The aggregator model has taken centre-stage at BT, leveraging its existing capabilities instead of trying to beat the content industry at its own game.
Under Gavin Patterson, BT tried to do something which almost looked impossible. It attempted to disrupt the content industry by not only owning the delivery model for content, but the content itself. It attempted to muscle into an established segment and compete with companies which were built for the content world. It was expensive, complicated and messy, and it failed spectacularly.
BT has not given up on content under new leadership, but it is taking a seemingly more pragmatic and strategic approach. Aside from its own content, Now TV will also be embedded in the BT interface, meaning that customers can now watch, pause, rewind and record premium Sky Entertainment and Sky Sports content. Customers will also be able to integrate Amazon Prime Video and Netflix onto their BT bill, while each element of the bundle can be scaled-up or -down month-by-month.
It is making best use of its assets, and it looks to be a comprehensive and sensible pillar of the convergence strategy.
“Life doesn’t stand still from month to month, so we don’t believe our customers’ TV should either. Our new range of TV packs bring together the best premium services, fully loaded with a wide range of award-winning shows, the best live sports in stunning 4K and the latest must-see films – all with the flexibility to change packs every month – with quick and easy search to find what you want to watch,” said Marc Allera, CEO of BT’s Consumer division.
BT will ‘own’ some content, it still has the UEFA Champions League broadcast rights after all, but it is picking its battles. The BT TV proposition failed in years gone because it tried to go it alone, but without the broad range of content genres, it looked like a poor attempt to compete with the likes of Sky. In reality, it didn’t need to.
The telcos have a significant advantage over many content companies around the world; they have an existing and trusted billing relationship with the customer. According to the Ovum World Information Series, EE has 30.6 million mobile subscribers and BT has 9.1 million broadband customers. These relationships can be leveraged through the partnership model to realise new profits in a low-risk manner.
BT is in a position of strength. The streaming wars are raging, and the service providers will do almost anything to gain the attention of the consumer, as well as build credibility in the brand. By bundling services into the BT, the OTTs are leveraging the trust which the customer has in the telco billing relationship and gaining eyeballs on the service itself. All they have to do is offer BT a small slice of the profits.
This is the symbiotic relationship in practice. The OTTs gain traction with customers, while BT can complete the convergence objective in a low-risk manner through the aggregator model.
That said, it is somewhat of a retreat from its previous content ambitions.
“This well long overdue move feels like a last-ditch effort to be successful in TV,” said Paolo Pescatore, founder of PP Foresight.
“Aggregation is the holy grail. BT has done a superb job of introducing some novel features and bringing together key services all in one place. This will strongly resonate with users. However, it is unlikely to pose a considerable threat to Sky who in turn will be able to bundle BT Sport into its own packages. In the future expect this new TV platform to be bundled with BT Halo which will further strengthen its premium convergent offering.”
Convergence is a strategy which should be fully embraced by the BT business. Not only has it been proven in other European markets, see Orange in France and Spain, but the depth and breadth of BT’s assets should position it as a clear market leader. With mobile, broadband, public wifi hotspots and content tied into a single bill, as well as partnerships to bolster the experience, BT is heading down the right path. If it can start to build service products on top, such as security, this could start to look like a very competent digital business.
The issue which remains is one of price. The Halo bundle is one few can compete with, but if it is not priced correctly it will not be a success. This does seem to be the issue with the BT consumer business right now, it is pricing itself out of the competition. Convergence is attractive to customers when it is convenient and makes financial sense, but right now it doesn’t seem to.
BT is slowly heading in the right direction. It might have taken years, but it is slowly creating a proposition for the consumer which few should theoretically be able to compete with. If it can merge the business into a single brand and sort out the pricing of its products, it should recapture the market leader position.
There might be a lot of pretenders to the video streaming crown but data from the US demonstrates one thing; no-one comes near Netflix.
Hulu, HBO and Amazon Prime might boast and posture about success, but the true measure of victory for a content giant is eyeballs on the screen. According to data from entertainment data firm Nielsen, streaming services now account for 19% of the total TV usage across the final quarter of 2019, with Netflix taking a considerable chunk of the audience.
Perhaps one of the most interesting statistics to emerge from this data is the consumers increased appetite for data.
As it stands, 60% of US consumers subscribe to more than one paid video streaming service. As more options have emerged, 93% of the survey respondents suggest they will either increase or keep their existing streaming services.
