The Digital Video Business - Bringing TV to Life, Issue VI - Accenture

 
The Digital Video Business - Bringing TV to Life, Issue VI - Accenture
Bringing TV to Life, Issue VI

The Digital Video Business
The Digital Video Business - Bringing TV to Life, Issue VI - Accenture
Foreword
As Media & Entertainment industry lead,         forces in the marketplace, forecasted how   This year’s issue, authored by Sef Tuma, our
it is my pleasure to release the latest issue   existing and future trends will shape the   Accenture Managing Director and Digital
of our Bringing TV to Life series.              market, and provided what we believe are    Video Strategy Lead, offers unique insight
                                                important suggestions for how our clients   on the broad OTT-Video ecosystem as the
Bringing TV to Life was established in 2010     can react. We remain very bullish about     collaboration models between traditional
as an annual commentary over the nascent        OTT-TV as it continues to evolve its        Content Providers and Aggregators become
Video over IP industry brought to you by        consumer offerings, business models and     strained. We are witnessing a battle for the
the Accenture Media & Entertainment             supporting technology innovation to serve   digital consumer of seismic proportions
practice and Accenture Digital Video. Over      an increasingly sophisticated consumer.     and this requires facing the digital future
the last six years, the OTT-TV market has       Constant revolution and disruption are      without fear of cannibalizing legacy
become more mature and has begun to             nothing new for those working in digital    business models. Becoming a Digital Video
confirm much of its incredible potential,       entertainment. Even by those standards,     business at scale today requires a new
evolving to become a mass-market                the pace of change in recent years has      approach to investment but is the ticket
phenomenon with great penetration across        been exceptional—but it is fast becoming    price for a successful future.
virtually all industrialized economies.         the norm.
During this period, we have looked at the

                                                                                            Francesco Venturini
                                                                                            Global Media & Entertainment Lead

2   | Bringing TV To Life, Issue VI
The Digital Video Business - Bringing TV to Life, Issue VI - Accenture
The Digital Video Business
Over the past 15 years, video has been the only part of
the media industry to sidestep the full impact of digital
disruption. The video industry (spanning theatrical, home
entertainment, pay TV, advertising-funded and free-to-
air models) has remained relatively immune from the
trends that have swept music, publishing and other
branches of the media industry.

This is all beginning to change, with        and associated operating models begin         A reluctance to adapt will lead to
a wave of disruptive innovation now          to capture a greater share of the market.     declining growth opportunities and
engulfing the video industry. Trends                                                       most likely a fall in market share.
that until recently have held sway—          Accenture defines and highlights two
rising production costs, traditional value   capability models that offer traditional      Companies need to make three
chains, non-disruptive investments,          Providers and Aggregators an opportunity
                                                                                           fundamental decisions:
heavy policing of piracy threats and         to reinvent themselves and maintain
unmet consumer demand—are becoming           their relevance in the industry’s rapidly     •   What type of digital video business
unsustainable. As the industry transforms    changing value chain:                             do you want to be?
itself, the stakes are high: the value
                                                                                           •   How are you going to build the
of the global video market surpasses         Digital Content Providers (DCPs)                  capabilities needed to be successful?
$500 billion.                                are a new breed of business looking
                                             to serve content across a wide                •   In the event you need to collaborate,
As growth slows in many traditional                                                            how can you do so in a way that
areas of the video industry, established
                                             array of different digital channels,
                                                                                               helps maximize leverage and
companies face the formidable challenge      including OTT and IP distribution.                profitability in your business
of capturing new growth while protecting     Sometimes DCPs will offer content                 transactions?
their existing business. To succeed, these   directly to consumers; in other
incumbents will need to make some            cases, they will provide it through           In this issue of Bringing TV to Life,
critical decisions about where they fit      collaboration with Digital Content            Accenture aims to help video businesses
into the industry’s emerging value chain,                                                  answer these questions. It focuses on the
                                             Aggregators.
which is centered around IP distribution                                                   roles of DCAs and DCPs, and the relation-
of video.                                                                                  ship between them, outlining some of
                                             Digital Content Aggregators                   the challenges that each face. Accenture
In this evolving value chain, the value      (DCAs) are digital video                      also helps to identify the capabilities and
of leverage points such as infrastructure    aggregation platforms designed                strategic options that both Aggregators
(e.g., distribution networks, traditional    to package multiple DCPs to                   and Providers need to consider to stay
STB devices), sales and traditional                                                        ahead of disruption in the digital video
                                             consumers. In contrast to
customer relationship management                                                           market.
is falling, as digital capabilities and      traditional Aggregators, DCAs
platforms are beginning to change how        focus more on providing the                   In short, this perspective is intended as a
customers are served. At the same time,      data and platforms, such as                   guidebook for transformation, empower-
scale of reach, quality of experience,       media distribution and targeting              ing traditional Providers and Aggregators
data-driven operations, ubiquity and         services, that DCPs need to                   to help capture growth, protect market
seamlessness across devices are                                                            share and drive profitability in both
                                             engage with audiences directly.
becoming increasingly critical sources                                                     established and emerging businesses.
of competitive advantage.
                                             The time to act for traditional Providers
                                             and Aggregators is now. As the pace of
An important consequence of this change
                                             disruption in the industry accelerates, the
is that collaboration between traditional
                                             relative size of the investment needed to
Content Providers and Aggregators
                                             enable change will only grow significantly,
are becoming strained, as consumer
                                             especially as gaps in capabilities widen.
behaviors evolve and as new business
                                                                                                               Bringing TV To Life, Issue VI |   3
The Digital Video Business - Bringing TV to Life, Issue VI - Accenture
All change: an industry in flux
Constant revolution is nothing new for those working in
digital entertainment. But, even by the standards of the
media industry, the pace of change in recent years has
been exceptional.

FIGURE 1 | Comparison of digital growth and traditional growth in pay TV
Total Pay TV Revenue, 2015–2019c, $US billions, Source: PWC and SNL Kagan 2015

        Broadcasting: 2.9% CAGR

2015                                                                                                                         310

2016                                                                                                                               314

2017                                                                                                                                     325

2018                                                                                                                                           338

2019                                                                                                                                                 348

        Telco: 9.2% CAGR                               Cable: 3.4% CAGR                                                       OTT: 15.6% CAGR

2015                        36                  2015                                    94                            2015                 23

2016                         40                 2016                                     97                           2016                     27

2017                             44             2017                                         101                      2017                      31

2018                              48            2018                                         104                      2018                          36

2019                                  51        2019                                            108                   2019                               42

