As OTT and direct-to-consumer models alter the power structure of the video industry, operators – particularly smaller ones – can remain relevant in the media value chain by serving as the trusted aggregator and subscription-enabler, and by serving as a critical supplier of local content.
Traditionally, operators have been very successful at being the gatekeepers to the consumers. Either from a purely technical perspective, providing network and devices, or from a customer relationship perspective, being the sole entity with a billing relationship with the consumer. The symbiotic partnership between media companies and operators has, over the past 40-50 years, given rise to one of the most interesting and dynamic industries.
OTT is fundamentally changing the power structure in the industry. Media companies can go directly to consumers, and while most of the profitability still lies with the operators, supplying high-speed Internet connections, whether fixed or mobile, it is clear that the overall industry growth resides with the media services. We're seeing some of the larger operators acquiring content or media companies to try to tap into this growth, and also finding new ways of exploiting their market position, but this strategy is challenging to execute and it's clearly not suitable for small and mid-sized operators.
While there are operators who will focus on the core part of being an operator, which is to provide the best quality infrastructure and service delivery, in this article I will discuss the ways an operator can remain relevant in the media value chain. I see several alternative ways for smaller operators to stay relevant in the future. Choosing one of them, or a combination of them can lead to success.
1. Being the trusted aggregator
Media consumption has changed dramatically over the last decade, much more so than with pretty much any other consumer industry. When change happens this fast, consumers don't have time to gradually adjust and the result is often confused consumers. With so many different video services to choose from, it is increasingly difficult to navigate the media landscape. Consumers are challenged with choosing the right service and in many cases are subscribed to multiple video services, with multiple billing relationships. This is a very fragmented approach and consumers are looking for a better way to aggregate all of that in one place.
The operator, as a well-known trusted entity for consumers, is in prime position to offer unbiased advice and ensure a quality assurance of the vast plethora of new media services on the market.
2. Being the trusted subscription enabler
Data privacy and cyber security are becoming ever more important. According to a recent survey by YouGov, only 9% of global consumers say that they trust tech companies with their personal data. Meanwhile, according to McKinsey, 87% of consumers wouldn't deal with a company if they had concerns about its security practices. With high-profile data breaches happening regularly, that trust is at risk for many companies. Operators, however, have gained a great deal of trust having been securely managing consumer data for decades.
It's reasonable to assume that operators are better positioned to scale with increased requirements from regulators and consumers. This trust is a competitive edge which operators can use both to help media companies as well as providing a long-term opportunity of learning more about consumers, which will benefit both monetization as well as product development.
It is of course more challenging for smaller operators to be able to invest in this area, but I believe we'll see interesting partnerships between data vendors and partner groups of smaller operators to enable an infrastructure which is scalable and future proof.
3. Being the local provider and enabler of content
Smaller operators are normally only small in a national or an international context. They're normally a well-known brand locally, where market shares tend to be quite sizable. Some operators are as small as a single city or town, whereas a national operator in a small country of less than a million inhabitants would function in the same way. Regardless, it's clear that compared to the international giants, that local knowledge and presence is a unique asset.
In this day and age, with Netflix, HBO and Disney being disruptive in most media markets, it's easy to forget that the media market is inherently local. Language, local relevance and local tastes will all play a factor here, and a smaller operator will be much better positioned to tailor an offering to that local audience. That said, a local offering today will also need to be complemented with international media, and it's also likely that consumer tastes will evolve quite rapidly over the coming years. A nimble operator who knows its customer will be able to run circles around the larger operators with their more standardized offerings.
At Accedo, we strongly believe that the operator has multiple important roles to play in the media industry, even if ownership of media companies isn't necessarily one of them. I, for one, am excited about a new era of media consumption being delivered into the hands of consumers everywhere in the world.
— Michael Lantz, CEO, Accedo