One of the big questions which has been circulating the industry for the last few months is how tolerant will consumers wallets be to the increased number of service providers? The market is already fragmented, with more launches on the horizon, though a household will subscribe to more than one service which will offer encouragement to those dreading the prospect of a head-to-head battle with Netflix.
Looking at the reasons behind the purchase, it is not particularly surprising. Cost, ease of use, availability of content and streaming quality are the top reasons anyone would purchase a service.
While it might seem obvious to state, some have clearly not got the memo; user experience is just as important as the content and pricing strategies which have been employed. Sky has ruled the linear TV market in large blocks of Europe for decades because the user experience has been the highest quality, and few can compete with the simplistic and functional set-up which Netflix has created.
Interestingly enough, with the aggressive volume of content which will be available to consumers, the discovery function is going to be important. This will drastically impact the user’s ability to locate relevant content and perhaps the appetite to trial new services. If user experience is completely satisfactory, then why would they look elsewhere, the opposite can also be said to be true.
There might well be a tsunami of new services hitting the streaming market over 2020, including the wave making Disney+, but realistically for the moment, no-one is challenging Netflix for the content crown.
Now with added video!
Ofcom has released data detailing the complaints lodged for each telco in the UK, and Vodafone almost clean sweeps the awards.
Collecting the most complaints for broadband, mobile and landline, only Virgin Media’s TV offering saved Vodafone executives from further embarrassment. At the other end of the scale, Sky, EE and Tesco Mobile collected the prize for best performance.
|Service||Least complaints||Most complaints|
“People have never had more choice in the phone and broadband markets,” said Fergal Farragher, Ofcom’s Director of Consumer Policy.
“It’s also never been easier to switch your service. So, companies that don’t prioritise great service could see customers leaving them for ones that do.”
Thanks to new rules being introduced by Ofcom, telcos are being forced into greater transparency when it comes to the conclusion of contracts and what deals are being made available, as well as simplifying the process of leaving a service. Soon enough, a simple text message will be enough to switch providers.
Moving forward, the new rules should filter down to the telcos. One would hope this would not only improve customer services, but also the performance of the networks as pressure ramps.
Interestingly enough, Vodafone at the top of the list might come as a surprise to some. This is a company which has been investing intensely in a new, converged network, as well as introducing a major overhaul of the business processes to recapture the lost fortunes of yesteryear. It is easy to forget that Vodafone was once the market share leader for mobile, though now it sits in third place.
While no-one wants to be awarded these prizes, the trends are heading in the right direction in the UK. Ofcom has previously pointed towards data which suggests telcos are getting better at delivering on the glorious promises make by breakfast-themed brand ambassadors on TV.
For example, in the first quarter of 2011 the number of complaints for broadband, mobile, TV and landline services stood at 40, 13, 5 and 38 per 100,000 customers respectively, though this industry average has fallen to 14, 4, 6 and 10. TV might not be heading the right direction, though the data suggests the reliability of these services is improving.
Another factor to consider is that the telcos might just be more honest with their customers today than they were in 2011, though through no fault of their own.
t seems like a distant irritation, but it wasn’t long ago that the telcos could make use of the ‘up to’ metric. This enabled service providers to mislead customers on the performance of products. The fact that the telcos are being more realistic on the performance of products in advertising might be a prominent contributing factor to the number of complaints; if the customer is getting the service it was promised, there is nothing to complain about.
“Complaints about mobile, broadband and landline to Ofcom have fallen to historic lows over the last decade, so it’s disappointing to see a slight increase this time around,” said Richard Neudegg, Head of Regulation at Uswitch.com.
“We hope this isn’t a sign that telecoms providers have taken their eye off the ball, as there is still room for improvement.”
Video streaming giant Netflix reported revenue growth of 31% on the back of 21% subscriber growth, but it will face a lot more competition this year.
These numbers were a bit better than forecast and were rewarded with a small share price bump. Perhaps investor exuberance was tempered by the need for Netflix to invest ever greater amounts of cash on content in the face of relentless competition. With the ramping of a bunch of fresh rivals from the US in the form of Disney, HBO and Apple, this pressure to invest will only increase, but the cash has to come from somewhere.
“Worryingly, the company is burning through a lot of cash,” said Paolo Pescatore, Analyst at PP Foresight. “It needs to recoup this by adding customers more quickly, increasing prices or taking on more debt. Therefore, expect price rises in all key markets during 2020.”