Disruption has driven growth across the            Key trends                                         an affordable way to personalize services,
digital video industry, but the stand-out                                                             increasing engagement and the value
success has been the over-the-top (OTT)            This growth has been propelled by both             of advertising.
segment, which has been responsible                advances in technology and changes in
for the vast majority of annual growth             consumer behavior and expectations:                Consumer trends
(Figure 1)—a trend that most analysts                                                                 Consumers can buy ever cheaper yet
agree is likely to continue.                       Technology trends                                  more sophisticated devices and now
                                                   Continued infrastructure upgrades, in              expect constant connectivity and
Moreover, the growth in traditional                particular fiber-based high-speed                  immediate video provisioning across all
markets is not a given for many                    broadband, have made OTT propositions a            their gadgets. The portability of devices
incumbents, as both churn and average-             reality. Faster broadband (in January 2015         is changing content consumption trends,
revenue-per-user (ARPU) pressures hit              the Federal Communications Commission              both for long-form and short-form video
their business, meaning they will need             upgraded its definition from 4Mbps to              audiences. Another trend sees video
to become nimbler, to both protect their           25Mbps1) has reduced barriers to entry             services that have sprung from the
existing growth trajectory and augment             for new players, who are able to optimize          internet rather than broadcasting tending
it with OTT.                                       delivery of video on unmanaged                     to offer more free content or lower-cost
                                                   networks. HD (and ultimately 4K) have              subscriptions. To an extent, this has set
                                                   also raised customer expectations,                 the bar for consumer expectations and
                                                   enabling businesses to differentiate               influenced their willingness to pay
                                                   between quality and “freemium” content.            subscription fees. The proliferation of
                                                   At the same time, cloud technology and             OTT services is popular with consumers,
                                                   big data have provided businesses with             but the increased competition it brings
                                                                                                      challenges the value of existing carriage
                                                                                                      agreement deals.
1 The Verge. “The FCC has changed the definition of broadband.” Retrieved March 2016.
  http://www.theverge.com/2015/1/29/7932653/fcc-changed-definition-broadband-25mbps

4   | Bringing TV To Life, Issue VI
FIGURE 2 | The digital video industry value chain today
Source: Accenture

                Creation                               Providers                              Aggregation                             Consumption

    Content          Rights Holders,                          Web-based           Cable and           Online Video            Device                Platform
                                        Broadcasters
    Producers           Studios                              Providers (OTT)        IPTV               Platforms           Manufacturers            Providers

       Rights Owners (NFL, NBA)                                                   Super Platforms (Google, Amazon)

                                                       Aggregators building D2C                             Content providers launching
 Key Value Chain Movements                             propositions which may cannibalize                     direct-to-consumer video
                                                       their existing business but help                        OTT offerings (HBO Now)
                                                       defend against new market entrants
                                                       (Sky, NowTV)

                                       Super platforms moving                                                         Super platforms expanding
                                       towards content distribution                                              in point of consumption devices
                                       (Netflix)                                                                (Google Chromecast, Amazon Fire)

An evolving value chain                            However, a transformation of the value
                                                   chain is under way. Two important
Much OTT growth has been driven by new             emerging business models lie at the heart
market entrants who have been investing            of this change: Digital Content Providers
significantly in “webscale” platforms.             (DCPs) and Digital Content Aggregators
These players have no legacy business,             (DCAs). (See callout box on page 6.)
granting them considerable commercial              To stay relevant in the new industry
and creative freedom, especially if they           value chain, traditional Providers and
can procure premium content rights. To             Aggregators will need to consider
position themselves for future growth              implementing one of these models.
and take advantage of disruption,
established businesses need to make
choices about how to pivot. While roles
in the traditional value chain (see Figure
2) haven’t yet materially changed, their
relative attractiveness is in flux.

                                                                                                                                    Bringing TV To Life, Issue VI |   5
From traditional Content Providers
                                      to Digital Content Providers (DCPs)
                                      Traditional Providers typically own or acquire rights and monetize them
                                      across different distribution channels. With either a business-to-business
                                      (B2B) model—striking carriage deals and selling advertising—or a model
                                      based on offering premium subscriptions to consumers, they manage
                                      content programming, curation, scheduling and linear distribution, while
                                      relying on Aggregators for the consumer relationship. The reliance on
                                      advertising revenue drives a focus on market share, and winners distribute
                                      to as many platforms (satellite, cable) as possible. That scale is important,
                                      and without it many traditional Content Providers have struggled to
                                      launch, for example, their own direct-to-consumer (D2C) models.

                                      Traditional Providers are best placed to pivot into Digital Content
                                      Providers (DCPs). This new breed of business aims to serve content it has
                                      acquired or produced across a wide array of different digital channels,
                                      including OTT and IP distribution. Sometimes DCPs will offer content
                                      directly to consumers; in other cases, they will provide services through
                                      collaborations with DCAs. Netflix is a high-profile example of a D2C DCP,
                                      as an OTT provider that exploits content rights through subscription
                                      services. Not all traditional Providers will be able to adopt a D2C model
                                      of this kind, as it requires significant global scale to drive growth and
                                      profitability. Instead, these Providers will need to work out how to
                                      collaborate effectively with DCAs to deliver content.

                                      From traditional Aggregators to
                                      Digital Content Aggregators (DCAs)
                                      Traditional Aggregators consolidate content from multiple Providers and
                                      serve it to consumers, providing them with a broader content proposition
                                      through subscription services. Cable companies, such as Comcast in the
                                      US, own networks that market, sell and fulfill video services to consumers.
                                      They own the customer relationship, packaging and bundling Providers,
                                      and rely on audience scale in negotiations with Providers to create a
                                      profitable subscription business.

                                      But a new generation of Digital Content Aggregators (DCAs) is being
                                      born. In Europe and elsewhere, telcos are increasingly becoming digital
                                      video aggregation platforms. BT now competes with Sky and Virgin Media
                                      in the UK, providing broadband, phone, TV and now mobile packages.
                                      They deliver content through their broadband network without the
                                      same number of carriage agreements, enabling FTA and OTT networks
                                      through the YouView platform.

6   | Bringing TV To Life, Issue VI
FIGURE 3 | Tomorrow’s transformed digital video industry value chain—a virtuous circle
Source: Accenture
                 Distribution rights                                                                       Channels                                           Channel bundle + experience

While a simplified view
                   Rightsof the relationship between traditional
                         fees                                    Providers
                                                             Carriage fees and Aggregators may look Subscription
                                                                                                    like this: fees
Creators                                                                         Programmers                                         Operators                                                                           Audience

                    Distribution rights                                                                    Channels                                            Channel bundle + experience

                       Rights fees                                                                       Carriage fees                                                         Subscription fees
Creators                                                                         Programmers                                         Operators                                                                            Audience

…the relationship between DCPs and DCAs, with supporting capabilities, could evolve into something like this:

                                                                                                                                         Da
                                                                                                                                           ta,
                                                                                                                                               pla
                                                                                                                                                  tfo
                                                                                                                                                     rm

                                                                                                                                                        an
                                                                                                                                                          dn
                                                                                                                                                            etw
                                                                                                                                           Da
                                                                                               DCPs                                          ta,

                                                                                                                                                               ork
                                                                                                                                                 pla

                                                                                                                                                                  -dr
                                                                                                                                                    tfo
                                                                                                                                                       rm

