ott providers : the changing landscape
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OTT SERVICE PROVIDERS : THE CHANGING LANDSCAPE
FTI Consulting surveyed digital media and technology executives across entertainment, sports, and media organizations to develop a perspective on over-the-top (OTT) streaming video platforms. Conducted over a two month period, our surveys revealed what mattered most to digital executives launching streaming video products. We also uncovered four key trends that are changing the landscape of streaming video platform services.
Three factors – cost, control, and customer experience – were identified as pivotal to the digital executives surveyed, although each organization weighed them differently.
OTT Platform Providers : A Perspective
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What mattered most in selecting an OTT platform provider?
Retaining ControlSeveral survey participants wanted to maintain control over the strategic pieces of the supply chain, such as user experience (UX) and analytics, in order to tightly manage the brand experience or have a more robust, state-of-the-art solution.
Although prices among most of the platform vendors were not much different, participants pointed out that there were outliers: “For us price was important but honestly their price isn’t that outside the ballpark of everyone else. We recently did bidding for [product X] development; we had nine vendors and everyone was close – only one was far outside the average, and our vendor’s was in the lower third.” “One platform vendor’s price was so high it was prohibitive to even spend more time considering it.”
Considering CostWhen comparing costs from vendors, survey participants typically sought the best price for the functionality and innovation they needed to develop their product. Participants factored in whether or not their own companies had in-house knowledge, experience or infrastructure that could be leveraged. For instance, one participant’s product requirements included Live TV Everywhere that had live feeds side-by-side with Video on Demand functionality. This company did not have the capabilities to do this in-house and therefore sought a vendor with the best price who could develop this solution.
“We control the UI/UX… we control and build out all the designs… everything that the user will touch will be art that comes from us…” “We thought about end-to-end solutions, but what we would like to do is build out our internal platform where we hope to have a state-of-the-art, robust platform. We thought one vendor had the most robust service but it was also the most expensive… there were others that we were interested in, but at the end of the day we thought that we could have a solution that would be better and more scalable, and more robust, then any of the options.”
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Trend # 1 : Customer experience moves toward center stageOur research indicated that as initial functionality requirements, budget and timelines were met, it became increasingly important that providers offered users a reliable platform that would function seamlessly, with quality streaming and a clean user interface across multiple devices. Subscription management, billing and search had to be easy to use, and customer service email and online chat readily available.
“Anytime you are messing with subscriber management or payments, the magnitude of risk is high… if something screws up there and your subscribers can’t log on or you don’t get paid… that is a disaster.”
Ensuring a positive customer experienceA consistent, enjoyable customer experience was seen as important to building customer loyalty and reducing customer churn. Participants wanted their customers to easily self-manage subscriptions; search content, access reliable, quality feeds for both live and OTT content; and access customer service support in their preferred language.
“If you have a problem with TV you call up the cable provider, not the network. So we didn’t have customer service and it was important for us to have, especially in Spanish. We have thought about bringing customer service in-house, but so far our vendor is doing fine.”
What are the trends changing the OTT landscape?
Digital executives’ focus shifted to controlling customer touchpoints, so that users would have a coherent, customized experience across all products and platforms. The thinking became, “How do we make the customer experience better and stickier?” Each customer touchpoint – including subscribing, billing, accessing content and customer support – has an interaction model, whether self-serve, app-based, etc. Providers began to focus on what each of the interaction models looked like today and how models could be mapped by customer segment, so that each segment got what it valued across the continuum of touchpoints.
THEN NOWSpeed to Market Speed to MarketEnd-to-End Solutions Performance and QualityContent Management Systems Customer ExperiencePerformance for Live EventsApplication Development Capability
Participants further indicated that they were establishing comprehensive service metrics to constantly monitor customer touchpoints. Participants also wanted to ensure they were partnering with a service that would allow them to continue enhancing the customer experience by adding capabilities that would help deliver a robust, data-driven solution.
Figure 1 – Shifting Priorities for OTT Providers
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Trend # 2 : Most OTT providers outsource infrastructureA recurring and important theme was digital executives looking for an established vendor able to provide the complete end-to-end solution; they also wanted to have the capability to replace some of the components with their own as needed for flexibility and confidence in meeting time-to-market constraints. As one executive we interviewed said, “We needed someone that could do soup to nuts...” “We were looking for maturity and a proven track record, to that degree that you can have maturity in this space, but at least some degree of maturity.” “From building a CMS, or licensing a CMS, to transaction components to bringing in multiple live feeds and
getting all of that content and clipping it and encoding it so it could go to VOD library afterwards to designing the apps, to designing the desktop, getting the apps approved… no one [in-house] had experience with this… Our vendor delivered… there were some compromises related to functionality, but none of the functionality we deferred took away from the product.”
Headcount and Infrastructure CostFor many of the digital executives surveyed, the initial decision to outsource the end-to-end solution was primarily driven by the high level of investment required to develop the entire solution in-house. Several noted that their companies did not have assets to leverage and building the entire solution in-house represented an investment they did not want to make. Therefore it was important to work with a vendor who offered a complete solution, including CMS, content encoding and distribution.One survey participant came to the realization that they were not a tech company and thus will never have the personnel, technical, or financial resources to match the planned growth and scale of the product. This digital executive noted that his company was in process of transitioning its TV Everywhere service from a hybrid internal/external solution to a fully outsourced, end-to-end solution. The thinking among several survey participants was that as long as the vendor provided a decent customer experience, and didn’t threaten to take away control on important points such as subscription billing or user interfaces, there were definite advantages to outsourcing the end-to-end solution.