“There’s a fine juggling act by raising revenue through price increases vs. retaining subscribers. This could backfire as many of the new and forthcoming video streaming services are cheaper than Netflix. This makes Netflix vulnerable in its home market where it stands to lose out, quite considerably as underlined by these latest results.”
“Let the streaming video wars commence. Netflix has a huge head start and remains in pole position given its broad content catalogue and extensive relationships with telcos and pay TV providers. It should be able to weather the streaming battles over the short to medium term. All the future subscriber growth will come from its overseas operations. EMEA is and will continue to be a key region of growth for coming quarters.”
Of all the new competitors Netflix seems to be most wary of Disney+, with its massive back catalogue of family blockbusters. You can hear in the earnings chat below that the Netflix leadership reckon most of the growth for Disney+ will be taken from linear TV rather than Netflix, but there is presumably an absolute ceiling on the amount a typical household is willing to pay for video content of all types. Faced with all these new offerings some people are bound to reconsider their Netflix membership in 2020.
Disney will be entering the European streaming wars on March 24 will an offer which undercuts industry leader Netflix.
Launching a week earlier than initially forecast is an interesting bit of news, but ultimately it doesn’t necessarily mean anything material. Plans might be moving a bit quicker than expected or it could just be a ploy to attract more headlines. That said, the beginning of the streaming wars is now one week closer than we originally thought.
Interestingly enough, Disney+ will come into the market noticeably cheaper than its rivals. At 5.99/€6.99 a month, or £59.99/€69.99 for an annual subscription, Disney will undercut Netflix currently charges UK subscribers £8.99 a month, while Amazon Prime is £7.99.
“Let the battle commence,” said Paolo Pescatore of PP Foresight.
“This service ticks all the boxes for households; a broad range of content will be available across numerous devices at an attractive price. However, distribution will be important, and Disney must secure deals with partners including telcos.”
While the variety, quantity and quality of the content will ultimately decide who gains an upper hand in the streaming wars, pricing will obviously play a key role. Disney has decided on an intriguing price-point, as undercutting Netflix by a couple of quid perhaps tempts users into a trial period for the service.
This is the challenge which Disney will face over the coming months; stealing subscriptions off Netflix. The video-on-demand (VoD) market is starting to become very congested and priced at such a point that consumers will have to make decisions. It is becoming too expensive to simply subscribe to everything, but Disney is the cheapest available. It is not inconceivable for consumers to trial Disney+ for a couple of months at £5.99, which allows it to prove value.
Disney+ is an unknown for many customers today. If the objective was to go head-to-head with Netflix from the outset, it would lose; Netflix is a trusted and popular service. Some might elect for Disney+ over Netflix, but not as many as Disney would hope for. Setting the price this low, allows for some to dip their toe into the Disney waters, and a couple of months might be enough to either hold onto them as subscribers, or turn them away from Netflix.
The question which remains is how many services can a household tolerate? There are now three main players (Netflix, Amazon Prime and Disney) which would cost a subscriber £22.97 a month to gain access to all three. Then there is Sky, a dominant player in some markets, Viaplay, HBO, Movistar, TimVision and a host of others. The wallet can only be stretched so far.
As Pescatore notes above, partnerships will be key to gaining leverage in a very competitive market and also a more direct link to the consumers wallet. Telcos offer a trusted service to consumers, and therefore are a logical choice, but Disney is yet to announce deals in Europe. Both Amazon Prime and Netflix have partnerships in place, and this will be a very important aspect of the battleplan should Disney want to capitalise on the momentum it is building in the US.
Looking at Sensor Tower’s estimates for the period leading into Christmas, Disney can be very encouraged. It was the most popular app to be downloaded in the US with 30 million, taking in more than $50 million in revenue in the first 30 days. This would suggest Disney can be a very viable threat to Netflix’s dominance in the SVoD market.
With a recognised catalogue of content, heavy investments into new titles and a brand which is known, and trusted, throughout the world, Disney is starting to look like a genuine threat to Netflix.
Now with added video!
A subscription video on demand service designed solely for mobile consumption will launch with the backing of much of the entertainment establishment.
Quibi is an abbreviation of ‘quick bites’ and is headed up by Silicon Valley veteran Meg Whitman and Hollywood aristocrat Jeffrey Katzenberg. This combination is being offered as evidence that the new service will deliver an ideal combination of entertainment and technology. We first encountered Quibi last year, but it used a CES keynote to ramp up the hype ahead of a 6 April launch.
