Home Analysis How Pay TV can counter the aggregation ambitions of CE device makers

How Pay TV can counter the aggregation ambitions of CE device makers

CE device makers are credible candidates to become the default UX/aggregator that consumers use every day, according to a recent Videonet webcast poll. Here, we take a look at the strengths Pay TV operators can draw upon to guarantee that consumer attention stays on them. Device strategies, especially when tied to multiplay provision, featured heavily in a webcast discussion that also addressed the role of content.

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CE device makers, and notably Smart TV providers, are credible competitors to Pay TV operators in the battle to be the aggregator of premium television. That was the conclusion from last week’s Videonet webcast on ‘Winning the aggregation battle’ – based on the views of panellists and the result of a live audience poll.

Mary Ann Halford, Partner at Altman Solon (one of the world’s largest global strategy consulting firms with an exclusive focus on the Telecoms, Media, and Technology sectors), said: “I believe they [CE device makers] are becoming the new gatekeepers”, although she pointed out that Pay TV operators can compete in the CE market too – with Sky Glass  an example of a Pay TV operator as a Smart TV maker.

“The race is definitely on,” declared Joe Nilsson, Chief Commercial Officer at SportsTribal, a FAST specialising in Tier-Two sports with 40+ channels spanning billiards and motor sports to combat sports. He pointed to the ambition of “flag-bearers” like Samsung and LG, “who have their own OS and aggregate in two ways: their direct content product in the form of Samsung TV Plus and LG Channels, and aggregation of the TV market via apps.”

Halford highlighted a key strength of Smart TV makers: collecting ACR (automatic content recognition) data, and advanced advertising. “They are all building their own ad sales capabilities and leveraging this data,” she pointed out.

ACR uses fingerprinting to understand what a household is watching at pixel/glass level, which means that content from any external HDMI source (like a Pay TV set-top box) as well as from Smart TV curated services is covered. ACR also monitors content whether it is broadcast or streamed. That is a powerful tool when it comes to showing what a household watches and what advertising they have been exposed to.

Picking up on a potential weakness of CE device makers as aggregators, Nilsson questioned the extent to which they can harness exclusive content like sports to drive usage. Will a sports fan buy a particular television set if their favourite sport or competition was exclusive to that device maker?

The live audience also thought CE device makers are credible competitors for the role of primary TV aggregator in the entertainment home. Here are their answers to this question:

Who is best placed to be the default content aggregation and discovery UX that people return to again and again, every day (thinking about the time period 2023-2026)?

  • Pay TV operators, 45%
  • CE platforms (e.g., Smart TV makers), 25%
  • Studio D2C, BVOD or AVOD apps providers, 13%
  • Dedicated independent apps that aggregate streaming services or deep-link to content, 17%

So, how do Pay TV operators differentiate themselves from CE device makers in the battle for aggregation? You can read some of the non-exclusive qualities that will determine success or failure in our previous story, here.

But asked to focus on strengths that clearly favour Pay TV providers, Halford pointed to convenience as key, and that means multiscreen availability of the aggregated service, and portable viewing. Nilsson pointed to multiplay provision – the ability to tie aggregation to broadband and mobile services.

Brigita Brjuhhanov, TV Product Owner/Team Lead at Elisa, which launched an Android TV based next-generation TV platform called Elamus in Estonia last August, highlighted how multiplay provision helps Pay TV compete with streaming services that curate content (albeit in smaller ‘bouquets’). She noted that consumers are used to seeing Pay TV brands advertised on bus stops, and people have used their cellular services for 20 years and have deep trust in the brand, whereas some streaming services are brand new to a market.

This webcast considered the extent to which Pay TV device strategies can help operators maintain their relevance – and maybe even grow their market – for content aggregation. Sky Glass is a great example of innovative thinking, with the Sky-designed (and retailed) Smart TVs marketed on the basis of sophisticated hardware at a good price, available in monthly instalments (or a single payment) to homes that may not have satellite dishes (as it is a streaming-only television set) with a flexible subscription TV contract on the side.