                                                                                                                                                                     iven
                                                                      Digital Content Providers
                                                                                                                  DCAs

                                                                                                                                                                          an

                                                                                                                                                                          serv
                                                                                                                                                                            dn
                                                                                       Evolved capabilities:       Digital Content Aggregators

                                                                                                                                                                              ices
                                                                                                                                                                               etw
                                                                                               DCPs

                                                                                                                                                                                  ork
                                                                Integrated multi-channel engagement

                                                                                                                                                                                     -dr
                                                                                                                   Evolved capabilities:

                                                                                                                                                                                        iven
                                                                        Digital  Content Providers
                                                                          Multi-business-model platforms
                                                                                                                   DCAs
                                                                                                                   Distribution products and services

                                                                                                                                                                                             serv
Creators                                                                                                                                                                                                                 Audience
                                                            Multi-distributionEvolved
                                                                               product development
                                                                                       capabilities:               Digital Content
                                                                                                                                 quality ofAggregators

                                                                                                                                                                                                 ices
                                                                                                                   Multi-channel            service/experience
                                                                   Segmentation-informed curation
                                                              Integrated multi-channel engagement
                                                                                                                   Content-
                                                                                                                   Evolved and subscriber-optimization services
                                                                                                                            capabilities:
                                                                          Direct marketing (content)
                                                                     Multi-business-model platforms
                                                                                                                   Cross-DCP care services
Creators                                                         Multi-channel content repurposing                 Distribution products and services                                                                     Audience
                                                             Multi-distribution product development
                                                                                                                   Package and ad targeting
                                                                                                                   Multi-channel quality of service/experience
                            Con

                                                               Digital ad- and content-optimization
                                                                    Segmentation-informed curation
                             Aud

                                                                                                                   Direct marketing enablement
                               ten

                                                                           Interactive and innovative              Content- and subscriber-optimization services
                                 ien

                                   t, b

                                                                           Direct marketing (content)
                                                                                                                   Content optimization enablement
                                     ce

                                                                                  content experience               Cross-DCP care services
                                       ran
                                         an

                                                                 Multi-channel content repurposing
                                          de
                                           d v ont

                                                                                                                   Cross-DCP targeting
                                             xp

                                                                                                                   Package and ad targeting
                                              iew ent,

                                                                  en
                                                er
                                                 C

                                                                 Digital
                                                                     ce ad- and content-optimization
                                                  i
                                                   ers
                                                    Aud

                                                              p        ,p                                              Direct marketing enablement
                                                      hi

                                                                me        rod
                                                                              ucInteractive   and innovative
                                                         ien

                                                                  as             ts a
                                                                    ure                                                Content optimization enablement
                                                            ce

                                                                                     nd content experience
                                                             b

                                                                         me
                                                              ran

                                                                            nt,          cura
                                                                an

                                                                                              tio
                                                                 de

                                                                                 dat              n
                                                                  dv

                                                                                    a an                               Cross-DCP targeting
                                                                   x
                                                                    iew

                                                                     p

                                                                   en                    alyti
                                                                      er

                                                                      ce                       cs, bil
                                                                        i

                                                                                                      ling, and customer support
                                                                         ers

                                                               p        ,p
                                                                            hi

                                                                 me        rod
                                                                   as         uct
                                                                      ure          sa
                                                                         me           nd
                                                                             nt,          cura
                                                                                               tion
                                                                                 datConsequently,
DCPs are transforming the role of                                                    a an                   the role of traditional                 DCPs and DCAs have the most to win—
                                                                                          alyti
traditional Providers by becoming                              more                 Aggregators cs, bil is also changing as     rt DCAs             and the most to lose—in this changing
                                                                                                       ling, and customer suppo
digitally enabled organizations. They are                                              focus more on providing the data and                          environment. Industry moves suggest
using their creative abilities as curators                                             platforms, such as media distribution                         increasing flexibility in business models,
to forge engaging and interactive                                                      and targeting services, that DCPs need to                     as companies innovate to discover their
experiences around the content they                                                    engage with audiences directly. Figure 3                      optimum position in the new value chain.
supply. Some DCPs with the requisite                                                   illustrates how the evolution of Providers
scale will be able to adopt direct-to-                                                 into DCPs and Aggregators into DCAs is
consumer (D2C) models, but others                                                      reshaping the industry value chain.
will need to collaborate with DCAs to
meet consumer demand for content.

                                                                                                                                                                                                        Bringing TV To Life, Issue VI |   7
FIGURE 4 | Comparison of expenses of a Traditional Content Aggregator (Comcast Cable)
Comcast Cable: Expenses as a percentage of video revenue. Source: Accenture analysis, company data
        Traditional Content Aggregator (Comcast Cable): Expenses as a percentage of video revenue

         Programming                                                      Technical &                              Advertising,          Other
                                                                          Product of
        Traditional Content Aggregator (Comcast Cable): Expenses as a percentage  Support
                                                                                     video revenue                 Marketing &
                                                                                                                   Promotions
         Programming
          44%                                                              Technical
                                                                            26%      &                             Advertising,
                                                                                                                    14%                  Other
                                                                                                                                          15%
2013                                                                       Product Support                         Marketing &
                                                                                                                   Promotions
          47%                                                                     27%                                     15%                     11%
2014      44%                                                               26%                                     14%                  15%
2013      49%                                                                       27%                                      16%                        8%
2015      47%                                                                     27%                                     15%                     11%
2014
      49%                                                                           27%                                      16%                        8%
2015 Digital Content Provider (Netflix): Expenses as a percentage of revenue
FIGURE 4B | Comparison of expenses of a Digital Content Provider (Netflix)
         Cost of Revenues                                                                                             Technology & Marketing          General &
Netflix: Expenses as a percentage of revenue. Source: Accenture analysis, company data
      Digital Content Provider (Netflix): Expenses as a percentage of revenue                                          Development                     Administrative
                                                                                                                                                             Other
         Cost
          71%of Revenues                                                                                              Technology
                                                                                                                       9%        & Marketing
                                                                                                                                   11%                General
                                                                                                                                                       4% 5%  &
2013                                                                                                                  Development                     Administrative
          68%                                                                                                    9%            11%               5%   7%Other
2014      71%                                                                                                       9%             11%              4% 5%
2013      68%                                                                                                    10%            12%                6%    3%
2015      68%                                                                                                    9%            11%               5%   7%
2014
          68%                                                                                                    10%              12%              6%          3%
2015