Outsourcing is a multi-year arrangementAs one executive pointed out, “When you get an agreement with a vendor, you can’t think you’re in it for just a year. If you think that way, you are dead on arrival. It takes one year to fully implement the platform, another year to leverage all its features, and the third year to go the extra mile and see how you can improve.”Switching vendors can be costly, and a new integration can take considerable time. Most platforms on the market use different coding specs and format, which means content has to be recoded to move it from one platform to another. As the number of assets grows, this becomes more and more complex and time consuming. User touchpoints, subscriptions and customer service are other areas that takes months of work to transition. On the other hand, moving marketing/targeting software from one vendor to another was seen as something that could be more easily accomplished.For several survey participants, however, switching vendors was part of the OTT discussion from the beginning. These digital executives indicated that their companies had developed strategies to allow them to limit switching costs. For example, they worked with multiple providers and structured agreements so that they could retain flexibility.
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Speed to market exists todaySince 2013 when Netflix added OTT to its product offerings, technology has matured to the point that platform vendors have the speed-to-market capabilities to meet even the most aggressive timelines. “We greenlit mid-February and had to be on end of May… It became clear it was going to be very tight, particularly because [we] had no experience doing this whatsoever… To our vendor’s credit, they said they could do it for this price and by that date and they did it for that price and date.”
Leveraging in house resourcesWhile one digital executive’s organization considered various end-to-end vendors, in the end they chose to leverage the resources of their parent company’s streaming service platform as the main infrastructure and add a vendor for customer-facing components. This allowed for a flexible and robust product, and enabled the firm to differentiate its capabilities from the other streaming video providers in the market. For another participant, as business matured, they needed a stable solution with the flexibility to choose and integrate their own components:
“Insourcing vs outsourcing is a decision we are constantly wrestling with…Our overall strategy is to try to keep in-house as much as possible everything that is in our core business but if it is being better scaled in the marketplace or if it is becoming a commodity then we will outsource.”
Some digital executives surveyed noted that their organizations, as they become more knowledgeable, considered moving some or all of the customer experience management in-house:
“We want to increase the amount of customer care we do in-house. It is not something we thought about originally but now it is becoming bigger part of how we manage our relationship with fans, with a specific focus on social…”
“It is not like you’re going to just flip a switch and change
everything over but decisions are made to retain flexibility. That is
important on a number of different levels.”
Trend # 3 : Going global demands robust and reliable infrastructureMajor sports organizations, which often have large international audiences, are at the forefront of the globalization trend. Because they often stream heavily trafficked live events globally and in real-time, these organizations require a platform provider with a global footprint and distribution capabilities. This is to ensure that the user experience is globally aligned, so that customers have a consistent experience regardless of cultural or geographic boundaries. The platform therefore needed to be able to handle e-commerce, billing and collections in multiple currencies and with evolving payment technologies such as PayPal, Bitcoin, Square, etc. As one survey participant said, “It was very important for us to have the capability to process and bill globally. It was a big driver in our decision to chooseour provider. They were able to quickly integrate this functionality.” Sports executives who participated in our survey also mentioned flexibility of packaging, pricing adjustment, entitlement, rights management, and the ability to create discount codes easily as the core features for global platforms.
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Trend # 4 : Video on demand emerges and consumption patterns shiftConsumer behavior is changing, resulting in shifts in consumption patterns. Armed with multiple Internet-enabled phones, tablets, laptops and more, users are no longer consuming content linearly. They want to access their sports, entertainment and news at any time and anywhere, from any device they own. As a result, we see video on demand (VOD) as the emerging requirement. Global sports and entertainment will continue to focus enormously on streaming large-scale live events, however, it is now important for all providers to have an archive and searchable library so content can be served up as VOD.
Final ThoughtsAs the OTT landscape continues to evolve, we anticipate more media, sports and entertainment organizations will launch products and benefit from the four trends we have identified here. Cost, control and customer experience will continue to be pivotal factors as these new entrants weigh which combination of internal and external resources will align with their business models and strategic goals.
TMT executives do not need to face today’s challenges alone. FTI Consulting is a leading advisor to companies across the Telecom, Media and Technology sectors. Our experts provide guidance to companies, their executives, equity holders and/or creditors throughout all stages of a company’s life cycle. We provide strategic, financial and operational advice with hands-on implementation for strategy, operations, transactions and restructuring related business issues.
The views expressed herein are those of the author(s) and not necessarily the views of FTI Consulting, Inc., its management, its subsidiaries, its affiliates, or its other professionals.
About FTI Consulting TMT Practice
About FTI ConsultingFTI Consulting is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. FTI Consulting professionals, who are located in all major business centers throughout the world, work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management and restructuring.
Nitin Kumar Senior Managing Director Co-Leader – Technology Sector
+1.408.915.8627 [email protected]
John CartouxManaging Director Media & Entertainment
Philip SchumanSenior Managing Director Co-Leader - Media & Entertainment