At least three of Europe’s major cable operators have confirmed that they are in the ‘super-aggregation’ business, with a strategy to onboard/integrate popular SVOD (and indeed other OTT) services to ensure their customers have the widest choice of content available through a single platform – namely their set-top box and user interface. Vodafone Germany, which incorporates what used to be Kabel Deutschland, already onboards Maxdome and Netflix and Manuel Cubero, the company’s Chief Commercial Officer, told Cable Congress delegates this week: “We will continue to add more. We want to bring them all in. It is a commercial strategy.”
He added: “We see ourselves as aggregators of SVOD services as well as TV channels. Twenty years ago we were an aggregator of channels and increasingly we are becoming an aggregator of SVOD. With GigaTV [Vodafone’s next-generation gateway/STB platform] we try to offer an integrated product; we have the public and private broadcasters, the pay channels and SVOD.”
Virgin Media was one of the first cable operators anywhere to sign an onboarding agreement with Netflix, which was later expanded across the Liberty Global footprint in a landmark deal. Tom Mockridge, CEO at Virgin Media, confirmed that the company views itself as an SVOD aggregator, although he ruled out a deal with Amazon, apparently on the grounds that they are competitive. “Amazon is a terrific business but fundamentally they are a retailer and we are a retail business.”
[We interpret this as a reference to the fact that whereas most Pay TV providers now view Netflix as a channel business, Amazon has a strategy to become a platform. Amazon Prime looks like classic SVOD but Amazon Channels is an aggregation play. We have reported previously how one analyst firm, Ampere Analysis, views the different strategies at the U.S. giants. And at any private gathering of platform and channel owners today, Amazon is flagged as being potentially the biggest competitor].
Pedro Bandeira, Head of Product Development at the Portuguese cable operator NOS, said his company’s strategy is to aggregate SVOD offers, too. “The Internet players are our new best friends,” he told the Cable Congress audience. He wants deals with the popular SVOD services in the near future, equating them to the subscription TV channels (and cable networks) that came before.
“They are a new generation of TV channels, so we need to have them in our package. Our value is as an aggregator, so we need to add them as another layer to the experience, using common search and recommendation, within our user interface. If I want to see a movie I should not have to care if it is in Netflix or in Amazon Prime.”
Tony Hanway, CEO at Virgin Media Ireland, revealed that in his territory Netflix is now the third most watched ‘channel’ on the programme guide after the state broadcaster (RTE) and commercial broadcaster TV3. “Netflix is a relatively close third and the rest of the channels fall off after that,” he explained.
The experience in Ireland is that people are still watching plenty of (traditional) television. “Customers always want news, sport and local content, which they do not get on Netflix,” Hanway said. “They are complementary, and we have not seen cannibalisation [of viewing from the rest of the bouquet].” That would suggest that overall viewing is up. Hanway does not expect Netflix to start competing in any meaningful way with news, sport and local Irish content, either.
Virgin Media Ireland cannot be complacent about the impact on other channels on its platform, since it owns some itself – the TV3 channels TV3 (the second largest channel in the country), 3e and be3. Less eyeballs for them would mean less ad revenue.
Liberty Global in general is pursuing an advanced ad-tech strategy that will include addressable TV – and in Ireland (and the UK) the company will cooperate with Sky to enable AdSmart on its set-top boxes. Liberty Global is also building a data insights business that will have broadcasters as key customers. These are two potentially important revenue streams and they both rely on a healthy TV ecosystem on the platform, so the judgement that Netflix is good for the platform carries additional weight.
Besides, people are going to watch Netflix anyway, as Hanway pointed out. He described a country that is the youngest in Europe and has a high adoption rate for new technologies. Irish people devour UK and American content and a “huge percentage” of customers are already signed-up for Netflix, he said. “You cannot ignore that and plough on regardless, so we made it a channel.”
While Virgin Media has integrated Netflix onto its platform and into the UI, it has not added the service to its own bills. Hanway is reticent about this extra degree of integration, wary of ‘bill shock’. “You have to be careful about boosting the size of your bill. I am happy that we should host the service and bill separately.”
Tim Degenhardt, CEO at Tele Columbus, takes a different view. The German cable operator has onboarded Maxdome, the SVOD service from ProSiebensat.1 Media, and the service is integrated into its channel bundles and also onto the Tele Columbus bill. Existing customers can add Maxdome as a stand-alone item and new customers can take a package called ‘HD maxdome plus’ that bundles Maxdome with 22 HD television channels.
Degenhardt inferred that he would want at least one of these options (integrated billing or bundling) to add more operator value to a Netflix onboarding exercise. “It needs to go beyond an integration into the EPG – I am not sure that [technical and UI integration only] is the way to go,” he said.
[Degenhardt previously worked at the Swiss IPTV provider Sunrise Communications, which offers Netflix but does not add it to the bill – so he has experience of both approaches].
What Tele Columbus has done with Maxdome is a precedent for what Sky UK wants to achieve with its recently announced Netflix onboarding partnership – the creation of a new subscription pack that contains the SVOD service (and existing Pay TV content) and the option for customers to have Netflix on the Sky bill. You can read more about the Sky/Netflix plans here. This is a first-of-its-kind deal (of billing plus bundling) involving Netflix.
Degenhardt echoed the general sentiments of other Cable Congress speakers on the principle of onboarding. “I think it is necessary for TV platforms to integrate content very easily. For operators of our size the trick is to have an open infrastructure so you can add extra services, and we have that.”
Manuel Cubero at Vodafone Germany was pushed to reveal the commercial terms when you onboard Netflix or other SVOD companies. He said they are similar to the deals with channel owners – meaning money passes hands for carriage on a per-subscriber basis. “There is nothing new about the commercial arrangements,” he said. The extent to which any viewing data is shared (anonymously, with all the usual privacy caveats) varies on a case-by-case basis.
Photo courtesy of Netflix.