Traditional content aggregators face rising            In a digitally disrupted ecosystem,                     SLING TELEVISION
programming costs, as they have little                 traditional Providers fret about the                    From Aggregator to DCA
flexibility with channels and bundling. In             power of aggregators and their own
contrast, DCPs can manage programming                  increased distance from their audiences.                Some aggregators are starting the
costs by leveraging data and analytics,                Traditional Aggregators, meanwhile,                     transition to a DCA model. DISH, with
allowing them to have relatively                       face stiff competition and need to court                its Sling TV offering, is an example of
significant content propositions without               a range of Providers to appeal to fickle                an aggregator moving in this direction.
requiring participation in an aggregated               consumers. Both traditional Providers                   Sling TV is targeted at millennials and
service/product bundle. In addition,                   and Aggregators are responding by                       consumers who don’t have a pay TV
increases in technical and product support             experimenting with new business models                  subscription. Launched in 2015, in its
costs are a common feature of traditional              and, in some cases, moving towards                      first year it acquired around 500,000
content aggregators—for example,                       a DCP or DCA model:                                     subscribers.4
Comcast still need to bear expensive
infrastructure and technical support cost              DirecTV                                                 NOW TV
for the number of devices and associated
                                                       Aggregator consolidation                                From Aggregator to D2C DCP
services they offer the market. DCPs
                                                                                                               Some Aggregators are looking for
such as Netflix can, on the other hand,                Merger and acquisition activity has been
                                                                                                               different ways to leverage their content
help reduce content delivery costs by                  driven by traditional Aggregators wanting
                                                                                                               relationships to attack the OTT market
optimizing delivery across different                   to grow their subscriber base, helping
                                                                                                               and capture a new audience. An example
channels and devices, leveraging purely                them to diversify offerings and drive
                                                                                                               is Sky’s D2C Now TV service, which
cloud technologies for infrastructure, and             up ARPU. A recent example in the US
                                                                                                               acquires rights and acts as a DCP, while
by digitalizing their support model, mainly            is AT&T’s $49-billion acquisition of
                                                                                                               its parent, Sky, continues to operate as
through the use of innovative software.                DirecTV.2 In March 2016 AT&T
                                                                                                               a traditional Aggregator.
This allows technology budgets to be                   announced it would be launching
primarily reserved for continued software              three digital-only streaming services,
development and less for infrastructure                which don’t require an annual contract,                 HBO NOW
(Figure 4).                                            a satellite dish or set-top box.3                       The rush to OTT
                                                                                                               Traditional Providers are beginning to
2 New York Times. “F.C.C. Approves AT&T-DirecTV Deal.” Retrieved March 2016.                                   expand their OTT offerings into direct-
http://www.nytimes.com/2015/07/25/business/media/fcc-approves-att-directv-deal.html?_r=0
                                                                                                               to-consumer (D2C) services. HBO Now,
3 Wired. “AT&T Will Let You Get Cable TV Without Having Cable—Or a TV.” Retrieved March 2016.
http://www.wired.com/2016/03/att-will-let-get-cable-tv-without-cable-tv/                                       Showtime, CBS All Access and Hotstar
4 Advertising Age. “Dish Remakes Sling TV App to Vie With Hulu, Netflix in On-Demand”. Retrieved March 2016.   are examples of stand-alone streaming
http://adage.com/article/special-report-consumer-electronics-show/dish-tweaks-sling-tv-app-vie-hulu-netflix-   services that were launched in 2015.
demand/302013/

8   | Bringing TV To Life, Issue VI
Meanwhile, digital natives are also                    AMAZON PRIME                                           means many are exploring D2C OTT
assessing how best to position them-                   From DCP to DCA                                        propositions, though more as lateral
selves—whether as a DCP or a DCA—                                                                             than primary strategic moves.
in the industry’s shifting value chain:                Amazon launched a new initiative
                                                       called “Streaming Partners Program”                    For DCAs, the growth of IP and OTT
                                                       that allows Prime members to add
YOUTUBE RED                                                                                                   services has increased consumer choice,
                                                       subscription programming to their                      meaning they now need to relate to two
From DCA to DCP                                        Prime video service. For instance, users               customers: their users and the DCPs they
Google’s move into subscription video on               can add video content from Starz and                   support. Some have now created D2C
demand (SVOD) is an ad-free subscription               Showtime to their membership for                       Provider propositions, even though these
service in the US, launched in October                 an additional monthly fee.7                            may cannibalize their pay TV business.
2015.5 It’s YouTube’s first significant
move to becoming a rights holder.                      Staying ahead                                          Whatever the strategy adopted by each
                                                       of disruption                                          business, it’s clear the pivot requires
NETFLIX                                                                                                       investment. This could be in content
From DCP to global DCP                                 Traditional Providers still need to grow               creation or acquisition, building new
                                                       audience scale by working with as many                 capabilities and services or optimizing
Netflix recently announced expansion                   traditional Aggregators as possible;                   distribution costs with an eye on quality
into 130 countries, bringing their total               exclusive vertical integration with a single           of experience. The collaboration between
reach to 190 countries.6 The firm already              Aggregator without global scale has rarely             DCAs and DCPs is key. Although some
has more than 69 million subscribers in                proved to be a winning strategy. And the               companies will diversify, testing both
more than 50 countries.                                pressure to own the consumer relationship              DCA and DCP roles, ultimately each must
                                                       (and, consequently, subscription revenues)             decide which type(s) of business they
                                                       as digital becomes ever more important,                intend to operate and start building for
                                                                                                              success now.

5 YouTube. “Meet YouTube Red, the ultimate YouTube experience.” Retrieved March 2016.
http://youtube-global.blogspot.co.uk/2015/10/red.html
6 TechCrunch. “Netflix Launches In 130 New Countries, Including India But Not China.” Retrieved March 2016.
http://techcrunch.com/2016/01/06/netflix-finally-goes-global/
7 Re/code. “Amazon Starts Building Its Own Bundle by Selling Showtime, Starz and More With Amazon Prime.”
Retrieved March 2016. http://recode.net/2015/12/08/amazon-starts-building-its-own-bundle-by-selling-show-
time-starz-and-more-with-amazon-prime/

                                                                                                                               Bringing TV To Life, Issue VI |   9
An accelerating wave of disruption is transforming both
                                       the traditional and digital video industry. Conventional
                                       business models are under pressure, squeezed by shifting
                                       customer expectations and competition from digital rivals.
                                       Traditional Content Providers and Aggregators will need to
                                       adopt new business models to capture growth, protect
                                       market share and boost profits

 New business models
 for the digital video
                                                            DCPs
 industry
                                                             Digital Content Providers
                                           serve content across many different digital channels, either directly to
                                           consumers or through collaborations with Digital Content Aggregators.

                                        1. WORK TOGETHER WITH PLATFORMS               2. MOVE FAST High-performing DCPs
                                        AND DEVICES                                   must be able to rapidly test new
                                        A DCP’s ability to scale audiences and grow   consumer experiences and business
                                        profitability may depend on its success in    models so that they can respond
                                        building mutually beneficial relationships    with agility.
                                        with DCAs.

