Pay-TV operators nowadays are navigating a complex web of challenges. The traditional landscape of TV consumption is undergoing a seismic shift, with younger audiences increasingly favoring the diverse offerings of streaming services over conventional subscriptions. This shift signifies a fundamental change in viewer habits, with pay-TV no longer being the sole gateway to television entertainment.

During this period of change, pay-TV operators are facing the stark reality of shrinking customer numbers, finding themselves in a competitive battleground against numerous streaming services, each presenting a wide and varied selection of content options.

As a result of this, consumers are overwhelmed with an ever-expanding universe of content and face the paradox of choice. The result? A maze of apps, a flood of content and a growing sense of frustration and confusion. This complexity is compounded by the financial pressures on pay-TV operators, where the race to provide abundant content often clashes with profitability.

Let’s explore the industry challenges and discuss the three pivotal strategies for pay-TV operators: super aggregation, segmentation and cost reduction.

What is the current video entertainment experience?

Imagine a viewer with a remote in hand, ready to dive into the world of television. Yet, what should be a moment of leisure turns into a 10-minute odyssey, navigating through a labyrinth of channels and apps to find the desired content. This scenario is not just a minor inconvenience; it’s a reflection of a broader issue plaguing the industry – content overload.

Harit Nagpal from Tata Play encapsulates this challenge perfectly:

’’User Interface (UI) matters. A guy should get to the channel that he wants to watch within four seconds and three clicks after switching on his TV. And it should happen while the operator is carrying 600 channels in 16 different languages.’’

This quote isn’t just a statement; it’s a wakeup call for simplicity and efficiency in an era of complexity. Pay TV operators are in the best position to rise to the industry challenges, solve the consumers’ pain points and emerge as the preferred video platform.

How to address the content diversity and overload challenges?

The content production landscape has expanded dramatically, offering an unprecedented range of choices across various platforms and genres. The proliferation of apps and content to fill all these platforms, alongside pay-TV services, has given the consumer choice that they never had before, but while this diversity enriches the viewer’s experience, it also introduces significant challenges. The abundance of options can lead to confusion and what’s known as subscription fatigue.

This sense of overwhelm and frustration arises from the challenge of navigating a plethora of subscription services, and the financial burden of paying for multiple platforms. The key for pay-TV providers is not just to offer more content but to make the services more affordable and streamline access to it. That way the viewers can effortlessly navigate through the myriad of options.

Here are three strategies to stay on top of the current industry challenges:

Super aggregation: A unified content strategy

Initially, pay-TV operators focused on aggregating channels, but the advent of cord-cutting and the surge in direct to consumer streaming services have fragmented the media landscape. Today, the opportunity for operators lies in the concept of super-aggregation.

’’We are at risk of putting the consumer in the tremendously confusing and difficult position, because they absolutely want all the content and creativity we can bring to them, but they don’t want plenty different sources of content, each looking for a monthly subscription. So, I think the single biggest challenge is coming back to a sensible form of aggregation so the consumer experience can be simpler.’’ – Doug Lowther, Irdeto

This statement highlights the core of the super aggregation approach; streamlining access to content. Operators are no longer just content providers but also are curators of a cohesive and user-friendly viewing experience.

How do you balance variety of content with simplicity?

Super aggregation is about bringing together the best of all worlds in content delivery – linear TV, on-demand services, third-party apps, Free Ad-Supported Streaming TV (FAST) and even non-video apps. This approach aims to provide consumers with a rich and diverse content experience, all accessible through a single UI.

This approach is akin to building a ‘hub of the home’, a single point of access for diverse entertainment needs.

In implementing super aggregation, the challenge for operators is to balance the variety of content with simplicity in user experience. It’s not just about aggregating content but also about organizing it in a way that is intuitive and user-friendly. This means ensuring that the addition of new content types and sources does not worsen the issue of choice overload, but rather enhances the overall viewing experience.

By doing so, pay-TV operators can effectively reduce churn and maintain a loyal viewer base in a highly competitive market.

Segmentation: The evolving consumer journey in pay-TV

As Euan Smith, CEO of Astro, captures it, understanding and catering to the diverse needs of consumers is crucial:

’’The complication is that you are trying to create an ecosystem where some consumers can afford zero Malaysian Ringgit and some can afford 200, so you are trying to create that environment where you are able to monetize and give people a great experience across the entire range. So, how do you do that whilst not confusing the customer? You have to create some very simple, distinct and compelling propositions with various price levels.’’ – Euan Smith, CEO of Astro

By employing tiered subscription models and catering to consumers’ behavior and their access to the internet, pay-TV operators can effectively address the varied preferences and financial capabilities of their audience. Catering to diverse consumer segments results in sustained engagement and ensures everyone has access to quality content.

1. Super aggregators

For the content enthusiasts, the ‘super aggregators’ tier is a perfect fit. This tier combines traditional linear models, like satellite broadcasting with modern streaming services. It offers a comprehensive content buffet, ensuring that consumers who are willing to pay a premium have access to a wide array of programming.