The unique selling point is that all the content it offers will be specially created to be consumed on a mobile phone. This means not only special framing but clips ranging from four to ten minutes in length. The big new feature Quibi execs banged on about in the keynote was the ability to auto-rotate the content between portrait and landscape mode. In most cases this seems to just mean the portrait view is just a cropped and zoomed version of landscape, but there’s also the potential to offer unique perspectives depending on the alignment.
That last feature is novel but could easily become an annoying gimmick if used clumsily. So could a Steven Spielberg series called after dark, which you can only watch at night. What if you want to watch it during the day? Quibi needs to be careful that, in it’s desire to differentiate itself in the highly competitive SVoD market, it doesn’t get carried away with cute but irritating features.
On that note we spoke to Ovum’s Chief Analyst for entertainment Ed Barton, to get his take on the imminent launch. “Quibi’s innovations are revolutionary and it must, arguably, inspire a revolution in viewing habits to succeed,” he said. “Mobile-first viewing services have not enjoyed a particularly illustrious track record and already huge volumes of mobile video consumption are driven by YouTube, messaging and social apps, and Quibi is betting that there is space for a premium player. It is a bold bet especially when competition is more intense than ever before.”
Barton’s cautious assessment is reflected in Ovum’s initial forecast for emerging global direct to consumer video platforms, which you can see below. It should also be noted that Ovum still only sees these new platforms accounting for 29% of the total US (where most of them are expected to have the most traction) SVoD market by 2024.
Quibi does have a lot going for it, not least the apparent backing of the entire mainstream media and entertainment establishment. On top of that T-Mobile US will be offering it to its punters from launch and Google seems to have a major role too. It has promised three hours of fresh, original content per day and is asking for $5 with ads and $8 without ads for access. The pitch is that Quibi is premium video for millennials, which makes its partnership with Google especially intriguing as that puts it in direct competition with YouTube.
The entertainment landscape is shifting at remarkable speed, but it might surprise a few to see the internet giants are hording such a monstrous proportion of the wealth.
According to the latest statistics from the British Association for Screen Entertainment (BASE), the home entertainment sector grew by 9.5% in 2019, bringing the total market value to £2.6 billion. Subscription video on demand (SVoD) accounted for 65.9% of this total, with Amazon and Netflix leading the charge in the UK.
“The UK’s creative industries make a significant contribution to both GDP and the broader employment landscape, something likely to be further enhanced by the success of emerging SVoD platforms and by the response to that from other quarters,” said Kevin Dersley, Co-Vice Chair of BASE.
“All of this change endorses the buoyancy of film and TV content but as a category we must ensure we’re fleet of foot and part of the ongoing digital revolution mentioned earlier. We know that audiences find enormous value in our content and the first half of 2020, packed with diverse new IP as well as must-see franchise titles, should serve as the perfect reminder that in a market of consumers hungry for content, there’s plenty of room for those able to adapt.”
As Dersley points out, while this is an impressive number, there is plenty of room for growth as the concept of SVoD is adopted by more demographics and additional platforms are launched.
Looking at the current UK market, Netflix and Amazon are clear market leaders, 9.9 million and 7.7 million subscriptions respectively, though Now TV, Sky’s answer to the OTT trends, also has a notable presence. Perhaps one of the more interesting developments over the course of 2020 will be the emergence of new competition.
BritBox and Apple TV+ have already launched in the market, while Disney+ will enter the fray on March 31. The marketing assault has not been felt in the UK just yet, but analysts are predicting with some venom these three services will aggressively attempt to carve a slice of the incredibly profitable pie being selfishly horded by Netflix and Amazon currently.
While these figures are of course noteworthy, because the most interesting development tied to these services is the shift towards mobile consumption of content.
Although traditional broadcasters are creating more VoD services and answering the mobility demands of consumers, the hand is generally being forced. The likes of YouTube and Netflix are driving the shift towards mobile consumption of content, and trends are accelerating.
Twitter has said that 90% of the videos viewed on its platform are from mobile devices, while more than 50% of all YouTube’s content is consumer via mobile. Cisco predicts that 82% of all mobile internet traffic will be video by 2022. Consumers are ditching the laptops and consuming more content via mobile.
SVoD is already making a considerable dent in the wallet, but with more services to be launched and more consumers intrigued by mobile consumption, there is still plenty of room for growth.