There’s no denying the likes of Facebook, Apple, Amazon, Netflix and Google (known collectively as FAANG) have altered the content landscape and made traditional TV sit up and take note. Their wide reach and subsequent ubiquity in many markets across the world has even contributed to the ushering in of the “post-OTT era” — a world where Internet delivery has now become mainstream.

In fact, the very notion of over-the-top now refers to a technology conceived to deliver media and entertainment services directly to the consumer, making a total abstraction of the broadband delivery infrastructure in between.

Findings from Nagra’s 2019 Pay TV Innovation Forum paint a picture of an industry that isn't immune to the influence of digital disruptors. That said, operators are becoming more optimistic about responding to OTT disruption. With 70% of providers now believing rapidly growing OTT consumption will have a positive impact on their business, it is arguably the time for OTT and pay TV to work together for the benefit of the consumer.

How? By bringing OTT offerings into the pay TV environment, operators can become super-aggregators of content. According to the Forum’s findings, 77% of executives expect super-aggregator platforms to emerge over the next five years — and that’s a role every operator could potentially take up, especially as consumers fundamentally don’t care where their content comes from, they just want access to it.

The Sports Wrinkle

There is one potential complication to this, though: sports. Historically a significant revenue stream for operators and content owners, live sports programming is a vital part of any pay TV business. But the supply of sports content into the market is expanding significantly, as new sports OTT services and providers proliferate, potentially reducing demand for pay TV. Eighty-five percent of executives believe that OTT sports streaming in their country will grow either moderately or strongly through to 2024, so it’s imperative to act now.

While DAZN may be one of the best-known, one of the biggest challenges currently facing the streaming sports industry comes from Amazon, should it decide to prioritize tier-one sports rights in key markets. Major sports broadcasters such as ESPN, reserving key rights for their own offerings, also pose a potential threat. According to our special report looking at the global market for premium sports OTT services, it is mission-critical for pay TV providers to maintain the rights to tier-one live sports. Thankfully, in part due to the investment sums required to purchase the licenses and protect the content, providers are well placed to maintain this control.

Providers should consider continuing investments in tier-two sports, too, the report advises, as they still encourage a wide enough customer base. Specialist sports OTT providers will often target niche products that aren’t profitable enough — but pay TV cannot simply ignore them. To ensure subscribers don’t churn away, they need to consider new bundling methods that enable subscribers to come and go alongside major sporting events as they wish. Sports OTT may have disrupted how consumers watch TV, but pay TV can take back control and offer a full suite of sporting content — but the industry must act now to do so.

With competition from OTT gaining traction on what is traditionally pay TV content, providers must act now if they’re to take back control and disrupt the disruptors. Thankfully, they’re under no illusions: Executives recognize their existing aggregation models must evolve in response to the rising popularity of OTT services and an anticipated decline in the number of l inear channels.

In the U.S. findings of the Pay TV Innovation Forum, industry participants widely expect traditional pay TV packages to be radically restructured during the 2020s — with fewer linear channels, a more diverse range of prices and packages, including bring-your-own-device offerings targeted at Smart TV owners and sell-through models similar to Amazon’s Prime Video Channels. There is also a strong consensus that channel providers will be asked to take on more risk and that up-front per-sub carriage fee payments will decline for many companies.

This changing dynamic from linear to on-demand viewing means that some smaller content products will become unsustainable for pay TV to carry alone, and which should be ripe for the disruptors to take over — and pay TV should encourage that. By shifting the burden of broadcast costs out of the business and onto third-party OTT providers that they can aggregate, pay TV providers can adapt their business models into the central gateway to all the content consumers want and love.

Turning the Tables

With more direct-to-consumer (DTC) products coming onboard, and already planning how to reach a wide audience — such as Apple TV launching on Roku — service providers have their work cut out for them. But by investing and innovating in new bundling, services and content, operators cannot just disrupt the disruptors, they can have the advantage by creating a new system that works for the consumer.

Operators that adapt their business models to become super-aggregators and take steps to manage piracy will be able to successfully do more than just compete with the “FAANG” companies. They will be agile enough to no longer think in terms of “pay TV vs. OTT,” but embrace one holistic and super-aggregated solution that delivers the best of pay TV with the best of streaming to the consumer.

TV is TV no matter how or where it is consumed, making traditional TV and over-the-top video synonymous. The viewer is now setting the tone and demanding the content they love wherever, whenever and however they choose.

To meet the increasing demands for this ecosystem, operators are reconsidering their offerings, as well as their technology and operations platforms. If pay TV players can understand and address current trends such as integrating various sources of content, running cloud operations and offering more flexibility, they are well on their way to integrating a strategy for success.

