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Survival of the Quickest and Smartest

WHY THIS MATTERS: To compete against online foes, both broadcasters and pay TV platforms must be innovative and nimble.

Innovation for broadcasters and pay TV operators is not just a matter of survival, but offers a wealth of opportunity.

It is a set of foundational decisions to increase profitability from core activities and build new business models in the accelerating digital market, while leveraging and bolstering existing advantages.

Though the paths to success may differ, shared challenges exist across media and communication service providers and understanding the challenges to solve is the start of the journey. The prize is scalable, sustainable digital businesses.

Among the new market realities for operators and broadcasters:
• Their customers are liquid;
• Their markets are disrupted;
• And returns from traditional businesses are eroding.
• For many firms, the profitability of the portfolio is shifting:
• Earnings before interest, taxes, depreciation, and amortization (EBITDA) are either flat in the core business, or will soon be after the latest round of simplification, and analysts are looking for differentiated growth stories in order to find comfort in future capital investment strategies;
• Traditional growth strategies through massive consolidation are increasingly scrutinized by regulators;
• The value of all-encompassing, bundled subscription revenues are questioned as new spenders seek online alternatives, with operators trying to find the “next bundled product;”
• There is pressure on traditional revenues such as linear advertising where digital is currently unable to make up the difference;
• And competition for exclusive content is rising, pushing up costs as global web-scale providers find new ways of monetizing without depending on affiliates.

Mapping the Solution Journey

To remain competitive and prepare for new market realities, today’s operators and broadcasters must innovate across product, engineering, commercial propositions and content. And this must be executed with a transformational mindset that truly leverages the capabilities built throughout the years. For today’s consumer, business offerings must be developed, tested and refined with increasing velocity.

Another new reality is finding the confidence to launch propositions — executed at the right time — that may cannibalize existing business models, in exchange for data that can create a different value equation for the industry, all on a foundation that benefits a number of business models as transformation occurs.

Trash the Rulebook and Thrive

Operators and broadcasters must question their position in the emerging digital value chain while maintaining leverage in the traditional ones.

The key is understanding the disruptions and deciding how to nurture business models which can attract new revenues, minimize the effect of cannibalization of existing customers, while facilitating a timely shift to digital growth. We call this “journey” the S-curve, a framework for balancing these potentially conflicting goals.

Internally this will require workforce and cultural transformation; externally, it will require a new type of relationship with both consumers and business customers in order to be agile to their needs while maximizing profitability.

Disruption can come at any time from a broad set of ecosystem players trying to break down the barriers brought upon by the traditional value chain. Digital companies currently have some advantages. Traditional players must keep up with investment in content and rely on outmoded processes which support the core business. It is this core which provides most of the revenues, but which is experiencing little or constrained growth.

For operators, a significant challenge is the evolution from infrastructure-bound and non-scalable, legacy operating models to platform-based operating models.

While this can also apply to broadcasters today, the evolution to digital video is failing to offset declines in the traditional business, which could result in more consolidation.

Journey to a New Future

Both operators and broadcasters face unique barriers to entry, but the journey starts with moving from inflexible infrastructure and processes to reduce costs and drive profitability in the core business. It requires a digital transformation program that is not IT, not product, but all-encompassing across the business.

This means revaluating the technology ecosystem. Vendors should no longer be viewed as monolithic systems suppliers, but as part of a broader ecosystem — enablers of data-driven platform capabilities to unlock an organization’s intelligence and decision-making and preparing it for new ways of meeting consumer needs.

Sef Tuma is managing director and global lead, Accenture Digital Video.