Will Operators Own the Home?
Operators have been challenged with difficult market conditions within the media space in recent years. Despite the overall rise in viewing as a result of the pandemic, a study from the Pew Research Center revealed that the percentage of U.S. consumers that watch TV via cable or satellite has dropped from 76% in 2015, to 56% in 2021. The study went on to explain that 71% of consumers surveyed who do not use cable or satellite services say it’s because they "can access the content they want online". With operators now losing out to an abundance of OTT services how can they leverage their established position to provide value to audiences?
Operators are beginning to shift their role to that of an aggregator. Could the next phase see operators transition further into the role of facilitator, by consolidating all the elements of a smart home into a fully connected hub?
Pay TV Under Threat
Over the course of the past few years, pay TV has been under considerable threat from OTT video services. The impact varies greatly depending on region and maturity of streaming services. In the UK for example, Grabyo reported that since COVID-19 lockdowns began, video customers have increased their monthly spending on online streaming services by over £100 million, equating to a 25% rise. The same report showed that pay TV subscriptions are down 9% with a penetration of just 53%.
Latin America has historically been a strong market for pay TV. In 2018, it had roughly twice as many subscribers as OTT services. However, even there, according to Statista, that is changing, with an expected rise of OTT coinciding with a fall of pay TV subscribers to less than 57 million by 2022.
Juniper Research estimates that there will be around 2 billion active subscriptions worldwide to on-demand video services in 2025. That represents an increase of 65% from 2020. With an ever-growing amount of video services and consumers increasingly turning towards the convenience and flexibility of OTT services, it is clear that pay TV operators need to respond to remain relevant.
The Role of Aggregator
The rapid increase in OTT providers has led to a more fractured market but this is something that operators are already starting to capitalize on through the aggregation of content. We have seen a few good examples of operators doing this well, such as Virgin Media, Vodafone, Deutsche Telekom, and Tata Sky, amongst others.
The role of aggregation is only going to become more important. Our CEO, Michael Lantz, recently explained on a panel for StreamTV that operators will play a pivotal role in delivering a wide choice to consumers and enabling them to create their own content bundles from that selection. As Michael explained, this will likely include some special interest services that put together specific types of content. The operators will be key in enabling a much higher take rate for that content.
The operator holds a trusted position within consumer's homes, especially with many platforms no longer being truly independent. This means that operators are able to facilitate the aggregation of other video services and present those in an attractive way to consumers, taking away the complexity and even meaning consumers only have to deal with one bill, rather than multiple.
While many operators have already pivoted to this model and many more will likely follow suit, some are looking at how to take that even further and smart home looks to be an attractive route.
The Smart Home Opportunity
Smart Home adoption has been steadily growing over recent years. According to Parks Associates, around 9% US broadband households had at least one smart home device in 2014. By the end of 2020 that figure had risen to around 30%. During the pandemic, although overall smart home adoption didn’t grow more than expected, there was a bigger rate of adoption for certain areas, fuelled by people spending more time at home. This included smart lighting and security systems in particular.
At the same time however, there are ongoing concerns about the security and privacy of these systems, which is perhaps having an impact on the rate of adoption.
The Role of Operators in Smart Home
There has already been some experimentation with linking video experiences to the smart home. A number of the big OEMs have ambitions to be at the centre of the smart home, with everything controlled from the TV, whether that is checking on the contents of the fridge or pausing the video when the doorbell rings. However, the future of the smart home will be smarter still and we believe that XR is going to eventually be the centre of the entire experience.
Ultimately the frontier between the real and virtual house will be much less defined than it is today. In the new smart home, consumers will have an XR headset at the ready at all times, whether they are cooking dinner or watching TV. They will also be able to place virtual objects, decorations, or controls in the XR world that they can interact with only while wearing a headset.
Operators have been able to adopt the aggregator approach for a key reason: they are well-known trusted entities for consumer. This means they are in a prime position to offer unbiased advice and ensure a quality assurance of the vast plethora of new media services on the market. With concerns around security of smart home devices, operators could well play a pivotal role. After all, they have gained a great deal of trust having been securely managing consumer data for decades. As the smart home evolves, operators can shift that trusted position at the centre of the entertainment experience to being at the centre of the entire smart home, where absolutely everything will be interconnected.
The Future of Operators
Pay TV Operators have faced considerable threat from OTT services, but they have proven their resilience by adapting to a changing market. First by launching their own OTT services, then by fulfilling the role of aggregator. They remain in a unique position as a trusted provider, something that will be increasingly important as homes get smarter. The potential to extend that role to the entire smart home is huge and could be the savior of pay TV.
[Editor's note: This is a contributed article from Accedo. Streaming Media accepts vendor bylines based solely on their value to our readers.]
The past 18 months have seen no shortage of mergers and acquisitions, and it has me wondering if all this consolidation will lead toward innovation. My gut says no, and plenty of industry pundits agree, but it could bring improvements to the customer experience.
Struum's Paul Pastor discusses the rise of app-hopping in OTT consumer behavior--even as concentration in the market around the major services increases--and the role Struum aims to play in OTT discovery and recommendation for longtail content in this clip from a panel at Streaming Media West 2021.
Operators need to achieve a balance between support for legacy advertising tech and embracing adaptive bitrate (ABR) over IP.
The short answer is that they no longer have to, if they leverage their existing Android TV APK.