In a rapidly changing TV landscape where disruption is the norm, pay-TV operators are launching OTT services to combat churn and gain new revenue streams. Conax AS commercial product director Einar Vaagmo says the secret to success is simple: keep it simple
Conax Commercial Product Director Einar Vaagmo has been working with online video and OTT services for a decade and has extensive experience in the converging telecom and media industries.
“It’s not that many years ago that streaming services was a thing for computing nerds,” he says. “Streaming is now mainstream and there are fundamental changes in the user experience and the behavior and in the industry itself.”
Harking back to his days as part of an OTT start-up in the Nordics, launching a premium SVOD service on tablets, game consoles, smart TVs and phones, he recalls: “We actually received and email from a customer asking ‘you mean I actually have to watch this video on my computer?”
Times have changed and now disruption is the new norm. “Pay-TV providers, service providers and the broadcasters need to adapt to the rapid changes in the industry,” Vaagmo says.
Conax is a specialist in total service protection for broadcast, broadband, multi-network and multiscreen digital TV services, supporting more than 140 million pay-tv consumers in 85 countries. “We come from the traditional access part of the industry,” Vaagmo says, “delivering our security back end and smart cards. Today, we offer a complete portfolio where we deliver smart cards, cardless, IPTV solutions, we have a multi-DRM solution, cams and so on. And everything is managed from our modular Contego back-end system.”
To make sure Conax offers the right products and features, Vaagmo works closely with both sales and engineering departments that are responsible for product development. “I work closely with partners, so being close to the market and getting market input,” he adds.
He believes there are many challenges to launching a successful OTT service that span technical, commercial and structural issues faced by traditional operators.
New market challenges
In terms of the technical challenges, Vaagmo explains: “Many argue that the technology stack is not there yet. It isn’t mature enough. There is a lack of standardization, despite some great initiatives in the industry, like HTML5 video, MPEG-DASH as a format, Common Encryption and so on.”
In addition, the multiple hardware platforms, operating systems, streaming and encoding formats multiply the technical challenges. “These platforms are evolving and you need to deal with all these updates and introductions of new platforms, like iOS10 launched recently. There are major changes for the industry just keeping pace with iOS. It’s the same for Android and SmartTV platforms,” he explains.
Commercially, “many operators are finding it hard to get return on investment for their OTT service. They say that it is hard to monetize. But at the same time they are being disrupted by the new players in market,” he says.
He explains that more and more operators are now finding it hard to grow audience. “At the same time the cord-cutting is happening,” he adds. “Maybe not as fast in all markets as many thought, but it is happening. And churn has a huge cost, so the customer acquisition cost is huge.”
The key to combat this, he says, is launching a successful OTT service. “For many operators the fact that you can combat churn by launching OTT services should justify the return on investment in itself.”
A third challenge for traditional operators, while technically tech-based, is the “simplicity of scalability”. He cites the example of WhatsApp. “They were 55 employees serving 900 million users when Facebook acquired the company for USD$19bn. So with cloud technology, anyone can scale. Pokémon this summer became a world phenomenon in just a few days. This offers huge opportunities for newcomers entering this market with really low investments because the scalability is so easy to get with cloud services.”
He says: “Traditional paid-TV operators need to think different, see new market opportunities, see the benefits of new technologies and how they can monetize this.”
All these changes are driven, at least in part, by changing audience habits with a growth in niche audiences. Vaagmo uses the example of YouTube, where there are channels “with millions of subscribers watching gamers playing games on the internet for example. At the same time, streaming is mainstream now”.
He explains: “Millennials are watching TV in a completely different way to what we are used to. These customers don’t care how the content is delivered. They care about the user experience and simplicity, so with all these new streaming devices and services that are reducing the complexity for the end user to watch this content is one of the major opportunities and challenges for traditional players in this market.”
Keep it simple
One piece of advice Vaagmo has for traditional operators is to “keep their eyes open”. He explains: “Don’t close your eyes on what’s happening in the industry right now. It’s either disrupt or be disrupted. So the key thing is to have your eyes open. We see some operators go all into new streaming services, making their services available on all these devices and that means they are disrupting their traditional business.”
He says that the market is reacting: “We see more content owners and broadcasters going directly to consumers and so on. There’s no doubt that the market will continue to evolve, with new players both from technical players, but also content owners going directly to market. Simplicity is key. The end user has never had more options, more services available. The ones falling behind are the ones closing their eyes.”
One structural challenge traditional operators have to overcome, Vaagmo says, is the historic product cycle and time to market.
“The time when the paid TV operators spent two or three years making their new experience available to user with new middleware or new boxes and so on, that time has passed,” he explains. “You cannot operate like this anymore, because the industry is changing so rapidly.”
He adds that TV operators need to look to internet companies for the right approach, because “they are the ones that are going to win this game”.
“So if we work like an internet company, and we see some of the pay-TV operators working like that now, using things like AB testing, having a new approach to customers, you do new feature releases much more often and work much more closely to the end user.”
Looking towards TV Connect MENA
“The message we want to take to TV Connect MENA is one of helping operators launch OTT or multiscreen services with low investment and getting feedback from their customers and how to monetize their OTT services,” Vaagmo says.
He says that TV Connect MENA allows vendors to get closer to customers, as well as technical or service partners.
“A lot of TV operators want to choose the best solutions from what is out there and events like this are really important for us because of that.”