Interesting article. Too laborious to copy entirely, so I'll include most of
the meat of it. I think it's interesting how the MVPD evolution is described,
including these two components:
"At one end of the spectrum will be operators who focus on delivering broadband
services. Their biggest differentiator will be their asset base and their
ability to effectively manage capital investments. At the other end of the
spectrum will be OTT providers, who will become aggregators of various services
and also, potentially, create content themselves."
And the new, more flexible business models.
Bert
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http://performance.ey.com/wp-content/uploads/downloads/2015/11/EY-Performance-MPVD-business.pdf
This article is an extract from Performance, Volume 7, Issue 4, November 2015.
The full journal is available at ey.com/performance
Reinventing business models for the new era
To stay relevant in this dynamic industry and build a competitive advantage,
MVPDs have the option of either commoditizing their services and focusing on
continually optimizing their cost structure; or they can reinvent themselves
with a reimagined set of product portfolio and service capabilities with new
business, revenue and operating models.
Expanding portfolio of products and services
MVPDs have a unique position in the marketplace as the providers of “lastmile”
connectivity, owning a trusted relationship with the customer and significant
knowledge of consumer needs. We expect to see MVPDs begin to leverage this and
redefine themselves as the service provider to the “connected life.”
We expect MVPDs to drive broadband and OTT services. At one end of the spectrum
will be operators who focus on delivering broadband services. Their biggest
differentiator will be their asset base and their ability to effectively manage
capital investments. At the other end of the spectrum will be OTT providers,
who will become aggregators of various services and also, potentially, create
content themselves. Their differentiator will be their ability to understand
consumer needs, build agility and offer an unparalleled customer experience.
Falling between these two opposing ends of the spectrum will be an array of
existing and new services that MVPDs will offer (see Figure 3).
Unbundling content and services to target customer needs
Successful MVPDs will treat each customer individually and offer targeted
services. Some MVPDs will also leverage the unbundling trend to create niche
services targeted at a specific set of audiences. MVPDs will configure services
based on customer needs across broadband, video on demand, TV channel bundles,
gaming and a variety of other services customized to suit individual needs (see
Figure 4). The winners will be the ones who can use big data and analytics
insights to create relevant packages of service offerings for individuals, as
well as provide unparalleled customer service.
To drive enterprise-wide growth, MVPDs will seek to expand their range of
products and services; however, they cannot bring all these offerings to the
customers on their own. MVPDs will need to select their product portfolio
carefully and create winning partnerships with key players for aspects where
they do not have a core competency. This includes identifying capabilities in
areas such as gaming, security, home automation and the Internet of Things
(IoT), that MVPDs could develop or acquire. Additionally, we
expect to see MVPDs integrate vertically (inorganically or through
partnerships) into content to drive growth in video services and control rising
programming costs. MVPDs will also become superintegrators or aggregators of
all content for customers, seamlessly delivering services across entertainment,
communication, home and life management.
Transforming revenue models: leveraging “freemium” and advertising models
MVPDs will need to experiment with new revenue models for different consumer
segments (see Figure 5). For example, MVPDs could adopt the freemium model to
introduce new services for free, or provide a set of ad-revenue-supported
services complementing the traditional subscription-based services.
Alternatively, MVPDs should consider offering both a subscription-based model
and a freemium or ad-subsidized model based on customers’ willingness to share
data and participate in advertisement campaigns. This would give the customer
the flexibility to choose the model based on their willingness to share
information. However, to leverage the advertisement revenue stream (with an
addressable opportunity of more than US$80b), MVPDs need to build capabilities
that microsegment customers and target them with the right solution or services.
Key imperatives for MVPDs to drive value
As MVPDs look at repositioning themselves, success will depend on their
abilities both to reinvent themselves strategically and drive excellence in
customer insight and experience.
Identify new revenue opportunities
Given the rapid changes in their operating environment, MVPDs actively need to
seek additional revenue opportunities that will allow them to maintain growth.
Some of these opportunities could come from new product and service launches as
well as from new revenue agreements (see Figure 6). Incremental revenue streams
can be built on MVPDs’
existing asset bases, without incurring large capital expenditure, through new
product offerings, such as smart home, telehealth, personal information
management and cybersecurity.
In addition, MVPDs could create customized service bundles that reach a larger
audience and increase subscription revenues. MVPDs could also share in the
income derived from targeting ads and restructuring the advertisement inventory
available to them. This would drive yield management and deliver a better
return on marketing investment for brands that target consumers. MVPDs are in a
unique position to reshape linear advertisements by leveraging their deep
understanding of the customer.
Create agile business models
MVPDs must pursue agile business models if they are to compete effectively amid
blurring boundaries between content providers and distributors, shrinking
product life cycles and transforming distribution models. MVPDs will need to
grab the opportunities emerging from changing customer preferences through
partnership with other companies, new technology developments and increasing
competition to establish themselves as industry leaders and niche experts (see
Figure 7).
They will also need to offer more flexibility to customers to enable them to
design and modify their own bundles, watch the advertisements they prefer and
manage their spend across the various services they consume, based on their
needs. Furthermore, with increasing demand for content, networks speeds and
improved connectivity, MVPDs will continue investing in infrastructure
upgrades. Given the increased capital expenditure associated with the upgrades
and rising programming costs, MVPDs will need to drive cost optimization
through business model innovation, such as network sharing or spin-offs of
assets into real estate investment trusts. They will also need to improve the
cost of operations through analytics-driven service-delivery model optimization.
. . .
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