Here are the top trends pay TV service providers should address in 2019.

Fulfilling the Super-Aggregator Role: It is time for the service provider to embrace its role as super aggregator, a player that is consumer-facing, boasts a large user base, and is primarily a branded content distributor that delivers superior value for consumers through choice, flexible packages, price and convenience. Consumers are demanding the ability to get to the content they love in a simple way. This implies that UIs and backend business and security services platforms must create a bridge between content silos by elegantly harnessing multiple content bouquets even across multiple apps.

Beyond aggregating scripted drama SVOD services, sports will be the next genre to be seamlessly integrated. Sports leagues, teams and rights owners are working to create even more unique connections with fans worldwide, adding stats and exclusive content. With ESPN+ and various sports properties ramping up their investments in direct-to-consumer streaming strategies, 2019 will be a game-changer. This presents a challenge and an opportunity to both those direct-to-consumer sports providers (channels, leagues and clubs) and to MVPD players to make this content accessible to the consumer on their preferred device,

Actionable Analytics for Maximum Business Impact: Pay TV service providers must also adapt to a world where OTT and social media platforms, such as Netflix and Facebook, have built their success on the ability to capture, analyze and act on data to deliver a consumer-driven experience. 

With the right technology choices and business-focused approach, it is now possible for pay TV providers to leverage data, advanced analytics and AI to automate business decisions that reduce churn, deliver more relevant advertising, personalize content recommendations and help companies optimize the full value and cost of their content portfolio. Through actionable insight, service providers can deliver better business results and free up resources for next-generation platform investments.

Cloud-Driven Content Protection: As part of these considerations, cloud strategies are at the top of everyone’s mind to address the challenges of the next generation of content delivery. Delivering premium services directly to consumer devices implies leveraging the flexibility of a modular backend cloud-based content security infrastructure. This includes direct-to-TV security, connected set-top box security and Android TV security, while not forgetting emerging standards such as ATSC 3.0.

Android TV Going Strong: Android TV provides the opportunity to have an operator-tier branded UEX, Google TV services and direct-carrier billing. Benefits of this include easier access to third-party OTT, deep linking for additional search benefits, and advanced voice-driven technology while bringing cost savings and faster time-to-market. When implemented even in its basic form, operators can achieve a baseline “all in one place” aggregation, beyond any built-in casting capability from a vast collection of mobile apps. However, the challenge is to ensure any service built on the platform is secure, protecting both the content owners and consumers’ data. This requires end-to-end multidevice and multinetwork content value protection for broadcast and OTT premium content.

Evolution of Content Protection: Offering valuable content on different devices with changing business models can be a content-protection nightmare for service providers that are not prepared. With the right tools in place, content can remain secure, successfully countering the growing and varied number of piracy threats, while also meeting the requirements of their content providers. Players in the ecosystem need a unified and flexible platform for managing all content security requirements, as well as tackling piracy head on with the latest innovations in anti-piracy services and watermarking. For example, with streaming piracy’s global impact, a smart approach is to effectively mark content delivered through set-top boxes or consumer streaming devices in order to be able to trace the source of a leak, and then use an anti-piracy service to monitor, track and take down pirate services.

This approach is especially relevant in live sports, where streaming piracy is a growing threat. Fighting off pirate streaming services with protection strategies, anti-piracy services and watermarking technology protects the value of this content, as well as the business model of sports rightsholders.

OTT Sports Streaming: With a scalable, low-latency streaming technology, sports leagues and teams can now also deliver the kind of immersive and mobile digital fan experience that younger consumers expect. Fan engagement can be boosted, before, during and far after the game is over, with sports OTT content directly delivered to consumers worldwide, to any device, including Android TV. The data that is collected through this engagement over time can be leveraged with an AI platform to optimize monetization strategies moving forward.

Evolving Business Models: According to research, industry executives anticipate a decline in the conventional and linear “big channel bundle” pay TV services. They predict growth will instead come from skinny bundles, personalized packages, subscription OTT services, advanced advertising and content owner direct-to-consumer services, including all content sources and features that can be smartly re-aggregated and added to multi-play network bundles and other adjacent Smart Home services. The key to drive top and bottom line benefits from this digital transformation phase will be to build flexibility into the core technology platform while leveraging data to make smart business-driven decisions.

With it being a dynamic time in the industry, there are many opportunities and possibilities to consider when working to evolve in 2019. Those who choose not to take proactive action take might not success. Service providers who prioritize continuous innovation and address these trends, however, will evolve with the quickly changing market and come out on top.

Ivan Verbesselt is senior vice president of marketing at NAGRA.