIGURE 16 | Digital delivery factory

4. Science and art—making an ideal marriageA characteristic of successful digital businesses is their ability to bring together science and art to create something that is more than the sum of those two parts.

For digital content providers and broad-casters, balancing the interplay between the algorithmic and creative aspects of the business requires them to break down the barriers that have traditionally stood between two worlds. While that’s no easy feat to pull off, if achieved it represents a powerful proposition.

Enabling collaboration between the two requires a more agile test-and-learnrelationship with the customer that can

allow their data to permeate the organization, creating a new kind of supply chain that is automated wherever it needs to be and adds creativity where it will have the greatest impact. Successful digital service and content creation depend on the richness of the underlying data. That is generated from the interplay of engaging digital features and function-ality with the optimal mix of online, marketing and social channels that continually generates new customer

and product development insights. As these product development insights become more clear, successful companies will need to create integrated delivery operating models which allow for product to be shipped frequently and predictably in order to quickly respond to consumer demands. Such a model is shown in Figure 16.


External Dependencies & Providers(May include additional bespoke inputs as required e.g. ISPs/Infrastructure)

Product & User Interface

Requirements/User Stories

Application Programming Interfaces and Services

Operational Tools

Complex Tech Stories

“The Factory” Continuous Integration

User Interface / Front-end teams

Middleware

Device/Firmware

Backend Services

Infrastructure

Security

Data Management

Device IntegrationContent Development Support

Architecture

Operations

ReleaseManagement

Operations /DevelopmentOperations

Device ManufacturersContent Providers

Delivery Technology

Mastering the second waveA disrupted world brings intensity of competition and increasingly narrow windows of opportunity. In this challenging environment, content providers need to leverage their assets in new and smarter ways if they are to be well-positioned in the B2C marketplace.


It’s clear that as digital disruption continues to change and expand the video market, simply putting content online is not enough to sustainably counter the threat posed by new entrants, new players and totally new ways to watch and consume video content.

The ability to engage, retain, and monetize consumers in the digital world requires an efficient operating model that combines agile product development and a strong technology delivery capability. That’s a prerequisite for developing, testing, learning, and reacting to consumer demands as content-based features (discovery, consumption, and interaction) are shipped.

Content providers and broadcasters therefore face some far-reaching choices. They need to decide—and decide quickly—between two clear strategic options. The first is to determine whether they are able to build their own platform (comprising both the right technology and supporting organization) on which to ride the waves of disruption. If the answer to that is ‘no’, the second option is to partner with others that possess the relevant capabilities, and in doing so hone their abilities to successfully and sustainably monetize their content on partner platforms. It’s a highly strategic choice that will determine the future of content providers’ businesses. And it’s a choice they need to make very soon—before consumers make it for them.

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Copyright © 2015 Accenture. All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.

This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative.

About AccentureAccenture is a global management consulting, technology services and outsourcing company, with more than 336,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014. Its home page is www.accenture.com.

About this seriesAccenture’s “Bringing TV to Life” series aims to build an understanding of the technology and business trends and market drivers that are radically reshaping the video industry. Our perspective reflects our experience with players across the ecosystem and makes use of Accenture’s primary industry surveys. Our series aims to help all the players in this rapidly evolving space to accelerate their journey as high performance businesses. To learn more, please visit www.accenture.com/pulseofmedia

About the 2015 Accenture Digital Consumer SurveyThe Accenture Digital Consumer Survey for communications, media and technology companies was conducted online between October and November 2014, with 24,000 consumers in 24 countries: Australia, Brazil, Canada, China, Czech Republic, France, Germany, India, Indonesia, Italy, Japan, Mexico, Netherlands, Poland, Russia, Saudi Arabia, South Africa, South Korea, Spain, Sweden, Turkey, United Arab Emirates, United Kingdom and United States.

The sample in each country is represen-tative of the online population, with respondents ranging in age from 14 to 55+. The survey polled respondents about their usage, attitudes and expectations related to digital devices ownership, content consumption, broadband constraints, digital trust and the internet of things.

AuthorsFrancesco VenturiniGlobal Managing DirectorAccenture Media & [email protected]

Youssef TumaManaging DirectorAccenture Media & [email protected]

Angelo MorelliGlobal Managing DirectorAccenture Digital Video [email protected]

Simona Buono Strategy Manager IGEM Digital Video Strategy Lead Accenture Strategy [email protected]

Bouchra CarlierSenior Manager Accenture [email protected]

This document is produced by consultants at Accenture as general guidance. It is not intended to provide specific advice on your circumstances. If you require advice or further details on any matters referred to, please contact your Accenture representative. This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.

Copyright © 2015 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

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