The incoming CEO of AT&T recently alluded to the coalescence of the company’s pay TV and SVOD businesses over the coming years, with HBO Max representing the operator’s “scalable distribution element.” His comments encapsulate the broad direction a handful of TV content owner-distributors (including Comcast and Sky) are pursuing via own-branded OTT video strategies. The expectation is that over time, “super-bundling” of premium online video services by players such as these will emerge as the new generation of pay-TV packaging. Meanwhile number of integrated multi-service operators (telcos and cable MSOs) are also looking to OTT as a new route to video subscriber (and eventually revenue) growth. As traditional pay-TV customer bases continue to shrink for most larger operators in mature markets, some are striving to offset this downward trend via (a) proprietary OTT video offerings, (b) third-party aggregation services, or (c) a combination of the two.
AT&T has quite a hill to climb with HBO Max, as net pay-TV subscriptions fell by 17% in the year to March while its AT&T TV streaming base almost halved—suggesting that merely converting a traditional service proposition and format to online delivery has limited appeal among the target audience of cord-shavers and cord-cutters. Its rival Dish Network is also enduring a slowdown in uptake of its Sling TV offering. Meanwhile in Latin America Telefonica—another operator embracing the transition from traditional to OTT video service provision, has done a decent job of growing its Movistar Play customer base, which grew 79% in the year to March, as its pay-TV accesses in the region fell by 7%. We should note however that Movistar Play is a freemium proposition whose entry-level tier is included by default with the telco’s TV, broadband and mobile packages. Similarly, HBO Max will be bundled into many of AT&T’s offerings—a tactic that will clearly boost OTT video subscription numbers but won’t generate much in the way of direct video revenue.
But for telcos and integrated operators, direct revenue isn’t the main point of OTT video—in the short-to-medium term at least. Rather, it’s the ability of OTT video to generate indirect revenues by adding value to their fixed and mobile services, thereby enhancing both loyalty and blended ARPU levels. That’s why the likes of Telefonica Espana and Telecom Italia have partnered to bundle Disney+ into their broadband and multiplay plans—with the latter citing the premium streaming service as a major booster for activations of its own TIM Vision aggregation offering during March. Following the launch of HBO Max last week, and with Comcast preparing to bring Peacock to the US market in July, it’s worth bearing in mind that operators have multiple benefits to pursue via a combined standalone/bundled OTT video strategy. Additionally, the evidence so far suggests that differentiated (premium) next generation streaming propositions with flexible pricing and packaging are far more likely to resonate with consumers than simple repurposing of old pay-TV models.
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