OTT is Creating New Challenges and Opportunities for TV Networks

They say history tends to repeat itself and just like what it did to music, digital has completely transformed the TV industry. But rather than heed the warning signs, listen to frustrated consumers or embrace new models enabled by technology, TV networks were more concerned with negotiating favorable affiliate contracts, not upsetting the MVPDs (multichannel video programming distributors) such as Comcast or Charter, and preserving the status quo. It was comfortable. It was how business has always been done.

They say complacency kills.

All of the sudden, TV became democratized and an industry that never had many reasons to ever change before was significantly challenged. TV turned into the Wild West and everything was up for grabs – the players, devices, value-chain, programming strategies, and business models.

As the consumption of online video continues to explode, TV networks desperately need to figure out how to turn their legacy institutions into multi-platform media businesses. Because the models of yesterday are, and will continue to slowly erode. Just last quarter, AT&T lost a total of 544,000 pay TV subscribers. Dish lost approximately 266,000, while Charter and Comcast lost 145,0000 and 121,000 customers respectively.

The internet did not and won’t kill TV. It has rebirthed it. It’s become omnipresent and people are consuming it more than ever. As a result, media companies have gotten serious about launching their own OTT subscription streaming services. And as these direct-to-consumer services take on a greater importance, big media companies are forced to think about creating and maintaining direct relationships with paying customers for the first time.

Started from the Top, Now We’re Here

In the old world, to deliver programming to a user, a TV network would package its content and charge MVPDs a carriage fee paid monthly per subscriber in order to carry their channels.

MVPDs handled all of the technology, infrastructure, marketing, customer acquisition, retention, and billing. And when issues arose, they also handled customer support.

But when TV networks go direct without the benefit of an MVPDs customer base, they face the challenge of attracting enough OTT subscribers to make it profitable.

Those seeking to cut out the middlemen and go direct are navigating uncharted and treacherous waters.

TV Networks still make a very large percentage of their money from carriage deals, so how do you honor existing partners and contacts while capitalizing on the opportunities that can grow value and tackle the challenges that threaten your business models?

Some lines of business may wither and die and that may as well come as a result of companies actively cannibalizing themselves. Look no further than Disney, which is going all-in on its Disney+ streaming service launching November 12th.

The fact is, TV is changing and refusing to adapt your business to keep pace with evolving viewer preferences, you will face the effects of value destruction.

To thrive, companies need to think holistically about their brands and come up with clear strategies to influence outcomes in their favor and stay relevant in a world of unlimited choice for how consumers spend their time and energy. Netflix CEO Reed Hastings, has even gone on record saying “sleep is the company’s competition.”

Companies should no longer think of themselves as basic-cable, ad-supported television networks, but ubiquitous branded environments available to the consumer anytime and anywhere.

No longer are you just competing with other networks. Your biggest competitors have now become the digital platforms that are taking a share of your ad and subscription revenues. As a consumer-facing brand, your goal is to create leverage. Without it, your competitors and frenemies will render you useless.

The more a platform values a relationship, the more they’ll be willing to give. This is how Netflix was able to get away with removing iTunes billing and why the NBA, NFL, and other sports leagues are receiving white-glove treatment and favorable deal terms from Facebook, Twitter, and Snap.

Toys ’R’ Us didn’t have that holistic vision for its brand, lost its leverage, and it left them dead in the water.

“Some organizations recognize faster than others there are shifts in the ways customers want to be communicated with and the way customers want to purchase products,” said Toys ‘R’ Us CEO David Brandon. “It probably took us awhile.”

Great Customer Experience + Great Content Wins.

In order to future proof, networks need to develop new businesses that can stand on their own that customers can pay for.

This has caused big media organizations to place emphasis on acquisition, retention, and customer lifetime value. Historically, these skill-sets haven’t existed within these companies, and as a result new roles will continue to be created to maximize OTT audience engagement and retention.

The TV industry is changing rapidly, but the one constant of digital evolution is that great customer experience plus great content wins.

Originally published at Zemoga on May 13, 2019


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