                                         3. STAY CLOSE TO THE CUSTOMER                4. GET NOTICED DCPs need to use
                                         One-to-one relationships between             new techniques—in content and brand
Five key strategies                      business and consumer are most likely        marketing, and curation—to build brands
                                         to return future revenues, so DCPs may       with a personality and positioning that
to become a Digital                      decide to diversify into multiple models     customers understand.
Content Provider (DCP)                   (D2C, TVE, marketing only), to serve the
                                         consumer and promote loyalty. This
                                         requires new capabilities (including an
                                         understanding of identity) that neither
                                         have traditionally needed to optimize
                                         their business.                              5. SUPPORT MULTIPLE BUSINESS
                                                                                      MODELS Given the accelerated
                                                                                      segmentation of digital consumer
                                                                                      behaviors and the importance of scale
                                                                                      to their business model, DCPs need to
                                                                                      be able to launch different propositions
                                                                                      using a shared platform. This allows
                                                                                      them to efficiently exploit their content
                                                                                      investments while maintaining their
                                                                                      editorial voice, helping them to acquire
                                                                                      viewers and sustain consumer loyalty in a
                                                                                      manner that is both agile and consistent.

10   | Bringing TV To Life, Issue VI
DCAs
                       Digital Content Aggregators
        are digital video aggregation services that focus on supplying the                      New business models
        data and platforms that DCPs need to engage audiences, while                            for the digital video
        providing a consolidated offering to consumers.                                         industry

1. ALLOW CONTENT TO REMAIN KING                  2. SCALE UP TO SUCCEED A large viewer
Content is still the most decisive factor in a   base and footprint attract content providers
customer’s choice of provider. A unique and      and enhance a DCA’s ability to segment its
relevant content line-up will remain an          customers accurately and deliver more
important source of competitive advantage.       relevant user experiences.
Creating the perception of endless content
to multiple different segments of diverse
interests will be the key to optimizing new
consumer bundles.
                                                 4. ACCELERATE NEW DIGITAL
                                                 CAPABILITIES TO SUPPORT THE
                                                 ECOSYSTEM A DCA needs to be an enabler
3. DIFFERENTIATE THROUGH QUALITY                 for DCPs looking to engage customers
                                                 directly—creating a platform for innovation
OF SERVICE AND EXPERIENCE
                                                 not only in technology but also in content
Quality of service and experience are vital
                                                 curation and editorial. Tighter cooperation    Seven key strategies
differentiators: the better a DCA performs,
                                                 can maximize value for both partners,
the more interest it can attract from content                                                   to become a Digital
                                                 avoiding duplicated costs and efforts.
owners and DCPs.
                                                                                                Content Aggregator
                                                                                                (DCA)
5. AGGREGATE INSIGHTS DCAs are in                6. LEVERAGE THE LIVING ROOM
a unique position to understand customer         ADVANTAGE Through their ownership of
behavior. They can use these insights to         consumer premises equipment (CPE), most
improve their services and to provide a          DCAs hold a clear advantage in the battle
value-add to DCPs looking to learn more          for the living room. But leading DCAs need
about their customers.                           to find distinctive new offerings to set
                                                 themselves apart from the crowd.

7. BUILD TRUST By fostering consumer trust
and serving consumers wherever they are,
DCAs can become the preferred route for
customers to access digital services, putting
themselves at the heart of an ecosystem of
providers.

                                                                                                Bringing TV To Life, Issue VI |   11
Digital Content Providers
(DCPs)
Pressure is growing on broadcasters and other
traditional Providers in the digital video industry.
Traditional business models are being squeezed by the
dual threat of declining audiences (as more viewers
become cord cutters) and the migration of advertising
spend to online. At a time when shareholders are
expecting growth, this is creating challenges, forcing
Providers to adopt innovative strategies and explore
new areas to forge growth.

Accenture’s analysis suggests that          Typically, access to market is through       Becoming a direct-
traditional Providers can potentially       syndication deals with platforms (both
benefit from considering two (not           broadcast and digital). The extent to        to-consumer business
mutually exclusive) strategic options,      which platforms intermediate between         This strategy is most suited to DCPs who
which can help their transformation         the DCP and customer varies, with            already have access to a digital consumer
into Digital Content Providers (DCPs):      two models prevailing:                       base and offer a broad range of curated
                                                                                         content. To benefit from a direct-to-
Integration with                            Digital business-to-business                 consumer (D2C) strategy at scale, a
                                            (B2B) model is a straightforward             DCP will need to acquire, maintain and
Digital Content                             content-supply and revenue approach.         monetize the customer relationship.
Aggregators (DCAs)                          The DCP gains little insight about the       Digital product development capabilities,
                                            end-consumer but does not need to            with competitive speed to market, will
Most traditional Providers are focusing
                                            invest in the infrastructure required        be required to keep pace with content
on this strategy, and it’s a particularly
                                            for industrialized digital business-to-      platforms. Enhanced curation tools will
appropriate path for brands with specific
                                            consumer (B2C) capabilities. This is         help to generate customer loyalty. If
compelling content, niche output or
                                            effectively moving more towards a            successful, a DCP will potentially benefit
an ambition to address a variety of
                                            studio model where content portfolio         from a diversified business with a direct
geographic markets without significant
                                            management becomes more important            relationship with its customer base, a
marketing spend. The potential benefits
                                            than digital consumer engagement.            possible income stream from subscrip-
spring from the rapid growth and scale
                                                                                         tions, and an enhanced ability to segment
derived from access to large digital
                                            Digital business-to-business-                audiences to maximize advertising
audiences, which unlocks increased
                                            to-consumer (B2B2C) model                    revenue. But that is a pretty big “if.”
revenues through advertising services
and shared subscription fees.               offers a more sophisticated approach
                                            where the Digital Content Aggregator         Building on these two strategic options,
                                            (DCA) acts as a platform but does not        we have identified several themes for
                                            wholly divorce the DCP from its end-         traditional Providers to focus on as
                                            consumer, allowing the DCP to partially      they look to transform their business
                                            own that relationship. This is a less        (Figure 5). For each of these themes,
                                            conventional relationship because it gives   we highlight strategic tools that Providers
                                            the DCP some control of the consumer’s       can employ to overcome the challenges
                                            experience of the content coupled with       they face in these areas, helping them
                                            an understanding of consumer identity        move towards a DCP model.
                                            (e.g., shared authentication)—both of
                                            which have not been typically granted
                                            on traditional platforms.

