Pay-TV strategy from traditional cable operator to OTT

2019/06/07

For every new subscription to traditional pay-TV, three new subscriptions to OTT services emerge (source: satellite TV).

Faced with the fragmentation of uses, TV channels must adopt a new video strategy in order to reach audiences regardless of the medium they use. This means breaking down the barriers between traditional TV and OTT video.

It is estimated that 75% of users subscribe to a traditional pay-TV service via cable, satellite or a telecom operator. More specifically, 71% of 18/34-year olds subscribe to a pay-TV service, compared to 75% for 35/49 year olds and 81% for those over 50.

Satellite, cable, ADSL and FAI (Internet access provider) boxes still owns the majority of subscribers. However, OTT is more and more imposing itself in the market.

According to KOB Advertising - December 2018

Change in subscriber behaviour  

Horowitz Research is a specialized market research provider in New Rochelle, New York State. They conducted a survey in which the majority of subscribers to traditional offers (cable, satellite and fibre) indicated that they  were quite satisfied with the price they were paying for their pay-TV service.

Here are the figures from the study:

  • Satellite and  fiber: 70% of subscribers agree with the price they  pay
  • Cable: 62% of subscribers  reported that the service is worth the price they pay.

However, when the interviewees were asked whether they would be interested in switching from a traditional pay-TV service to an SVOD service,  almost half (48%) came out in favor of the idea. The percentage is even higher (58%) among 18-34 year olds, which proves that the behaviour of the younger generation is evolving.

This behaviour reflects consumers' willingness to explore new digital services, particularly because of their price positioning. Indeed, 93% of those interested in SVOD  mention price as a key factor. Secondly, the viewing experience and the technical quality of these services are also appreciated by consumers.

The case of the ESPN pay-TV sports channel is a good example. Due to a steady decline in cable and satellite  subscriptions since 2010, the company (a subsidiary of Walt Disney) was forced to review its business model. In April 2018, the ESPN+ streaming platform was officially launched at a subscription price of $5 per month, including many niche sports and live broadcasts. ESPN+ currently has more than 2 million users, but remains in deficit due to technological and content costs estimated at between 200 and 500 million dollars  a year.

However,  pay-TV (such as the American channels HBO, Epix, Showtime... or the French ones Paris premières, Planète +, Téva) still has a certain success and continues to defend itself. It is rather the traditional TV channels that are suffering the most from this societal change.

Streaming platforms that are on the rise

A fierce battle is taking place between  TV channel platforms (My TF1 and 6play) and pioneering platforms (My Canal and Molotov). In one hand, the main television groups plan to launch their video-on-demand platforms. Indeed, France Télévisions, M6 and TF1 have  gotten their stories straight in order to build a common content distribution platform (which should be called Salto). This puts Molotov in a difficult position, since it was obliged to deactivate free registrations because of this particular deal.

Read more on  "The digital challenges of television channels in 2018" :The new digital challenges of television channels in 2018

MyCanal

At a time when TV is falling apart, Canal is doing well. Indeed, the group has decided to use its myCanal application to develop its TV audience. The application offers subscribers an extension of the OTT subscriber experience.

Like its competitor Molotov, myCanal offers access to all DTT channels available: the possibility of watching a film broadcast on Canal in streaming or downloading for a period of time that exceeds that of traditional replay. Canal's offer is very close to the SVOD.

Concerning the content available for film and sports enthusiasts, the platform is  pretty extensive: a very large number of films are available on the platform and many channels are dedicated to sport. However, myCanal (like Molotov) no longer offers TF1 and M6 replays.

The Canal Group has abandoned the distribution of its own box for OTT subscribers. Instead, it is Apple TV that integrates the myCanal application and thus avoids the chain having to support complex developments and the management of a fleet of boxes whose obsolescence is accelerating with technological progress.

Molotov

The streaming platform Molotov has created a new way of watching TV. Basically, it offers its users a single intuitive interface in which they can choose between pay and free channels. Today Molotov claims 6.6 million users, including more than 20,000 subscribers in 2018.

The Molotov application can be downloaded on Android & IOS. It completes its offer with additional features: pause and resume for live streams, start-over to resume a show from the beginning, replay, bookmarking or saving in the cloud and sometimes even bonus content.

It is important to mention that these features are already offered by most ISPs (Orange, Free, SFR) in addition to their TV boxes.

Some channels available on Molotov (early 2019):

myTF1 and 6Play

In this atmosphere where OTT becomes the master of the game, it is not surprising that traditional television channels are struggling to get by. However, the two major private groups M6 and TF1 each claim more than 15 million registered users on their 6Play and myTF1 portals respectively. In addition, in order to compete with pay-TV channels, M6 and TF1 offer previews, exclusive programmes and extensions of their programmes; as well as start-ups, which they banned from their OTT competitors , who happen to be their partners.

It is too early to  tell if these applications will last and thrive, but it is certain that the features they offer and their multi-screen compatibility give them a considerable advantage over traditional television broadcasting, especially among young people.

Transition to OTT

In the American market, Roku dominates the competition ahead of Amazon, Chromecast and Apple TV. A leading position that urges Roku to launch its IPO for a value of one billion dollars.

The audience has gradually fragmented, moving away from traditional TV and towards more flexible over-the-top (OTT) broadcasting points.

OTT is attracting more and more users. Its major advantage is the possibility of having a choice. The choice to watch the video you want, when you want it and where you want it. This is the biggest difference with traditional television, which has prescheduled programmes. It must therefore break down the barriers between TV and OTT to be able to effectively maintain its profitability.

To learn more about how to develop a quality OTT video service, download our latest white paper: "The guidebook to a successful OTT service".

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