Consumer needs, revenue streams changing in the world of television

July 13, 2015
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Pierre Cloete Head of Practice, TV and Media, Ericsson sub-Saharan Africa
Pierre Cloete
Head of Practice, TV and Media, Ericsson sub-Saharan Africa

, Sitting in a dark room with a large screen and surround sound, an atmosphere that can only be created when people are experiencing the same emotion at the same time, this was what the cinema was all about.

A few years on, and the majority of people I know have a big screen or plasma TV at home, with surround sound, and most of them also have Video-on-Demand (VoD) service. Now, with countries headed towards the migration from analogue to digital, and with the growing number of connected devices in the region steadily growing, broadcasters are faced with intense pressure to find business models that will give us access to all of the channels we want, while still making a profit.

Once we switch from analogue to digital, broadcasters will be able to offer a number of channels in the spectrum which previously was only able to transmit a single analogue channel. Viewers are likely to have a wider range of channels to choose from, meaning more content will need to be produced, with the same amount of advertising revenue. A practical scenario would be that if the combined annual advertising budget for South Africa is USD100 000, distributed among the four free-to-air channels, and, the same advertising budget will soon be distributed among twenty channels after the migration. This means that there will be less money for each channel to earn in revenue.

The cost for free-to-air broadcasting in the region has grown significantly in the past few years, rising above the advertising growth. Therefore, after the migration, broadcasters will need to adapt to the changing consumer needs and protect the advertising revenue with diversified services. Content has always been king, but over the next few years, distribution may take the throne. As the demand for more personalized solutions increases, subscribers want to access content when they want it and where they want it.

People will always default to the biggest and best screen available to them. If you have access to your TV and your phone, you’ll choose your TV to watch first.  This is an opportunity for broadcasters to use the additional channels to provide services that were previously unavailable. For example, Time Warner in the United States offers its subscribers premium VoD movies on the same day as the films go to theatre. Although this is limited to very few titles, the significance is enormous. Could we be heading toward a cinema and popcorn-less world?

Allowing Premium-VoD services to compete in the first release window is not just about promoting competition, it is also about growing the entire market by giving new customer segments (such as adult members of families with small children) the opportunity to consume films immediately after release.

Although linear TV will continue to have a place in the market, the growth of the television industry will come from streaming and VoD services as consumers are looking to access content at their convenience. The rules that once applied to the TV industry will no longer have merit. Customer loyalty will be hard won. Consumers will demand more choice, better quality, and increased personalization.

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