Home EMEAEMEA 2012 Content is king – and the secret of surviving VoD

Content is king – and the secret of surviving VoD

by david.nunes
Mihai Crasneanu Issue:EMEA 2012
Article no.:3
Topic:Content is king – and the secret of surviving VoD
Author:Mihai Crasneanu
Organisation:Grey Juice Lab
PDF size:263KB

About author

Mihai Crasneanu is the CEO of Grey Juice Lab, an expert in non-linear content, which helps top tier operators in Asia, Europe, Middle East and Latin America to acquire, package and market on-demand and OTT video services to their consumers.
Previously, Mr Crasneanu was the CEO and founder of glowria, which isnow on the Paris Stock Exchange under the name Video Futur.It is the largest independent VoD white label operator in Europe and France’s largest online DVD rental company, with more than 30,000 titles negotiated with the Major studios (Warner Bros., Sony Pictures, NBC Universal, Paramount, Disney
Prior to creating glowria in 2002, Mr Crasneanu was VP International for UOL, largest online provider in Brazil. He launched UOL in seven countries (Five Latin American countries, the USA and Spain), becoming the leading ISP and portal ahead of AOL and Terra. Before joining UOL, he launched Latin America’s first webmail white label platform for clients including Telefónica. Prior to that, Mr Crasneanu was an IT consultant for companies such as Intel Europe, TotalFinaElf, Renault, Saint-Gobain and BNP Paribas.
Mihai Crasneanu is a Romanian-born French citizen. He speaks six languages and has a degree in engineering from EFREI (Paris).

Article abstract

No one argues that Content is King, but many new OTT (Over The Top) entrants are now operating in the VoD field, and some are enjoying great success. It is now essential to add value, such as Netflix’s Cinematch that enables consumers find the desired content – or the content to find them! The demand for interactive viewing experience opens up opportunities for carriers, but they must find their unique differentiation, as VoD titles quickly become commodity. Carriers need to navigate through numerous value-chain options. If they desire exclusivity they need to negotiate content rights, and that has become complex, expensive and time-consuming. Multi-terminal rights and multi-territory rights are harder to obtain, yet this is what consumers now demand. Carriers may benefit from expert advice on the content value chain and on what and when various content rights should be secured.

Full Article

The television landscape has changed significantly over the past 20 years. With the introduction of the internet and subsequent media convergence, audiences demand active engagement in a more interactive viewing experience. Broadcasters and operators now face the challenge of adapting business models to these new usage patterns to retain audiences and achieve return on investment.

As these trends in video consumption evolve, so do the demands of viewers – the digital TV viewers of today want to watch the content they want, when they want and on whatever device they choose – without paying an additional fee. If they don’t get it from their current service provider, consumers are not afraid to find an alternative way, and these alternatives are not hard to access.

As this monumental shift in media consumption takes hold, Video on Demand (VoD) and Over-The-Top (OTT) services are making a global explosion. Every country is considering them and in less than five years every country will have them.

The VoD and OTT market was traditionally made up of telecom operators and cable operators diversifying their offerings with a move into TV, but something interesting is now happening. More companies out of the operator space – media groups, cinema chains, retailers and independents – are all coming to the party.

Asthe world’s television markets exploding with companies that all have similar VoD and OTT offerings, it is important to differentiate them from each other. If everybody has the same Harry Potter or Batman, why should a consumer choose your offering? Naturally, it is important to have the must-haves. If you are a retailer, Coca-Cola is a must-have product for you, but it is also a commodity that you can buy it anywhere. Not having it means a customer is likely to go somewhere else, but stocking it means putting it out further into the market. Although it is a catch 22 situation, having the right titles in your offering is essential and it keeps you in the game.

There are different ways for an operator to differentiate its VoD or OTT service. One way is with the devices you’re present on and the features you’re offering, but more than ever content is the key differentiator. Devices are, of course, necessary and people want the latest new features, but without the content these devices would be silent and no one would use them. The more players you have in the market the more you have to find the content that will make you different from the rest. Differentiation comes from how you select and manage your library- the different genres and different groups of interests, the programming, the marketing and possibly the original content–just as companies like Netflix are already doing.

As consumer demand for content is exploding on every screen, operators – both old and new – are finding that getting their content strategy right is becoming more and more difficult. In today’s rapidly changing landscape, operators must overcome a number of challenges in order to maximize content revenues and create winning and sustainable businesses.

