Carrier OTT Monetization: All Options must be on the Table
CSP DEMAND FOR SUBSCRIPTION MONETIZATION SERVICES IS INCREASING RAPIDLY
The online entertainment industry has seen tremendous growth in users and recurring revenue over the past few years, particularly in the over-the-top (OTT) video segment. The success of online video subscription services such as Netflix, Hulu Plus and Amazon Prime have helped push the worldwide entertainment / OTT market to new heights.
As a result, CSPs are increasingly positioning themselves to capitalize on the growing population of “cord cutters” and “cord nevers” who want their favorite movies, videos and TV shows anywhere, anytime, and on any device. In addition to OTT services, CSPs are also capitalizing on other forms of digital entertainment such as music, online games, etc.
Our research shows that the four key functionalities that CSPs are looking for from their OTT technology investments are:
Enabling the creation of agile, subscription-based and video-on-demand business models that respond to customer demand;
Maximizing recurring revenue through pricing, packaging, bundling, campaigns and promotions;
Retaining customers longer by implementing frictionless payment strategies that reduce subscriber churn;
Leveraging subscriber analytics to gain knowledge about customers and understand key trends such a personalized discovery and social recommendation, thereby enabling faster and improved decision-making
CURRENT OTT MONITIZATION OPTIONS FOR VIDEO CONTENT
While several CSPs are using subscription-based business models for their digital content services, there are also alternative monetization strategies being implemented. These include:
TV Everywhere: This approach makes the TV content that consumers have subscribed to available over-the-top as well. In our view, this strategy turns OTT content into a feature of the Multi-Channel Video Programming Distribution (MVPD) model with the main objective of CSPs being to stem the flow of paying customers away from traditional pay-TV.
Ad-Based Monetization: Some CSPs (such as Verizon's Go90 service) make their video content available OTT without the need for sign-in or credentials. Consumers would need to watch the ads that accompany the content.
Pay-Per-View: Some CSPs charge for each unit consumed with Pay-per-view pricing applied to live sporting events and concerts.
Subscriptions: A subscription, membership, or other recurring revenue model lets the OTT consumer establish a relationship with the CSP. They cease to be just viewers. They choose to be the CSP's customers on an ongoing basis.Additionally, a subscription provides a foundation on which to build the multi-device user experience that cord-cutting consumers expect. Following an initial signup, the CSP content follows the subscribers across whatever devices they use.
PRICING AND BUNDLING OPPORTUNITIES AND STRATEGIES FOR CSPs IN THE DIGITAL SERVICE MONETIZATION SPACE
The CSP opportunity here is most evident in terms of video. In growing numbers, consumers are replacing their traditional cable and satellite TV packages with smaller, more customized, and often less expensive mixes of programming, cobbled together from an array of online and on-demand services.
CSPs that are quick to create an OTT strategy can gain a significant competitive advantage, particularly outside the US, where many markets are experiencing rapid growth in online viewership but where content owners, networks, and distributors have been slower to embrace this emerging pathway.
To create such a strategy, CSPs are increasingly taking a more segmented view of customer needs. While some customers will still want the big bundle, others would not.
In addition, telcos are taking an integrated approach that allows them to develop their OTT strategy from multiple angles. That means selecting vendor offerings that allow them to monetize, as well as perform content aggregation and discovery functions in key areas: the offer, the monetization model, the content, the product and technology strategy, and the organization.
CSPs are using various content strategies, and vendor support for both self-provisioned and third-party provisioned content is a key selection criteria for entertainment offerings in this context.
For example, large operators that aspire to be key TV and video players—and can shoulder the cost and development burdens of bringing out a best-in-class in-home and mobile offering—are considering full-blown integrated platforms.
Smaller operators, on the other hand, are choosing from an array of end-to-end turnkey platforms. In Europe, smaller telcos have been opting for third-party IP-based solutions—such as Zattoo—to distribute their video content to home and mobile screens. This approach can give a telco a robust video platform at less cost—and in less time—than a proprietary solution would likely require.