This holistic approach to content aggregation across various platforms allows operators to provide an all-encompassing experience, catering to those who seek depth and variety in their entertainment options.

2. Connected consumers

The ‘connected consumers’ tier is tailored for those who predominantly engage with content over the internet, moving away from traditional satellite services. This segment represents a growing global trend towards internet-based consumption and particularly resonates with younger generations, who value the flexibility of accessing a diverse mix of content, from free offerings to premium selections, anytime and anywhere on their connected devices.

This approach acknowledges the evolving consumption habits, ensuring that pay-TV operators remain relevant and engaging in an internet-centric world.

3. Unconnected consumers

For areas with limited connectivity or consumers facing financial constraints, the ‘unconnected consumers’ tier plays a crucial role. This tier primarily relies on satellite services, offering free or low-tier subscriptions that are vital for providing access to quality content.

By offering these options, pay-TV operators can reach a broader audience, introducing them to the world of content and potentially setting the stage for future upgrades as connectivity improves or financial situations change.

What should pay-TV operators focus on?

The key to attracting and retaining consumers is understanding consumer’s preferences and behaviors and tailoring their offerings to meet these evolving demands. This consumer-centric approach is essential for staying relevant and competitive in a market where choices are abundant and viewer loyalty is hard won.

Euan Smith emphasizes the focus areas for operators: ’’At the end of the day, all that operators should be spending on is content, product and marketing. This is how they are going to stay alive.’’

This underscores the need to focus on the consumer and invest in content curation, production and partnerships. It’s about securing exclusive rights, producing original content and understanding even the subtle preferences of diverse viewer segments. The goal is to super-serve the individual enabling access, discoverability and recommendation across all of their favorite entertainment experiences.

What is the perfect content balance?

For pay-TV operators, crafting a winning content strategy involves a nuanced blend of local and global offerings. They are uniquely positioned to deliver the best of both worlds: local news, sports and content, alongside international hits like Hollywood blockbusters, K-dramas and global sports events. This strategy encompasses a rich variety of formats, from FAST and linear channels to on-demand and catch-up services.

By balancing Video on Demand (VOD) offerings, such as movies and TV shows, with live channels featuring sports and news, pay-TV operators can provide a tailored experience. VOD caters to the desire for personalized, flexible viewing, while live channels capture the excitement of real-time events. This comprehensive approach caters to a wider spectrum of viewer preferences and ensures continuous engagement by offering a diverse, culturally rich, and globally connected content experience.

The era of custom-made products, where technology providers created specific components for individual customers, is giving way to open-source platforms like Android TV or RDK. These platforms offer a sensible starting point for quicker time-to-market.

With this strategy, pay-TV operators can align with the rapid consumption patterns of modern viewers and swiftly respond to market demands.

Strategic cost management: Moving from broadcast to streaming

As the industry pivots from broadcast to streaming, operators see that their more profitable, but declining, customer base sits in broadcast, whereas investments are necessary to support their growing streaming base that has a lower average revenue per user.

Managing this transition, especially costs, becomes a critical factor. Patrick Delany, CEO of Foxtel Group, emphasizes the importance of this shift: “The big thing for us at Foxtel is to brutally dump as many costs as possible out of the traditional TV service. Irdeto is a partner that provides encryption for our streaming service and is also helping us reduce costs through outsourcing. In the last five years we’ve been, leveraging technology and partnerships to achieve regional cost efficiencies.”

This strategy extends beyond mere cost-cutting; it’s about saving in non-core areas and re-investing in core competencies. By reducing non-core engineering costs, operators can package and promote their services more effectively, catering to the fast-paced demands of modern consumers.

Embrace partnerships to compete with global players

In the context of global competition, forming strategic partnerships and outsourcing certain operations can be crucial. Doug Lowther, CEO at Irdeto, highlights this strategy: “If you’re competing with global players, it can be very valuable to share some of your operational costs with your suppliers and that is exactly what we are doing now between Foxtel and Irdeto, and I think it’s the model that will work in the future because it’ll give us the cost structure we need to compete with the global players.”

Such partnerships enable pay-TV operators to streamline their operations, reduce operational expenditures and maintain a competitive edge in a market, where large global players enjoy bigger economies of scale. By focusing on these strategic areas – accelerating market readiness, managing costs effectively and embracing collaborative models – they can navigate the challenges and lay the groundwork for long-term sustainability.

Navigate your pay-TV journey with us

Pay-TV operators have a history of reinventing themselves to adapt to new market dynamics, and this era is no different. Today, they are uniquely positioned to thrive amidst disruption. Their ability to blend local and global content, coupled with a deep understanding of their customer base and long-standing relationships, places them at a distinct advantage.

To properly use this advantage, it’s crucial for operators to stay agile, innovative and consumer centric. By adopting a multi-pronged strategy that emphasizes consumer focus, they can manage the economic impact from broadcast to streaming.

Would you like to learn more about these topics? Watch the APOS discussion with four industry experts here.

And if you’re curious to hear more about how we can help you with super aggregation strategy and free up your resources to reinvest in growth areas, contact us for expert guidance.