“More Pay TV providers are starting to embrace Smart TVs as the fulcrum of the viewing experience,” according to Tim Pearson, Vice President, Solution Marketing at NAGRA (a long-time specialist in Pay TV and multiplatform TV provision, UX, business analytics and content protection, among other things). He was referring to the virtualised set-top box (‘operator-as-an app’ or ‘direct-to-TV’) model where the Pay TV operator functionality is built into the television set itself (thus removing the need for an operator STB).

NAGRA has a product called TVkey Cloud that supports this model by embedding the security anchors for content protection into the television set silicon (which has to be in partnership with a Smart TV maker – in this case with Samsung). This is designed for Pay TV operators ready to work with a CE partner, and enables marketing partnerships whereby the Pay TV offer is available out-of-the-box (as an automatic app launch) when someone plugs in their new Smart TV at home.

Sky has taken the concept another step forward, by becoming the CE partner for itself – designing and retailing its own television set (Sky Glass).

With more CE brands (beyond the original TV manufacturers) getting into the Smart TV OS business (e.g., Fire TV OS from Amazon and Roku TV from Roku), there is surely a growing danger that Pay TV operators could find themselves sitting behind a compelling UX-with-content offer from television set makers. Although Sky never says so explicitly, Sky Glass is a way for them to ensure their UX and content offer is always the first thing anyone sees in a Sky Glass home.

Sky cannot be relegated to second UX status on a Sky Glass television set – and that probably explains why another European Pay TV heavyweight, Deutsche Telekom, “is tracking this proposition to see if it makes sense,” – as revealed at Connected TV World Summit in May.

Still focusing on the impact of device strategy on the aggregation future, Pearson pointed to the growing sophistication of television sets and their operating systems in general, but also to the ongoing importance of set-top boxes, including how Android TV Operator Tier based STBs have proved their ability to boost a Pay TV operator’s position as a content aggregator (thanks to super-aggregation and content discovery features).

Brjuhhanov at Elisa noted that it is harder for Pay TV operators in smaller markets to onboard popular streaming services, due to market scale, and they may have to wait in turn while global streamers launch elsewhere. Elisa opted for an Android TV approach for its Elamus platform partly to ensure competitive onboarding. “Android TV has given lots of us more freedom and opportunities for aggregation, with more apps connected,” she pointed out (speaking on behalf of smaller Pay TV providers).

Halford pointed to the new Comcast/Charter Communications joint-venture in the U.S. for the nationwide availability of the Flex streaming device (and OS) as another example of how Pay TV providers can carve out new aggregation opportunities.

Comcast launched Xfinity Flex in March 2019 as a 4K streaming-only box (and OS/UX) to its Internet-only customers – that is the chunk of Comcast homes that are not taking a traditional Pay TV package from them. And there lies the opportunity: for Pay TV providers to stay in front of cord-cutters and remain their primary UX and aggregator for entertainment, even if it is a non-traditional bundle.

From that, new content distribution possibilities flow, too. Comcast bundled the Peacock streaming service (which it owns) with Flex at no extra cost. And most recently another of its owned streaming services, the free ad-supported Xumo, has been integrated into the Flex offer.

Then in April this year Charter joined Comcast in a joint-venture (contributing $900m to the cause) to expand the Flex OS/UX/app store/content offering into something more – a platform that can expand beyond Comcast homes via deals with hardware makers (and retailers). So, from 2023 when Charter starts to offer this product, Flex (however branded) will “compete at scale with established national platforms,” in the words of Tom Rutledge, Chairman and CEO at Charter.

It is worth pointing out that Flex is part of the same Global Technology Platform that the Comcast/Sky group has built and which also underpins Comcast’s Xfinity X1 set-top boxes, Sky Q and Sky Glass – and also X Class TV, an OS that Comcast makes available to third-party television makers in the U.S. (with Hisense as the launch partner). The plan for the Flex JV is that Comcast and Charter will both sell X Class TV sets directly or via retail, as well.

