Home Analysis Pay TV market becoming more segmented; service providers can take advantage

Pay TV market becoming more segmented; service providers can take advantage

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We have now reached an inflection point in the Pay TV industry where OTT delivery and connected devices are opening the way for more granular segmentation of the viewing population, according to what they are willing to pay and what their interests are. Simon Trudelle, Senior Product Marketing Director at NAGRA (which provides a portfolio of OTT platform, multiscreen and content security solutions) told the OTT TV World Summit on Wednesday that there is an opportunity for service providers to overcome existing technology and distribution ‘constraints’ to market existing and new content, especially to younger consumers.

 â€œThis segmentation is becoming a broad reality and it is probably time for every service provider in Europe and the rest of the world to join the fray and launch [OTT] services and monetize new consumers and new experiences,” he declared. Sometimes this means going off-net. It definitely means creating more targeted content bundles and presenting them to consumers who are movie-centric or sports-centric, and so on. “This does mean a change in the business strategy,” he acknowledged. “There are a number of threats emerging for Pay TV but also an opportunity if you look at this from the right angle, and with the right technology and partners.

“We are seeing a paradigm shift on the marketing side,” he continued. “We used to sell Pay TV as a big bundle with one or two content options, but generally we wanted to sell the whole package. Now there is an opportunity to aim more precisely at a given market segment.” He pointed out that segmentation of the television pay market is already a reality, thanks to OTT, and Pay TV operators must now embrace this fact and start chasing younger consumers in particular. “You should aim to capture these customers and then make them life-long customers,” he told the London audience.

This strategy is about growing revenues and Trudelle predicted: “As the [Pay TV OTT] experience gets better, prices will go up and the new services will become a real and important contribution to the bottom line for service providers.”

He pointed to the direct-to-consumer efforts of HBO, CBS and Sony as evidence that we have reached the tipping point for monetizing OTT delivery, driven partly by the fact that younger consumers are device-agnostic. While acknowledging the continued importance of traditional TV experiences, he argued that we are about to see a big change in the television kingdom, driven by U.S. consumers yet certain to spread to all major world markets. 

Trudelle gave some examples of Pay TV operators who are already making their content available online (and in a multiscreen setting)  in order to extend their reach or address more defined market segments, including Be TV Go from VOO, the Belgian cable operator, which makes live and on-demand content available on different screens and has packages for the more sports-orientated viewer or the more movie-focused consumer. “They are showing how it is easier to create specific packages with specific content.”

The Yomvi service from Canal+ in Spain was also cited. Launched in 2011 as a multiscreen offer to accompany a traditional Pay TV offer (TV Everywhere) but then extended in 2012 as a direct-to-consumer offer (with discrete subscriptions), the service includes Yomvi Play (EUR 6 per month), Yomvi Family (EUR 10) and Yomvi League including premium football (EUR 18). Trudelle pointed out that by creating this standalone online service, Canal+ has also given itself new distribution partnership opportunities, with its Vodafone Spain partnership as an example. 

“With Yomvi, Canal+ has created specific bundles [OTT] at specific price points as a way to segment the market,” Trudelle pointed out. 

Speaking separately, Alice Mascia, VP Strategy at Sky Deutschland, provided perhaps the best illustration yet of how a major Pay TV operator is segmenting its market opportunities using online distribution. Her company soft-launched Sky Online at the end of October, which can be compared to NOW TV from BSkyB in the UK – a ‘Pay TV Light’ offer with a mix of general entertainment, movies and sports. The promotional PR video (the service is not being advertised to German consumers yet) has the strapline: ‘Sky Online for Generation Sky’.

‘Generation Sky’ is a notable phrase. The Pay TV operator is acknowledging that there is a new generation of viewer that wants to access content differently, they are embracing this and, in effect, trying to take ownership of new consumer trends and present themselves as the enablers of it. It is classic marketing. Mascia declared: “This is a new product in our portfolio, just launched, and it will allow us to reach new target groups – those using connected devices.”

Mascia provided a graph illustrating how Sky Deutschland has now segmented the potential population of viewers in Germany (and Austria) according to the breadth of the service they want and the flexibility they expect in terms of contract commitments. Sky television is the classic full-flavour Pay TV offer, available over satellite and through cable and IPTV, coming with a set-top box and a minimum 12 month contract. This is accompanied by the ‘Sky Go’ TV Everywhere offer.

Sky Online offers less breadth and more flexibility. You sacrifice DVR and the remote control of course, but you still get access to what Mascia considers is the best 80% of the Pay TV content. The more content genres you like, the more economic sense it makes to take a full Pay TV package of course, but like other Pay TV Light packages, Sky Online lets you cherry-pick genres, like sport, so may appeal to more narrow interests. Viewers only have to commit to content one month at a time. “When you think that we have put 80% of our normal Pay TV content and made it available with a one month contract rather than a 24 month contract, that is a big step for us,” she emphasized.

Meanwhile the Snap! service from Sky Deutschland offers less breadth but even more flexibility. This is an SVOD library with 5,000 titles including box-sets – an alternative to Netflix. There is no linear streaming, but you can sign up for EUR 3.99 a month, or EUR 6.99 if you want to download content or view it on two devices at the same time. 

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