12   | Bringing TV To Life, Issue VI
FIGURE 5 | Strategic options for Providers looking to transform into DCPs
Source: Accenture

                            Traditional Content                                                             New DCP
                            Provider Capabilities                     Challenges                            Capabilities Required

                              •   Multi-platform planning             •   Reaching audiences cross-           •   Integrated multi-channel
                              •   Multi-platform format creation          device and platform                     engagement and scheduling
PROGRAMMING                                                           •   Retaining the brand’s               •   Multi-distribution product
& PLANNING                    •   Linear scheduling and programming
                                                                          hallmarks                               development
                              •   VOD catalog planning and
                                  management                          •   Managing customer                   •   Segmentation-informed curation
                                                                          relationship across platform            and commissioning
                                                                                                              •   Digital content optimization

                              •   Content financial and budget        •   Managing rights and entitle-        •   Multi-business-model platforms
                              •   Market screening and sourcing           ments across platforms and          •   Multi-channel content
RIGHTS                                                                    devices                                 repurposing and supply chain
MANAGEMENT                    •   Distribution and licensing
                                                                      •   Supporting mixed business
                              •   Content performance and analytics       models to increase average
                                                                          revenue per user

                              •   Content acquisition and quality     •   Supplying and managing              •   Multi-business-model platforms
                                  control                                 multiple content and metadata       •   Multi-channel content
CONTENT                                                                   variants
                              •   Content management                                                              repurposing and supply chain
PROCESSING                                                            •   Support curation and
                              •   Archive management
                                                                          recommendation tools
                              •   Content processing

                              •   Broadcast playout and control       •   Delivering quality multi-           •   Multi-business-model platforms
                                  Service delivery                        platform experiences                    Multi-channel content
CONTENT &                     •                                                                               •
                                                                      •   Protecting rights across a              repurposing and supply chain
SERVICE DELIVERY              •   Real-time content management
                                                                          multi-platform environment
                              •   Content protection

                              •   Resource planning                   •   Commissioning effective             • Segmentation-informed curation
                              •   News production                         content with good return              and commissioning
CONTENT                                                                   on investment
                                  Program and promotion production                                            • Interactive and innovative content
PRODUCTION                    •
                                                                      •   Engaging audiences with               experience
                              •   Sport and live event production         compelling propositions

                              •   Branding and digital marketing      •   Personalizing offerings             •   Integrated multi-channel engage-
                              •   Digital sales                       •   Maintaining one-on-one                  ment and scheduling
CUSTOMER
                                  Digital customer service                customer relationships              •   Multi-business-model platforms
PROPOSITIONS                  •

                              •   Customer experience design          •   Rapidly iterating products          •   Multi-distribution product
                                                                      •   Retaining customers with                development
                              •   Customer and audience analytics
                                                                          engaging products                   •   Segmentation-informed curation
                              •   Social interaction                                                              and commissioning
                                                                                                              •   Interactive and innovative content
                                                                                                                  experience

                              •   Marketing and commercial offers     •   Delivering scale propositions       •   Direct marketing (content) to drive
                                  Multimedia ad sales and billing         cost-effectively across digital         scale
ADVERTISING                   •
                                                                          and linear
                              •   Traditional ad operations                                                   •   Digital ad optimization
                                                                      •   Managing commercial customer
                              •   Digital ad operations                   relationships and optimizing
                                                                          inventory

                                                                                                                         Bringing TV To Life, Issue VI |   13
1                   Work together with platforms
                    and devices
A DCP’s ability to scale audiences and grow profitability
depends in part on their success in building beneficial
relationships with DCAs.
A major difficulty for DCPs when they       bring consistency of look and feel to the    propositions. A flexible platform to
engage with DCAs is a lack of control       programming they are promoting, while        support them concurrently may be
over how users experience their content.    also significantly reducing costs, through   required.
DCPs need to find ways to control how       the effective use of application program-
their brands appear to the end-customer,    ming interfaces (APIs) and software          Data sharing. DCPs currently receive
surface and promote suitable content,       development kits (SDKs). Automation tools    limited data or even a limited understand-
analyze their success, and collaborate      can help DCPs monitor “real world” usage,    ing of identity from DCAs—often it’s only
with the platform and other tenants. DCPs   measure performance and evaluate             performance data that is shared. Our
should boost their firepower by adding      consumer experience.                         analysis suggests that considerable value
capabilities such as “integrated multi-                                                  could be created if DCAs shared data or
channel engagement & scheduling” while      Marketing and advertising. DCPs              most likely data services more widely with
maximizing their return on investment       will need to shift their marketing focus     DCPs—changing the nature of their
through “digital content optimization.”     from just one output channel and liaise      relationship. DCPs could leverage insights
                                            with aggregators over the way their          from this data to identify, for instance,
We highlight three particularly important
                                            content is marketed—in terms of both         which audience niches are underserved
areas for DCPs to focus on:
                                            direct content marketing and broader         or over-performing, while exploring new
                                            awareness marketing. This may compel         channels, content types and audience-
User experience and                         DCPs to adjust their operating models to     sHowever, tools to facilitate business
engagement. DCAs own the user               resolve clashes in their marketing focus,    services powered by shared data are
experience and sometimes determine the
                                            schedules and windows between their          few and far between, and we believe
technical quality of service. DCPs can
                                            D2C, DCA partners, and broadcast             that strengthening this relationship is
                                                                                         a sizeable business opportunity to
                                                                                         be explored.

2                    Move fast
Shareholders want to see rapid growth. To maximize
its revenues, a DCP will need to acquire customers
rapidly—and keep them.

Delivering a consistently high-quality      Relying on continual iterations of legacy    to build modular, scalable cloud
product at speed and at scale is hard.      technology delivery platforms is a risky     architectures based on a micro-services
High-performing DCPs must be able to        strategy. These legacy systems often         philosophy. This allows appropriate
test new consumer experiences, business     spread their tentacles deeply through        technologies to be used for each feature,
models and marketing messaging so they      an organization, causing integration         while providing the ability to rapidly scale
can respond and adapt in an agile and       problems and inefficient product             and deploy new capabilities—and support
timely manner. Because this flexibility     development wherever they surface.           a wide array of different business models
and agility will be vital for DCPs as       The challenge is to deliver an               both locally and globally without
new market opportunities open, they         appropriately sized new platform with        significant capital expenditures. These
will need to be able to create “multi-      capabilities to support the business         technologies touch—and can even
business-model platforms’ supported by      as it develops, but not to waste money       transform—the entire approach to serving
‘multi-distribution product development.”   through pre-emptive over-specification.      the audience. Ultimately, they can unify
                                                                                         an organization into a single, efficient
                                            Cloud-based systems can support              operation for managing content,
                                            rapid growth in this way. Increasingly,      customers and advertisers, as well
                                            Accenture is seeing clients choosing         as the interactions between all three.

