Jakob BÃ¸gh SÃ¸rensen, Head of OTT at TDC Consumer, the telco/cable/mobile organisation that includes Denmarkâ€™s incumbent cable operator YouSee, has summed up the threats and opportunities that OTT present to traditional Pay TV operators. Speaking at Digital Home World Summit on Wednesday he admitted that Netflix could hurt YouSee VOD revenues or lead to other forms of â€˜cord-shavingâ€™ (people cutting back on their TV packages) and maybe even cord-cutting. But at the same time, OTT has just gone mainstream in Denmark and the expected demise of video rental stores means there is a good addressable market for the new YouBio OTT subscription and transactional VOD service that TDC/YouSee launched in January. The company set a target of 50% OTT VOD market share for this service and BÃ¸gh SÃ¸rensen told the London conference that they hoped to hit 60%, matching their dominance in telephony and broadband. It is early days for YouBio, though, and he admitted that uptake is nowhere near this yet.
BÃ¸gh SÃ¸rensen acknowledged that Netflix is making a huge splash in Denmark and the simultaneous arrival of HBO Nordic is also helping to drive interest in OTT services. The company has a dual strategy to deal with this competition: add value to the core YouSee service (to ensure customer loyalty) while also exploiting the decline in physical home entertainment (Blu-ray, DVD). YouBio, which is a standalone, pure-play OTT service available to anyone (so separate to bundled TV Everywhere) is designed to fulfill this second requirement. The company characterizes it as a subscription VOD service supplemented with transactional content (it has partnered with C More for the on-demand catalogue).
â€œLast year these kinds of OTT services were for early adopters but this year we it has become mainstream, and next year my parents will be looking for a new solution for movie viewing because their rental store will be gone,â€ BÃ¸gh SÃ¸rensen said. â€œWe have to think what happens when our parents move to this model, in terms of both sales and the content offer.â€
TDC/YouSee expected the technology to be the biggest challenge when launching YouBio but it turned out to be the easiest of three big issues that had to be addressed. Content was the second most difficult. The company has been surprised to learn that marketing is the hardest part of a pure-play OTT service for an incumbent telco/cable operator.
â€œWe are still grasping the right way to communicate. Coming from a cable and telco background you are used to selling really sticky products. Once you sell a broadband subscription consumers do not change it next month but with an OTT service they might,â€ BÃ¸gh SÃ¸rensen said. â€œSo you have a continuous sales pitch, constantly working on customers, and that is not something we are geared up for. Marketing is the place where we are weakest.â€
One of the big marketing challenges is explaining to YouBio customers what is included in the package, including what falls within the monthly subscription and which content requires an additional purchase. â€œWith subscription music services you expect everything to be available and services compete on price and user interfaces. With SVOD you have to describe to customers what is different from competitors; you need to find a way to carve up your content and tell customers what they will find. It is very difficult.
â€œWhen it comes to [on-demand] content, most of what we know, we know from TV and cinema so if you bring in an American show that has not been on Danish TV, nobody will know it and you have to establish its brand. That is really difficult too. As a content distributor you need muscle to create a new property, or otherwise decide to work with established properties.â€
In terms of the content offer, BÃ¸gh SÃ¸rensen noted the importance of local content and the need to cater for binge viewing. â€œIt is really important that you have full seasons, so you need a vast selection of content. A single season of â€˜Friendsâ€™ is not good enough; customers want to be able to watch all the episodes. So you need to know your target customer and what sector you are going for.â€
Multi-screen device availability is a given but putting OTT services onto television sets is massive problem, BÃ¸gh SÃ¸rensen said. He pointed to the fragmented development environment for connected TV devices, the complex DRM implementations and the need to redevelop apps year-on-year, even with the same brand of television. This has limited the television partnerships for YouBio. â€œWe do not have the clout that Netflix does when it comes to getting on the Xbox or Sony PlayStation so we had to make some easy picks for Smart TV.â€
In parallel, the company introduced its own hybrid DVB/OTT set-top box (built by Net Gem) that gives access to YouBio. DTC/YouSee is well aware that first movers, and perhaps most people, would rather avoid another box in their house, but this provides a one-stop solution in terms of apps development but also for customers, who can avoid buying a new TV or a game console for example. BÃ¸gh SÃ¸rensen believes older consumers like his parents, who will join the OTT market next year, will appreciate the simplicity of a box that gives them the movies they currently get from Blockbuster.
When it comes to technology, video quality is important. BÃ¸gh SÃ¸rensen said consumers understand and accept variable bit rates in the Internet environment but they do expect that where they have a good broadband connection, OTT viewing should be perfect and match the quality of broadcast TV. The company encodes its streaming video in up to 8Mbps. To cope with bandwidth demands the operator has built its own CDN.