In short, [these] Pay TV providers have dived into the cord-cutter market to become the aggregators of non-Pay TV (but broadband) homes. As Halford points out: “They are seeing people cut the cord and seeking out content a la carte on Samsung TV, Roku and Amazon Fire, and they are trying to provide something [in that market segment] with the robust features of Pay TV navigation and discovery.”

Given the importance of apps onboarding, content partnership relations are as important as ever, and these were next on the webcast agenda. Is there any way that an aggregator can set themselves apart from others when looking to attract streaming services to their platform? Nilsson outlined what mattered to him.

“Addressable reach for the app is the primary driver – so how many of those devices [that the app is being integrated with] are in the market and also connected to the Internet. That’s the first question you ask yourself: ‘Is the juice worth the squeeze’, especially when there is a unique OS [that you have to develop/manage the app for].

“There is a commercial element,” Nilsson adds. “And we look for an alignment of our free offering alongside their paid propositions [so are they a good complement].”

Then there is ‘share of voice’: how many apps there are on the platform. Discoverability is also key, with Nilsson keen on the deep metadata integration that allows SportsTribal to automatically surface content from its app.

During the webcast, the audience were asked what they think are the key value-adds an aggregator must offer to content partners. Here is the full question and the results of the poll….

Beyond ‘carriage’, what are the most important value-adds a content aggregator (e.g. Pay TV/CE device maker) can give to a streaming content service? You can choose up to four items from the list. 

  • Content discovery & content promotion (surfacing, visibility, prominence), 58%
  • Attractive packaging (including in bundles, maybe with ongoing bundled discounting), 53%
  • Unique audience reach (including co-marketing & promotional discounts), 47%
  • Sharing of viewing behaviour insights, 42%
  • Favourable onboarding/carriage business model (e.g., revenue share), 32%
  • Credit/billing/account management functions, 26%
  • Single sign-on, 26%
  • Advertising (sales house) representation (where ad-supported), 21%

Content was also part of this discussion – namely the extent to which you need original, exclusive or local content to win the battle for aggregation. For Brjuhhanov, content is still key if you want to differentiate as an aggregator. “It is mandatory to have original content to separate you from others, but you must only focus on high-quality originals,” she declared.

The Elisa executive believes Pay TV operators can compete with global streamers for attention by ensuring the best content is available in local languages, with subtitles and audio description, and her advice is to partner with the local (national) broadcasters to create original content. She agreed there may be an opportunity to harness broadcaster library content on a platform and help to promote it.

For Halford, sport is the glue that keeps the diminished number of American Pay TV subscribers on-platform, and it remains the bedrock for Pay TV subscriber retention (and acquisition). “Sports is a flag in the ground for Pay TV providers to acquire new users,” Joe Nilsson added. “That means the fight at the top [for Tier-One sports rights] is pretty intense.”

Local and hyper-local is an opportunity for Pay TV to differentiate itself, now that streaming has reduced the barriers to entry for live productions, according to Pearson. This is a strategy employed by several NAGRA Pay TV customers in the U.S.

Sports is an obvious candidate for hyper-localisation. “Some of the regional operators we work with see this as an opportunity to differentiate their services and add a whole new category of content,” Pearson explained. Hyper-local could mean city-level stretching to regional or even State-level in the U.S. “It depends on the size of the audience for the content [i.e., how widely you have to spread the content offer to reach a viable minimum audience],” he explained.

This is part of a two-piece report, and you can read about the other key webcast insights here, including:

  • The importance of content discovery, packaging and promotion in the battle to be primary aggregator
  • How the total content offer on a platform can be expanded using apps onboarding
  • The value of multi-genre and multi-demo diversity via the apps partnerships, when super-aggregating
  • Value-adds that leverage trust and brand relevance, like carrier billing.

Watch the webcast itself on-demand.


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