14   | Bringing TV To Life, Issue VI
3               Get noticed
Building a business requires visibility and differentiation.
Neither are simple to achieve in the digital economy.
Successful DCPs need to build brands            Marketing efforts by DCPs will need to        Brand marketing and curation.
that stand out, with a personality and          be focused on two parallel streams:           Consumers appreciate a trusted guide,
positioning that customers understand.                                                        and the way that content is curated can
                                                Content marketing. Consumers                  tip the balance between success and
The journey to building a loyal audience        today face a bewilderingly vast choice        failure. For D2C DCPs seeking to attract
begins with getting noticed, which              of content. To stand out, DCPs must           an audience who will return frequently,
requires stronger capabilities in digital       restructure their capabilities to promote     curation can be a vital means of
marketing and branding. The production of       consistent engagement across digital          differentiation. Fundamentally, this
original content can kick-start this process,   channels. Planning and promotion-             represents a transition away from
by attracting the creative talent that is       management tools must be deployed             traditional scheduling capabilities to a
needed to establish an attention-grabbing       to support the brand and schedule the         model where the selection and promotion
marketing platform. That said, building         release of content, creating a coordinated    of material is focused on driving consistent
capabilities such as “direct marketing to       content-marketing strategy across outlets     engagement. To make this transition
drive scale” and “segmentation-informed         and social media, deployed at the pace        successfully, DCPs will need to develop
curation & commissioning” will also be          consumers expect. Metadata is becoming        a number of important capabilities.
critical to maximizing reach, optimizing        increasingly important to personalized        These include:
revenue and, ultimately, remaining viable       content marketing. A successful business
in the B2C game.                                will drive revenues by marketing the same     •   Creating tools to lower the supply-
                                                piece of content with different “feel” to a       chain costs of curation: for example,
                                                variety of audience segments. This is not         by facilitating content browsing and
                                                entirely foreign as traditional Providers         supporting horizontal catalogues to aid
                                                have created different promotions for             serendipitous research, thus reducing
                                                their programming to different segments           costs.
                                                on linear TV. Finally, businesses need        •   Improving content packaging and
                                                a feedback loop. For many traditional             catalog planning: providing the right
                                                Providers this will be a fundamentally            metadata and catalogue-management
                                                new capability: a business horizontal             tools allows a curator’s personality to
                                                that can capture individual usage data            burst through to the consumer.
                                                and generate insights to drive new
                                                revenues, by reviewing the effectiveness      •   Testing and refining strategies: KPIs
                                                of marketing activities.                          must be consistently measured, so
                                                                                                  that the effectiveness of curation in
                                                                                                  driving engagement can be accurately
                                                                                                  evaluated.

                                                                                                                 Bringing TV To Life, Issue VI |   15
4                    Stay close to the customer
It’s increasingly clear that services based on one-to-
one relationships between business and consumer are
best placed to return future revenues.

For a DCP this can mean diversifying into    relationship management challenges of          resulting in a horizontal business
a D2C model to boost scale and reach,        acquiring and then retaining potentially       capability that can support marketing,
enhancing its ability to monetize assets.    millions of customers in one go. This          sales, loyalty and churn management,
In those D2C models, DCPs will need          presents two specific challenges:              to directly boost revenues.
evolved capabilities including “digital
content optimization” and “interactive       Subscription customers demand                  Managing this transition will be a
and innovative content experience,”          a high quality of service, measured            fundamental change for organizations
as they strive to increase loyalty while     in both technical and human terms.             unused to direct marketing to individuals.
balancing their portfolio of content         There is a new billing relationship to be      They will need to identify an individual
investments.                                 established, customer-lifecycle and churn      customer’s specific needs and match a
                                             management becomes important, and the          proposition to them, without appearing
For many traditional Providers, this
                                             requisite direct marketing skills are rarely   “creepy.” Faced with a mountain of data,
move—from a broadcasting to a retail
                                             present in a DCP’s marketing department.       DCPs must be able to link up the cross-
model—is the most radical change in
                                                                                            device activity of individuals, analyze it
their history. Digital technologies have
                                                                                            at the level of an individual consumer,
made this an affordable ambition, and        Handling vast volumes of
                                                                                            derive insights and feed initiatives
most DCPs have little legacy in this         customer data will become a crucial            that can influence their KPIs around
area to act as a brake. However, few are     requirement for businesses dealing
                                                                                            engagement or monetization (e.g.
already equipped to handle the customer      directly with millions of users. Investment
                                                                                            direct marketing campaigns).
                                             in a data platform will be needed,

5                   Support multiple business models
Shareholders want to see rapid growth. To maximize its
revenues, a DCP will need to acquire customers rapidly—
and keep them.
Given the accelerated segmentation           In some markets, the DCP’s ability to
of digital consumer behaviors and the        leverage similar services effectively to
importance of scale to their business        support product development and related
model, DCPs need to be able to launch        business services will be used purely as a
different propositions using a shared        marketing channel; in others it will be as
platform. This allows them to efficiently    a full-blown D2C offering. In either case,
exploit their content investments while      being able to quickly launch, test, adjust
maintaining their editorial voice, helping   and scale new business models will
them to acquire viewers and sustain          become a critical capability in the digital
consumer loyalty in a manner that is         B2C game.
both agile and consistent.

16   | Bringing TV To Life, Issue VI
Becoming a Digital Content Provider
(DCP)
Revolutionary change to your business and operating
model can appear a daunting prospect. Here we outline
some pragmatic, short-term steps that traditional
Providers can take to being the transformation of their
businesses.

As the popularity of digital and IP-distributed video
increases, traditional Providers will need to assess how
to evolve their business models to capture revenue
growth. This may not entail an immediate interruption
to the business but certain activities will need to be
reconsidered in preparation for what will most likely be
a significant disruption. Traditional Providers need to
take some important first steps to becoming DCPs:

Move from one-way to two-way                  Have a clear “digital-first”                 Evolve relationships with
conversations with consumers.                 strategy.                                    traditional and Digital Content
Many Providers, especially traditional        Many Providers continue to rely on the
                                                                                           Aggregators (DCAs).
broadcasters, are accustomed to one-way       traditional part of their business to feed   The business and operating relationship
communication with their customers. They      premium content to their digital channels.   between traditional Providers and
take audience measurement into account,       “Digital first” would change this: the       Aggregators has evolved very little,
but primarily through conventional means,     DCP’s digital capabilities such as content   despite rapidly changing consumer
such as “overnights” or focus groups.         capture, supply chain, metadata manage-      behavior. Carriage agreements require very
Traditional Providers need to become DCPs     ment and editorial would be primed to        little digital integration between Providers
and collect data from digital channels        transform at the ‘speed of internet’ and     and Aggregators, other than cooperating
that allows the organization to respond       feed all traditional and digital channels.   on TV Everywhere models, which are
to consumer specific needs. If collected      This is especially important as DCPs will    widely seen as a defensive rather than
and analyzed at scale, this data could give   potentially need to use these channels       revenue-growing strategy. In today’s
insights into new audience segments,          for multiple business models in an agile     digitally disrupted video industry, DCPs
transforming traditional scheduling as        manner. DCPs should be looking to            could benefit hugely from the capabilities
much as digital marketing. “Horizontal”       support these capabilities with cloud-       of DCAs, including consumer relationships,
business capabilities need to be put in       based technologies, as cloud providers       usage and quality of experience data, and
place to bridge the gap between the           are investing heavily in video storage,      service channels. DCPs should determine
traditional and digital parts of the          transport, encoding and distribution.        how DCAs could complement their digital
organization.                                 This results in the fact that, to remain     agenda and include these requests
                                              relevant in B2C, DCPs will need to           when renewing carriage agreements or
                                              transform into media technology              content deals.
                                              companies who value highly efficient
                                              software development as much as
                                              compelling content production.
                                              Traditional Providers who do not move
                                              now will find themselves responding
                                              much more slowly to consumer demand
                                              than the rest of the market.
                                                                                                             Bringing TV To Life, Issue VI | 17
Digital Content Aggregators
(DCAs)
In a continually evolving digital video landscape,
traditional Aggregators need to act fast to fend off
the ever-growing threat of content owners and Digital
Content Providers (DCPs) going direct to the consumer.
Aggregators also need to quickly establish their position
as a Digital Content Aggregator (DCA) in the industry’s
shifting value chain, identifying how best to leverage
their assets to maximize market share.

