IPTV is no longer just for telcos: It is becoming a key part of the infrastructure for commercial TV companies of all types as they come to grips with the reality of multiplatform services delivered to devices beyond the living room. This raises the question of how pay-TV operators will recoup their investment in alternative delivery platforms and find new ways of gaining revenue either directly from customers or advertising. The IPTV World Forum, held in London March 22-24, will reflect these issues, showing how far the show has come from its origins as a niche conference and exhibition focusing on the needs of telcos to delving more deeply into IPTV.
This year, there is still a strong focus on making money, but now on the part of pay-TV operators diversifying into a multiplatform world. The ugly phrase “multiplatform monetization” will be heard booming in conference halls and echoing around the congested aisles of the exhibition. But there seems little certainty over how the multiplatform aspects of service can best be tapped for new revenue. This is not through lack of ideas or from ignorance of what the money-making opportunities are, but because of uncertainty over emerging consumer behavior. The answer really is to explore the opportunities and avoid committing to a single business model.
One thing is for sure: Like it or not, pay-TV operators and free-to-air commercial broadcasters around the world have to make their services available on multiple platforms, largely at this stage for defensive reasons. Just as broadband service providers have to offer high speeds that consumers do not actually need, so, too, do pay-TV operators have to show that their content can be consumed in an expanding number of places.
In fact, there are signs that this is starting to gain revenue indirectly, by making multiplay packages, including phone, mobile and broadband, more attractive. The pay-TV package can, in turn, be made available through the broadband and mobile services, perhaps even for a small premium; although, the scope for charging is limited and varies from region to region.
The ability to distribute the pay-TV service over the Internet and mobile networks also expands its reach, with the potential to attract new subscribers beyond the range of cable TV networks, for example. For satellite operators, it creates a new option avoiding the need for a dish. So while these new platforms do present the risk of “cord cutting,” because existing subscribers may be lured to lower-cost rival services, they also present opportunities for incumbent pay-TV operators to exploit their brand and muscle for gaining rights to premium content. It is above all content rights that will continue to determine success in pay TV, irrespective of the distribution platform. This was proven in 2010, when U.S. satellite operator DirecTV gained a large spike in subscriptions in parts of Latin America during the FIFA World Cup through gaining exclusive rights to many matches.
Apart from subscriptions, the other main source of potential revenue from multiplatform services comes from advertising. First, multiple platforms create more viewing opportunities away from the living room at places where consumers happen to be, and at times they would not previously have been watching TV. This equates to more viewing hours in total and, therefore, extra advertising time — at least operators hope. The other advantage of alternative platforms, such as the PC and smart phone, is that they engage the viewer in a one-to-one relationship, with greater scope for targeted advertising and also for interactivity.
There is also scope for extending this one-to-one relationship by creating narratives, including responses from the viewer, in the hope of gaining greater engagement with a brand, product or service that brings loyalty and generates sales down the line.
The success of these strategies again depends on consumer behavior, and it does not follow that because people watch more TV on a variety of platforms they are going to want to consumer more advertising. Even if they do, they may well not spend more money on the products or services concerned. There is the danger that this is really just recirculating the revenues rather than increasing them.
What is certain, however, is that people are going to be spending more time watching video on these different platforms, and they present opportunities for targeting, which can save money by avoiding the cost of distributing adverts to people who are not interested.
It also changes the scope of competition, because successful brands in the future will be those that adapt best to the new opportunities and can create campaigns that bring together all channels, including social media. That issue will be foremost among those discussed at the IPTV World Forum.
