Intelligence Brief: Is content really strategic for MNOs?

08 AUG 2018

The war for video content is intensifying. To be fair, we’ve all heard this before. But, over the past few years, we have seen a ramp in the amount being spent on content and on the battle to acquire partners which can strengthen a content proposition. Consider some of the higher profile moves (see image below, click to enlarge).

 

Video content usage: The obvious driver
Three main elements are driving content usage: affordability; accessibility; and variety.

First, it is increasingly affordable to consume content. This is something we can all speak to personally. Content from Netflix, for example, can be watched for less than £6 per month in the UK. Connectivity easily costs less than £20. And, as content has become cheaper, it’s also got easier to consume when and where we want. Users can view content on multiple devices (for example tablet, smartphone, TV, PC). High bandwidth internet access speeds on fixed networks (including DOCSIS 3.0, FTTP/B/H) and mobile (4G) have made this possible.

Of course, none of this would matter if there wasn’t compelling content available. While we might argue with those who say we’re in the golden age of television, the fact remains that the variety of content available to consumers today is enormous. The vast range of video content available (including high-definition and ultra-high definition options) truly caters to all consumer tastes.

Video as strategy: The obvious follow-on
As content supply and demand have both ramped, traditional players (broadcasters, film studios) in the video content space have seen the arrival of organisations such as Netflix, Amazon and Facebook. They have also noted an increased interest from telecom operators.

The motivations of those newcomers can be varied. For Amazon, a streaming video content service may help cross-sell other products. In the case of telecom operators, video content may help them in a few ways:
• increase network traffic and potentially upsell offers as a result;
• compensate the gradual weakening of differentiators such as broadband speeds and bundling;
• build affinity (stickiness) with customers.

In a world where it’s increasingly difficult for a telecom operator to charge more for bandwidth (for instance, user experience for customers with 1Gb/s speeds may not be different from having 120Mb/s) this is all particularly important. And where bundling can work well to capture new customers and generate upsell in the short-term, the potential to create downward price pressures over the medium- and long-term can often be ignored (particularly if the operational benefits of offering video in a bundle can generate cost efficiencies).

Exclusive content – good idea?
There is no single best content strategy for all operators to follow. The optimal strategy will depend on each operator’s circumstances and assets: budget size; risk appetite; market competitiveness; et cetera. One facet of any strategy which most operators will need to consider is how they look at exclusive content. Is it worth the investment of time and money? Does a combination of both make sense?

• Exclusive content. Here, we’re talking about content produced by the operator (for example, series) along with content sourced from third parties (such as sports). However, producing original content comes with a risk of failing to be attractive to consumers, despite high levels of investment. Operators going down this path will need to master this skill. On the other hand, sourced content is a safer choice as its potential demand has already been tested. For example, broadcasting sport events such as the Olympics or the Premier League are likely to find strong consumer demand.
• Non-exclusive content. Beyond generating their own content, operators can act as distribution channels for content providers, with a partnership typically operating under a revenue-sharing business model. The lack of exclusivity means differentiation is limited, but so is the level of investment. Consumers, of course, can access the same content through other channels, such as directly from the content provider.

But is it truly an either/or decision? Not at all. Even where operators choose to develop their own, exclusive content, they can also partner to deliver the other content their customers want. One example I’m looking to is Telefonica.

In February, the operator announced a launch of original content to be broadcast over 13 countries in Latin America, alongside content sourced from third parties. Content quality and choice are obviously a key differentiator. Telefonica, however, also sees user experience as a key factor to differentiate its proposition: the operator expects its network and content access platform to play a strong role in that regard. How this all plays out is still a question. But it’s good that we have examples to look to.

– Nuno Afonso, senior analyst – Multiplay, GSMA Intelligence

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.