A DCA must operate on two fronts,           A healthy relationship                  With these two crucial relationships in
with its potential success dependent on                                             mind, Accenture has identified a number
the health of two critical relationships:   with consumers.                         of strategies that a traditional Aggregator
                                            DCAs must build on their enviable       with ambitions to become a DCA can
A strong alliance                           position as owners of the customer      adopt. Figure 6 sets out some of the
                                                                                    options that Aggregators have to evolve
                                            relationship, to become the single
with DCPs.                                  interface for consumers, offering an    their business and ensure their continued
Beyond negotiating carriage agreements      array of additional content and         success in a fast-changing market.
to bring compelling content packages        services that keep pace with viewers’
to consumers, the DCA must create           ever-changing tastes.
additional value for the DCP, to better
cement its position in the value chain.
The DCP should come to see the DCA
as an enabling collaborator rather than
a potential competitor.

18   | Bringing TV To Life, Issue VI
FIGURE 6 | Strategic options for Aggregators looking to transform into DCAs
Source: Accenture

                            Traditional Content                                                             New DCA
                            Aggregator Capabilities                    Challenges                           Capabilities Required

                              •   Customer service                     •   Increased customer               •   Distribution products and services
                              •   Customer experience design               segmentation                     •   Data-driven package and
SALES &
                                  Customer / audience analytics        •   Simple consumer product              ad targeting
MARKETING                     •
                                                                           offerings with complex
                                  Social interaction                                                        •   Digital package optimization
                              •                                            constructs
                                                                                                            •   Cross-DCP care services
                                                                       •   Increased competition from
                                                                           digital service providers        •   Multi-channel quality of service /
                                                                                                                experience

                              •   Content financial and budget         •   Balance between customer         •   Content and subscriber
                                  Distribution and licensing               demand and ecosystem                 optimization services
OFFERING                      •
                                                                           commercials
MANAGEMENT                    •   Content performance and analytics                                         •   Data-driven package and ad
                                                                       •   Skinny bundles economics             targeting
                                                                           while maintaining breadth        •   Content optimization enablement
                                                                           of content offerings
                                                                                                            •   Cross-DCP targeting
                                                                       •   Optimizing packages with
                                                                           content inflation

                              •   Service delivery                     •   Importance of coherent           •   Distribution products and services
                                  Content protection                       multi-platform distribution          Data-driven direct marketing
SERVICE DELIVERY/             •                                                                             •
                                                                       •   Effective partner ecosystem          enablement
NETWORK                       •   Distributor enablement
                                                                           management                       •   Multi-channel quality of service
                                                                       •   QoS / QoE across a number of         and experience
                                                                           different devices and services   •   Content and subscriber
                                                                                                                optimization services

                              •   Marketing and commercial offers      •   Cost pressures on advertising    •   Data-driven package and ad
                              •   Multimedia ad sales and billing          without measurement                  targeting
AD SALES/
                                  Traditional ad operations            •   Provider vs Aggregator revenue   •   Data-driven direct marketing
AD ENABLEMENT                 •
                                                                           share imbalance                      enablement
                              •   Digital ad operations
                                                                                                            •   Targeted and dynamic ad services
                                                                                                            •   Cross-DCP targeting

                              •   Application and infrastructure ops   •   Multi-service and multi-         •   Multi-channel quality of service/
                                  Network engineering and                  platform management                  experience
SERVICE                       •
                                  operations                           •   Ubiquitous network               •   Content and subscriber optimization
MANAGEMENT                                                                 management                           services
OPERATIONS                    •   Service monitoring
                              •   Field force                          •   Disconnect across service        •   Cross-DCP care services
                                                                           offerings                        •   DevOps-driven platform
                                                                       •   QoS / QoE across a number of         development models
                                                                           different devices and services

                                                                                                                       Bringing TV To Life, Issue VI |   19
1                   Allow content to remain king
Content is still the most decisive factor in a customer’s
choice of provider. Consequently, the quality and
relevance of a DCA’s content will continue to be key to
its success. A content line-up that sets its offering apart
from that of rivals will remain an important source of
competitive advantage.
Strong content propositions will depend     By building a “content and subscriber      bundles will depend on the DCA’s ability
on the DCA establishing broader content     optimization” capability, DCAs can also    to create profitable, contractually
collaborations with multi-channel           experiment with how content is packaged    permitted bundles and market them at
networks (MCNs) and services such as        and presented to consumers. Extending      an attractive price to viewers, while not
Netflix. As consumption trends continue     and repackaging traditional content        cannibalizing its higher-ARPU customers.
to diversify, becoming the gateway that     bundles with niche content from a broad    The speed and flexibility of digital does,
brings a wide range of content together     variety of sources, to create new—and      however, give the DCA the opportunity
in a consistent, easy-to-use experience     previously unrealizable—skinny bundles,    to rapidly launch, test and evolve new
will attract and engage customers.          has now become an almost inevitable        packages, boosting its chances of hitting
                                            option. The success of these skinny        upon a successful product.

2                   Scale up to succeed
Scale is critical for aggregators and underpins both
advertising- and subscription-based business models.
A large viewer base attracts content providers and enhances
a DCA’s ability to segment its customers accurately and
deliver more relevant content and user experiences.
The ability to measure and manage           Building a new audience. An                Service bundling. DCAs have
this scale of engagement will unlock        effective way for a DCA to gain scale      significant opportunities to expand
capabilities such as “data-driven package   is to expand beyond the footprint of its   through service bundling. Amazon is
and ad targeting” and “data-driven direct   physical infrastructure. Sky’s Now TV,     achieving substantial growth through
marketing enablement.”                      which we highlighted earlier as an         bundling additional services at a
                                            example of a D2C DCP launched by an        competitive price point. By offering a
Both traditional Aggregators and DCAs       Aggregator, demonstrates how this          subscription that bundles SVOD, shipping
face a clear and present threat from        approach can attract new and different     and music services, Amazon is setting the
super platforms, whose unrivalled scale     audiences, including millennials and       benchmark for what a future DCA could
and agility enables them to accelerate      cord-cutters, while managing the impact    look like. For service bundling to be a
product innovation and reduce time to       of churn on their traditional business.    success, DCAs will need to evolve to
market. In response, a DCA will need                                                   support increased innovation, reduced
to resolutely defend its position as                                                   time to market and the ability to explore
the preferred route to the consumer.                                                   new initiatives in parallel.
Investing in infrastructure will play an
important role, but a DCA should consider
two further growth opportunities as part
of its strategy:

20   | Bringing TV To Life, Issue VI
You can also read
Next slide ... Cancel