Mukul Krishna
Global Head of Practice, Digital Enterprise & Digital Media,
Frost & Sullivan

Time for broadcast, cable, and satellite industry to evaluate its resilience

The impact of the COVID-19 pandemic has been felt across every industry, and the media and entertainment market has not gone unscathed either. Where conventional wisdom would make you assume that the market would do better than most, since more people are consuming content as they spend more time at home–the reality is far from it. To understand what the broadcast, cable, and satellite market is looking to invest in to cope with the pandemic, we first need to understand the challenges they face today. Let us start by unpacking some of these challenges:

Reduced advertising revenue. This first challenge is a no-brainer and based on basic economics. Due to the lockdown and impact on various sectors, the economy has taken a battering. There is a broad consensus among economists that the Indian economy will contract by approximately 4 percent in 2020. With production down and sluggish demand in many sectors, most companies have reduced revenues, resulting in a decline in advertising spending. This reduced spending is impacting several channels, including broadcast, cable, and satellite.

Reduced subscriber revenue. With the brakes being slammed down on the economy, many able and willing workers have found themselves either out of a job or seeing their income slashed. Though unemployment rates in India have fallen from their peak in May, they are still hovering around approximately 9 percent, and that does not count those that find themselves underemployed or working at a reduced income than before. This has put a strain on a typical family’s expenses, and discretionary spending is, therefore, under tremendous scrutiny. With other ad-supported alternatives like FTA (free-to-air) broadcast and ad-supported streaming available, subscriber churn for pay-TV services is expected to be high.

The nonexistent sports calendar. At the start of the year, there was a lot of excitement about live sports as this was supposed to be an Olympics year, which would see a lot of media companies investing in equipment upgrades. Typically, many nations and media companies would use the Olympics to highlight moving to HD or UHD transmission/delivery or other enhancements. The Indian market has been seen as an especially vibrant market for media technology purchasing because of cricket. Frost & Sullivan’s deep research in this domain has shown that almost all vendors for these technologies (video processing, nonlinear editing, video servers, switchers, middleware, etc.) are expecting negative growth this year because their pipelines have evaporated. Expectations for 2021 are much better as many purchasing decisions have been pushed to next year, but that does not erase the fact that 2020 is a disaster for these companies. Sports are also responsible for attracting a massive amount of eyeballs to various screens, which, in turn, also leads to a lot of advertising revenue and subscription revenue–all of which have evaporated this year.

Availability of alternate platforms. If things were not bad enough, competition from OTT streaming platforms have further complicated business planning for the broadcast, cable, and satellite market. With consumers cutting and shaving the cord in larger numbers and trying out ad-supported or cheaper streaming options, there is no guarantee they will come back to traditional broadcast and pay-TV once the pandemic is over and the economy stabilizes.

Building a cetter mouse trap. We have just scratched the surface of some of the challenges facing the market today, but how is the industry responding? Most media companies are in survival mode as even the cost of original content production has suddenly gone up with COVID-19 emphasizing the need for crew and cast safety. Most media companies are focusing on and investing in three aspects with urgency:

Media Management. Today, most commercial solutions focus on repository services that enable indexing, archival, and discovery. These solutions either focus on upstream workflows during the production process or further downstream as a staging ground for content delivery. Rarely is there any purpose-built integration across the workflow, and managing content across the ecosystem is still manually driven and expensive.

In the world of TV, there are upward of 100,000 content items available within a 7-day window, where content moves constantly and new content keeps getting added. Keeping up with these new content items using manual classification or external services is not only cumbersome but can lead to inconsistency, ambiguity, and missed viewing opportunities for consumers, especially for content that is either big-budget or destined for primetime. Organizing content by basic genre, actor, or director categories is simply not detailed enough to understand what the content is all about.

In today’s content-rich world, consumers are overwhelmed by the choices available to them on TV, VoD, etc. Initially, this is exciting for a new consumer, but it rapidly becomes an irritating experience as, each time, they have to click through multiple channels or wander through the electronic program guide (EPG). Based on Frost & Sullivan’s research, 73 percent of audiences reported that they are extremely or quite frustrated when they cannot find anything to watch on their video service. A typical subscriber will only look at about 10 to 20 titles on a couple of rows of recommendations before switching to another entertainment option. In such a scenario, having a robust media asset management capability that uses contextual intelligence to enable better content discovery for the consumer is a must.

Subscriber Management. Viewers today have more choices than ever, which intensifies audience fragmentation and adversely impacts subscriber numbers and revenue forecasts. Additionally, the growth of connected devices and the proliferation of high-speed broadband have given rise to many OTT subscription and VoD and vMVPD (virtual multichannel video programming distributors) offerings and skinny bundles. These developments have made reaching audiences more complex.

Every operator is focused on acquiring new customers. Successful marketing and capturing a user’s attention today requires sophisticated targeting and message personalization. Operators need to have a deep understanding of their different customer segments, including loyal viewers, lost subscribers, stalled trialists, transients, freemium subscribers, at-risk subscribers, etc., so that they can target the right lookalikes and drive efficient customer acquisition marketing campaigns. Personalization reduces acquisition costs as much as 50 percent and lifts revenues by 5 percent-15 percent.

The money operators spend on acquiring users would not matter if the users churn quickly after trying out a service. In addition to providing the most immersive service, to become a leader, organizations need to embrace churn-reduction analytics and optimize subscriber-retention practices. Operators need to distinguish between voluntary and involuntary churn as well as identify the underlying root cause for voluntary churn so that they can activate relevant strategies to combat it.

By understanding the current use cases and requirements, as well as existing techniques and strategies associated with viewer and subscriber acquisition, upsell, engagement and retention, cable and satellite operators can identify the gaps in their capabilities that are prohibiting them from successfully targeting, attracting, engaging, and retaining viewers and subscribers.

Monetization. The lines demarcating content owners, aggregators, syndicators, and distributors have become blurred, further driving the complexity in their business models. Industry consolidation has hastened the need for media companies to quickly monetize content across new and unfamiliar channels. At one end of the ecosystem, media companies need to ensure that they are managing revenue streams across the contribution network through effective content pricing, license and carriage agreement management, as well as royalty tracking. At the other end of the value chain across the distribution network, media companies need to ensure there is minimum revenue leakage and there is a robust and agile billing system in place for subscribers while also optimizing CPMs (cost per mile) for ad-supported content.

As there are so many different moving parts to enable content monetization today, media companies need to take into account pure advertising, pure subscription, and hybrid models while also ensuring there is no revenue leakage upstream across the contribution network or downstream across the distribution network to the consumer.

The bottom line. The broadcast, cable, and satellite industry has had a rude awakening and its flaws have been laid bare by the pandemic. In many ways, it is also a blessing in disguise as these media companies evaluate how they can become more resilient in a post-pandemic world. There is going to be a new normal as we come out of the other side of the tunnel. If the industry has not pivoted to provide a more targeted user experience, taken concrete action to arrest subscriber churn, and, try to minimize the revenue leakage, the industry is going to continue the downward spiral as it constantly loses ground to competition from OTT streaming. As the industry stands at a crossroads, there has never been a better time to transform.

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