There are three key elements to making a successful VoD service – technology, quality content and marketing. Get one of the pillars wrong and the business collapses. Get the balance right and business will flourish whilst obstructing further competition from entering the market. As technology becomes more commoditized, anyone can create a VoD service in a matter of days with little to no budget. However, quality content is heading in the exact opposite direction. With increased competition it is becoming more expensive and much harder to negotiate content rights.

However, there are a number of very successful operators who have achieved this balance and stand out as success stories in the US and Western Europe – Netflix, LoveFilm and Maxdome in particular. Operators around the world look to emulate this success, but there is a lot to consider when doing so. Netflix is an unparalleled service today and actually has been since its launch in 1999 when it invented the unlimited, subscription-based online DVD rental model. It has created a service used by 23 million subscribers with a churn rate as low as three per cent – quite a challenge in any market. A key point of its success has been Cinematch, its unique and unrivalled proprietary recommendation engine that enables subscribers to find the right content among 30,000 titles. Actually, it’s not that she/he has to find the right content, it’s more that the right content can find them.

The world has woken up to the benefits of ’Content Everywhere‘ and even without Cinematch, OTT solutions allow for ambitious companies (media, retail or telco) to develop Netflix-like services in their own country by consolidating a very wide and diverse catalogue of premium and desirable content. Combining a SubscriptionVoD(SVOD) based model with very aggressive programming and scheduling, while encompassing all possible types and brands of devices is a recipe for success. Although most regions across the world have plans or projects to develop such services, there are evident challenges that need to be overcome – low internet speeds in certain areas, data capping in others. Ultimately, the biggest challenge is securing rights for a whole catalogue of content, as it would be impossible for a service to exist without it.

So, how far are we from a world in which content rights are universally offered to all devices? Well, there is a reason why the cliché ’Content is King (and Cash is Queen)’ has survived the test of time and all the challenges introduced by new and disruptive technologies. There is a myth that with content owners wanting to reach audiences on every device and every platform, it’s easy enough for operators to acquire the rights themselves. Unfortunately the market is becoming so competitive and there are so many requests being sent to the content providers, that it is becoming very difficult to acquire content nowadays. It takes a lot of time to negotiate the contracts, it’s much more expensive than before and the multiplicity of rights – devices and territories – makes it much more difficult to negotiate. A media group, for example, may have publisher rightsfor their magazines and television broadcasting, but that isn’tVoD – the rights are completely different. Nowadays, these companies have to go to a specific carrier inside a studio with visual rights- something that they did not previously have to do.

The concern doesn’t come from forming a relationship with a studio- anyone is able to call a studio, and they in turn are happy to receive business. The main concern is that if you are not a big customer that is willing to spend a huge amount of money, you are going to struggle to get to the top of the pile. When negotiating rights with certain studios it is possible to include all devices in the rights agreement – the question that needs to be addressed is ’cost v benefits‘. If it is clear that return on investment (ROI) will be guaranteed on all devices or that competition will be blocked from certain rights ownership, then it makes sense to negotiate rights for multiple platforms. Alternatively, if you can see benefit in you owning rights for all devices and by that blocking your competition – go for it. Otherwise, leave costly rights on the table, if they don’t fit your device footprint.

The caveat is that some Studios wish to ensure that their premium content is consumed the right way, hence certain restrictions apply. For example, if a consumer wants to watch a high definition 3D movie on a first generation smartphone hooked to a 2G connection, it can be compared to turning up to play against a tennis star in a Wimbledon final with a cricket bat! The experience will be terrible and that is something the Studio’s will continue to limit. Operators should build content strategies to be technologically agnostic and every decision should reflect that, so that at every point the platforms can easily horizontally integrate and expand their offerings to cater for additional clients, models and devices.

With the increasing adoption of TV-enabled devices and a new consumer demand to watch content everywhere on any device, there is a huge opportunity for telcos to enhance their consumer offerings with a VoD or OTT TV service. To get the right balance operators should look to the content experts to help them get it right. Content companies can provide operators with consultative advice on all aspects of the content value chain while helping to secure rights for a unique catalogue of Hollywood studio and premium content, allowing the operators to concentrate on what they do best.

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