Everyone I spoke with or saw speak at MWC agreed that mobile is no longer just an add-on to traditional TV. Our own survey of online video viewers found that two-thirds used smartphones to watch, behind PCs and smart TVs but ahead of tablets, TV set-top boxes, game consoles, and media streamers. About 13% of Netflix customers – a service with content largely based on "big screen" TV formats – said they most preferred watching via their smartphones, a percentage which rises to 16% for the much-coveted 16–34 "millennial" demographic.
Many executives at MWC also agreed that mobile experiences would increasingly influence the design and technology of TV services as a whole, with many expecting user interfaces to trend toward personalized "feeds" similar to those of social networks.
Similarly, we at Ovum expect the TV user interface to become a hotly contested area over the coming year, with no single mode or player guaranteed for success. The ability of pay-TV operators to innovate may be hamstrung by their legacy technology platforms. The agility of consumer technology firms like Google, Apple, and Facebook, meanwhile, might not amount to much if they can't secure access to the content people want to watch.
Every operator needs a mobile video story
All of the operators I spoke with also agreed that they need to do something about mobile video.
The reasons are fundamental. At a global level, we expect that the average revenue per user (ARPU) for mobile services will continue to decline for at least the next five years, with only a small proportion of operators achieving modest increases at best. Average mobile data traffic per user, meanwhile, will skyrocket, with video fueling growth to account for two-thirds of the load on cellular networks by 2020.
Clearly, operators need to reduce the cost of carrying video on their networks, but they also need to increase ARPU. How? Video offers not one, but many answers.
AT&T made the strongest statement, justifying its acquisition of satellite operator DirecTV and its bid for media giant Time Warner by arguing that a mobile operator without a content strategy would become a business without a future. Why? Consumers don't care about "the Gs" – 3G, 4G, and the gigabyte (GB) download allowances operators have historically promoted. They care about the content and services these technologies provide access to.
Clearly, few companies can afford to pursue such telecoms and media mega-mergers, though we don't expect AT&T will be alone in doing so. But smaller operators can't afford to ignore mobile video. They must look to offer bundles, data pricing, and other ways to make viewing more appealing to consumers – rather than just more expensive.
Big media reaches out with open arms
MWC 2017 also saw some of the strongest commitments from content owners in support of mobile video since the ill-fated days of broadcast mobile TV. Discovery CEO Jean-Briac Perrette, for example, revealed plans to partner with operators to offer mobile access to Olympic Games coverage, while Vice Media CEO Shane Smith was characteristically bullish about his company's partnerships with mobile operators around the world.
Much has changed since the broadcast mobile TV era – and not just consumers taking to watching video on smartphones. Traditional content owners are facing unprecedented challenges as pay TV in Western countries matures and growth in emerging markets slows. Both pay-TV operators and internet platforms are also putting pressure on pricing of TV channels and content rights, as they look to focus more on quality rather than quantity.
Mobile offers a greenfield opportunity for content owners, a chance to expand their addressable market from hundreds of millions of homes to billions of smartphone screens. As a result, one of the most consistent questions we've had from our studio and channel-owner clients over the past two years has been: "How can I price and package my content for mobile operators?". This year's MWC saw some new answers; expect more over the months and years to come.
Netflix plays it cool – but don't be fooled
We had hoped Reed Hastings would say more about Netflix's plans for partnerships, but he limited his comments to encouraging mobile operators to offer so-called zero-rating tariffs which allow subscribers to watch unlimited video without drawing on their data allowances.
That doesn't mean Netflix isn't seeking deeper forms of collaboration. We're forecasting that growth in the online video company's subscriber numbers will slow in 2017 and beyond as the hype from its global expansion fades. Adapting to local market dynamics will be vital to attracting new customers, especially in emerging markets, and partnering with mobile operators will be key to that effort.
Hastings was coy perhaps because our extensive research into partnerships between operators and internet firms shows that the outcome of negotiations depend on which party has the strongest hand. We expect he chose not to show his – and spend more time emphasizing what a powerful, independent, global player Netflix is – lest he undermine the company's considerable leverage. Indeed, just days after MWC, Netflix announced a partnership with Vodafone India to enable the mobile operator's customers to charge their Netflix subscriptions to their phone bills.
This article was originally posted on Ovum’s Straight Talk weekly briefing
Rob Gallagher is an analyst and research director for consumer services at Ovum