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Wooing the Video Customers of Tomorrow

Alan Breznick
3/25/2019
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How can cable operators attract and retain tomorrow's video consumers? Good question.

For the past few decades, cable and other pay-TV providers have defined their target customers as those who are situated ‘on plant,’ love video content and will sign up for multiple services in a bundle. This made perfect sense because consumers have historically shopped for service providers by considering the video offering first and foremost and then purchasing a multi-product bundle upon further consideration.

But, as we all know, the times are changing, and awfully fast. As video packages from various providers have become more or less indistinguishable from each other (basic + expanded + premium + sports), consumers are increasingly shopping for service providers based on other key considerations, such as value, convenience and brand perception.

Plus, as high-speed broadband service has become more and more important to consumers, it has increasingly become the anchor of the typical cable bundle. At the same time, legacy pay-TV service has become more and more expensive, making it a less compelling option for consumers, especially as far more affordable, and equally entertaining, SVoD options have proliferated over the past couple of years.

As a result, progressive cable operators are increasingly marketing to consumers and acquiring customers by promoting broadband features first, or at least the stickier features of broadband. Witness today any given Xfinity TV commercial from Comcast talking about home WiFi, IoT and parental controls (and no longer voice remotes or DVRs).

But focusing on such broadband features is not nearly enough. Cable operators must also re-imagine their business models and revise their attitudes towards customers to keep up with fast-changing consumer tastes. Among other things, that means continuing to focus on video because of its great stickiness, just in a different, more innovative way than before, and reaching unserved/under-served markets with video offers that have high value because of their content, convenience and pricing model.

Indeed, as study after study has shown, most consumers still view video as critical to their home entertainment experience. According to Cisco's latest Visual Networking Index (VNI) forecast, for instance, video will account for 82% of all Internet traffic by 2022 and thereby remain a huge driver for broadband service. So, if operators think that they can de-prioritize video, they have another think coming.

The fact is that consumers still want to be entertained with video. But they want their video experience to be different than it's been before. Most importantly, they want the viewing experience to be simple and straightforward. Unfortunately, traditional pay-TV does not offer the choice and flexibility of the newer OTT services. But those OTT services are highly fragmented and consumers find that subscribing to a bunch of services, searching for shows and navigating that content is not so simple or straightforward either.

Further, consumers want all their desired video content to be available in just one single place, no matter whether it's delivered by broadcast, cable, satellite or streaming technologies. In a recent PwC study, for example, 50% of respondents said they wanted all their video content to be offered in one unified platform.

Consumers also want to make a single monthly payment for all their pay-TV services, just as they are used to doing with cable. They don't want the hassle of having to pay multiple bills to multiple video providers at multiple times -- with multiple user names and passwords.

In other words, tomorrow's consumers will be looking for simple, easily searchable and personalized viewing experiences anywhere, everywhere and all in one place. The video providers who can master that challenge will be the ones that survive and thrive in the brave new world of nearly unlimited TV choice, control and convenience.

So how can cablecos make this critical shift to supreme video aggregators? First, operators must look at the various market segments they're seeking to serve. According to a recent MIPTV study, these segments consist of:

    Content Connoisseurs -- Young and wealthy, they value convenient/on-demand content but are likely to churn

    TV Traditionalists -- Middle-aged and middle income, they tend to love sports

    Super Spenders -- Like linear TV programming

    Broadcast Bingers -- Price-conscious consumers

    Digitally Detached -- Older viewers less likely to churn

In their drive to serve these different segments, operators have to look at when to leverage their existing assets and when to make new investments. They must look at the costs and complexities of operating and innovating on multiple overlay platforms, as well as at the risk of making large new investments with a long "time to revenue" in a very fast-changing environment. They need to develop and offer new business models -- suited to target segments. And operators need a solution that permits them to efficiently serve all market segments and innovate for all these segments in a highly cost-efficient manner with low business risk.

Pay-TV operators need to fully embrace the innovations of digital to drive this strategy. That means offering: video services with flexible cost/content mixes that provide real value to consumers; sign-up models that are fast and frictionless; and delivery models using STBs, apps on media players/Smart TVs or mobile. Equally importantly, they need to know and understand their customers, so they can act on data to create the video offers, react to feedback and make the video offering more and more personal and targeted.

One option that is becoming very attractive to cable operators is to leverage a TVaaS offer. This offer can provide access to all the digital capabilities they need with fast time to revenue (60-90 days) and very low business risk because the upfront costs are minimal. Plus, the costs scale with revenue in a predictable manner and with a well-funded partner.

This blog is sponsored by Espial.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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