Pay TV growth will only drive revenue for the privileged few. Why not look elsewhere?

On the face of it, pay TV and content seem attractive investments, as there is room for growth in the market. But, the reality is different. Research shows that revenue is facing increasing downward pressure, with all except those with the current premium content challenged to benefit from the next phase. Price battles will ensue, with predictable results. Why waste time and money if you cannot guarantee the right content for your customers? Instead, why not chase other targets?

Many operators have invested heavily in the provision of pay TV solutions in the search for revenue growth. But while penetration has increased, ARPU is falling. To some extent, increased penetration has offset this, reports consultants Arthur D Little, just as it did in broadband markets but there is a significant gap in revenues between what is described as regular TV and premium packages.

This shouldn’t be unexpected. Premium packages are driven by content, for which viewers will, naturally pay more, but there is a limited range of content for which they will pay continuously – annual subscription packages for top-level sport cannot be shared among more than a handful of providers and, the fragmentary nature of much new content means that payments shift to on-demand models, rather than ongoing revenue.

Consumers are fickle and will quickly divert their attentions to whoever offers the most interesting TV and sports packages. In short, some will have compelling packages, to be sure, but most will not. Worse, keeping up with the required investment to stay ahead and to be relevant will be beyond all but the deepest pockets. It’s a battle in which there can only be a handful of contenders. Everyone else cannot possibly compete.

As a result, there will be a limited number of operators that can really achieve the anticipated profitable revenue growth through investment in the right combination of content and reach. As for the rest, without premium content, then margins will face ever-growing pressure – and less attractive content will lead to a predictable spiral in terms of user satisfaction, growth and popularity.

In that respect, there’s a sense of “we’ve heard this before”. Unless clear leadership can be achieved, many investments in TV packages and services are doomed to be “me too” offers but without the attraction of premium content that results in healthy audiences. Such providers will be subject to continuous price pressure and increased competition. So, why are so many operators rushing headlong into a fight they know they cannot really win?

Why, instead, don’t they focus on something that they can control and over which they can seize ownership? Chasing diminishing targets after the rights to plum content have been allocated can only go one way, as Arthur D Little’s research shows, so why don’t operators switch focus and save resources that they could spend on services that offer better long-term and more secure potential, such as by delivering richer enterprise services?

Surely, that’s a better way of achieving revenue growth. If you want to develop a more enduring strategy that can be sustained through the long-term and which doesn’t depend on the cost of investing in the right sports packages or the good fortune to happen to acquire an unexpected hit, why not talk to Gintel? We can help you develop the right enterprise strategy, based on core competencies of voice communications and enriched with more cloud offers and complementary services. Best of all, we can show you how without draining resources or chasing unsustainable investments.

Tags: B2B Cloud Services Voice communications

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