Pay TV has been the core cable product ever since the industry first emerged in the 1940s. Now with massive changes in the video landscape, cable operators are faced with refining their business to meet the changing preferences of a new generation of viewers.
Video consumption patterns and preferences are continually evolving and new generations of Pay TV audiences are now comfortable with standalone streaming services offering video on demand libraries of programming not available on the major broadcast networks or even from the cable TV networks.
The very structure of the Pay TV industry is different than it was just 5 years ago too. The major players in ad-supported and subscription video are no longer the LA or New York-based entertainment conglomerates, but rather the major Bay Area tech companies including Facebook, Amazon, Apple, Netflix and Google.
Phil Schuman of FTI Consulting says, “If you’re not a FAANG company, every legacy media company has to fundamentally transform itself for the future, or there won’t be a future for them...Those legacy media companies that don’t move quickly to adapt are going to be challenged.”
Improving the Cable Subscriber Relationship
While there’s a lot of talk about cord-cutters quitting cable because they prefer cheaper and more flexible streaming subscriptions, it’s also true that subscribers are cutting the cord because of their experience with an industry that’s synonymous with bad customer service. MVPDs in general need to do a lot more to create positive relationships and begin to create a positive personal emotional experience with their customers.
Per Scott Brown of CableLabs’ Upramp accelerator, “[Historically], we’ve always had a relationship with a home address rather than a human being.” After the setup of a subscriber’s cable service, a subscriber may only interact with their cable company when something goes wrong. “Finding a way to create relationships around moments of joy with an individual human being, I think, is the biggest opportunity for an operator today.”
According to Howard Horowitz of Horowitz Research, “The industry has a legacy reputation that it controls my life, that I have no choices. It’s the big bad cable company franchise in my local community.” But in fact, the industry is trying to move away from control and position itself as being a consumer enabler. “It has a lot of cultural issues to overcome, but it’s headed in the right direction,” Horowitz believes.
Redefining Expectations Around the User Experience
Howard Shimmel of Janus Strategy and Insights notes that Netflix has redefined the viewer experience for video from two perspectives: Everything is on demand so it’s easy to find something you want to watch; and, the user experience is the same no matter what device you’re using.
Cable faces foundational challenges, among them legal and financial, that limit cable operators’ ability to fully transform the search experience. Rob Bykowski of Tivo talks about the promise of the universal discovery experience for consumers. From Rob’s perspective, it’s not necessarily in the interests of the siloed video services to enable universal discovery so trying to coordinate access to the necessary metadata and the business relationships to productize universal search can be difficult.
On the other hand, there are some cable products such as Comcast’s Xfinity platform that feature voice search that have helped improve the customer experience around search/discovery. It’s clear that solving the search issue for video consumers remains a huge opportunity for cable as a way to improve the customer experience while increasing the average number of hours viewed and reducing churn.
The Emergence of 5G Cellular Networks
While there are a lot of new Internet of Things products that the proliferation of 5G cellular networks will enable, the cable infrastructure backbone with 10 gigabyte-per-second download speeds to cable homes will continue to provide a massive advantage over cellular network 5G. “It’s important to understand that “5G” is really just an umbrella marketing term used for lots of different things,” says Jana Henthorn from the Cable Center. “5G refers to the fifth generation of cellular network technology, not download speeds.” According to Phil Schuman, “In terms of broadband speed in the home, there really is no effective competition to cable today.”
The Conflict between Data-Driven Personalization and Human Curation
The availability of data on subscriber tuning preferences means that video subscribers have to balance the desire to benefit from personalized content recommendations that have become the hallmark of standalone IP-based streaming services with a desire to benefit from a more traditional but highly curated Pay TV experience as represented by the traditional cable network bundle.
In addition, as the number of streaming services proliferate (Hulu, Disney+, Netflix, Amazon PrimeVideo, etc.) and costs to access all this new available streaming content grow, we might see consumers once again shift their preference towards a bundled group of networks that provides a better value by aggregating all of this available video content into a single video product.
Whichever way consumer preferences shift, cable operators are in the driver’s seat and should continue to play a key role in delivering video to subscriber homes. Continued investments in infrastructure (including enabling addressable advertising) so that cable remains the foundation on which the Pay TV business sits all while improving relationships with subscribers will help position the industry as an enabler of customer choice for video, home security, and other emerging high-speed data products that rely on fast, reliable high-speed data networks that only cable operators can provide.
This is a summary from the “How Pay TV is Revamping to Respond to the Migrant Video Subscriber” panel discussion from the most recent TV of Tomorrow conference in San Francisco. I’ll continue to publish these summaries as I review my notes. Sign up for the December 2019 TVOT show in New York here https://thetvoftomorrowshow.com/register-tvot