OTT as a premium channel
Wherever the revenue comes from, the real takeaway is that OTT video demand is real and growing, and pay-TV players have to figure out how to incorporate that into their strategy, says Ratner of Pioneer Consulting.
“As customers opt to watch more OTT services, whether it’s SVOD or AVOD, pay-TV operators really need to think about how to curate OTT services on their own platforms, offering multiple services at the same time to meet the customer demand,” he says.
Telcos are already starting to do this, he notes. “We’re seeing that essentially they’re packaging multiple OTT services and creating electronic EPGs for this, so you can choose to watch Netflix, or iflix, or Hooq or other kinds of services all in one spot, and through carrier billing you pay for everything in one bill.”
In that sense, OTT video is less of a competitor to pay-TV and more like another premium video channel to add to the pay-TV bouquet. So, for example, a basic cable package gets you linear-only TV and streaming services like YouTube, DailyMotion and Vimeo; a mid-tier package includes one or two OTT services; and a premium package includes access to all of the OTT platforms available in your country.
That’s certainly how Hooq sees its role, as well as the role of OTT video in general, says Hooq’s Rajagopalan.
“As an OTT service I can tell you we are not competing with any of these players,” he insists. “We tend to work with all these players to augment their offering. Free-to-air broadcasters are some of my best content sources and we spend a lot of time talking to them.”
Rajagopalan says that as far as he’s concerned, OTT is simply an extension of what pay-TV players already offer. “Pay-TV operators already pay for a lot of different channels. They have a lot of content licensing, they spend a lot of money acquiring rights, and they deliver it to one thing, usually a set-top box. OTT really represents the opportunity to take that set of channels and content and deliver it to every other stream that the viewer has. OTT as a tool provides a lot of value to the players.”
The telco advantage
That’s good news for telcos who have been looking at things like, say, Netflix’s global push and wondering how in the world they can compete against that.
Jim O’Neill, principal analyst at Ooyala, advises telcos who want to know how they can compete against OTT players to have a better understanding of the playing field they’re competing on.
“Everywhere I go in Asia, I come across a lot of the same concerns from operators: ‘How do we compete against Netflix? How do we do this? How do we win?’ And my answer is: Define what ‘win’ means,” he says. “Does Netflix necessarily win because they’re the biggest? Or can you win by offering better content that’s more relevant and in tune to what your viewers need?”
And Asian telcos are in a great position to play in the OTT video space, says Rajagopalan of Hooq (which, after all, counts Singtel as a co-founding member), not least because of their billing capabilities.
“If you look at the payment landscape in Asia, compared to developed markets, there are very few opportunities for players who can deliver a consistent frictionless payment method for users,” he says. “Telcos are pretty much the only business besides utilities that have mastered the art of collecting money from consumers every month. When you think about bundled services, churn, customer acquisition and retention, these are issues that OTT services face but telcos are masters of solving those problems. Telcos have a very significant role to play, and we want to partner with them, and enable them to find the right partnership model to enable a paid ecosystem.”
As for just what the “right” partnership model is, there are several options, such as integrating OTT players into the bouquet or pursuing a white label strategy, for example.
Ooyala’s O’Neill says we’re likely to see a little bit of everything. “In Asia we’re seeing a little bit more experimentation, but some players here are taking slower steps than in the US, for example, being more cautious, which is where partnering or white labeling may seem a more prudent option.”
O’Neill adds that some telcos will still opt for a more DIY approach to OTT video. “It’s difficult to do totally DIY, but sometimes you have to because you’ve already built part of the infrastructure and just throwing it out the door doesn’t make any sense. But even there you need to find partners who can use what you have, improve on it or just modularly plug into what you have and make it work.”