Securing a partnership with the likes of Netflix and Amazon might be the golden-ticket for the telcos, but no-one should forget they have as much negotiating power as the OTTs.
For the telcos, convergence is an oasis of profit in the barren desert of the connectivity industry. As traditional means of generating cash are either destroyed (SMS and voice tariffs) or increasingly squeezed (CAPEX investments for 5G), many telcos are searching for differentiation to charge more and prove they can add value beyond the utilitised connectivity column. Content is a very popular route for many to take.
Aside from attempting to create content platforms, more telcos are seeking third-party relationships to move into the aggregator business model. This is a very sensible approach to business, the telcos can add a lot of value to the OTTs and securing a partnership with one of the more prominent streaming players is a key cog to their own ambitions. However, despite the desperation of the telcos, they should consider themselves on equal terms to the OTTs.
“Every telco is fighting to become an aggregator, but there is also a battle between the streaming OTTs to gain visibility,” said Paolo Pescatore of PP Foresight.
As Pescatore notes, outside of the two major players in the streaming world (Amazon Prime and Netflix), achieving visibility and scale can be very difficult. This is and will continue to be an incredibly congested field, therefore the relationship between telcos and OTTs could add an edge for any challenger.
Looking at the growth opportunities for the OTTs, there is plenty of cheddar left on the table, though in the developed markets, there are only crumbs left. Take the US for example, here Netflix subscriber growth has slowed, suggesting the glass ceiling for direct customer acquisition has been reached, or will be in the near future. The question is how these final customers can be engaged? Third-party relationships are key here.
At IBC last year, Maria Ferreras, VP of EMEA Business Development at Netflix highlighted that partnerships with telcos were an important cog as the streaming giant continues to evolve. At the time, the discussion was primarily from a billing relationship, though there are plenty of other opportunities.
Partners with their own content platform offer Netflix and Amazon something incredibly important; real-estate. Whoever can secure the most prominent position on the content platform will gain additional visibility and engagement with customers. It is evidence the OTTs are buying into the convergence strategies employed by the telcos, but also the value of the telco relationship with the customer.
Looking around the world, these partnerships are becoming much more common. Netflix has been embedded in the Sky platform in the UK, while Amazon Prime has been integrated into the Virgin Media platform. Mexico’s Totalplay has become the first operator in LATAM to add Amazon Prime to its TV service, while Vodafone Spain has secured partnerships with Netflix, HBO Spain and Amazon Prime.
There are of course numerous ways in which these partnerships can develop. Some are simply billing relationships, allowing the streaming service to be added onto the monthly bill, while some can have the OTT experience embedded into the content platform offered by the partner. What is clear, however, is this is an arms race from the OTTs.
The more partnerships which are in place, the more opportunity there is to engage potential customers and increase subscriptions. These partnerships are not only about securing visibility or accessing billing systems, but also leaning on another brands credibility to engage customers who wouldn’t have been previously accessible.
Interestingly enough, there aren’t many telcos or content providers who have relationships with more than one of the streaming giants. This might be a coincidence, or there might well be a desire from the OTTs to secure exclusivity through the platform of choice, even if it is not made official or public.
The challenge which many will face is going toe-to-toe with Amazon and Netflix. If these partners are securing the best relationships with the telcos, they will gain the most eyeballs on their services. Disney is company which will certainly want to lean on relationships with third-parties, but it will have to move sharpish to ensure it is not shut out.
Although Disney is one of the most prominent brands on the planet, it is almost unknown in the content world. This will present a challenge in two ways. Firstly, cutting through the background noise to educate the user on its offering, and secondly, the billing relationship.
For both of these challenges, third-party relationships with telcos and content platform owners can help. A direct line of communication is already in place, visibility can be offered through apps, billing relationships already exist, and third-parties are looking for partners to help build bundling options.
If Disney is going to be successful in its pursuit of streaming fortunes, it will need more than engaging content. It already has the content, and the ambitions for original content creation do look promising. The challenges will be in terms of securing visibility and credibility in the eyes of the consumer.
Telcos should realise sooner rather than later that they are an equal partner to the OTTs in this context, as they are just as desperate to secure favourable partnerships as the telcos. This is the next battleground in the streaming race; partners mean prizes.