The television industry is facing a much more rapid period of change that could see significant numbers of subscription TV channels fail, according to a report prepared by The Boston Consulting Group for international cable operator Liberty Global.
According to Liberty Global’s The Value of Content report, free-to-air channels will be well-positioned if they can manage the transition to wide-scale non-linear viewing and large infrastructure-based distributors are likely to prosper. It predicted that the future of the TV business is likely to evolve around one of five scenarios.
The first is that the industry will continue along a path of gradual evolution within the framework of its current structure, with an increased value placed on formats such as serialised drama that work well in the non-linear world, while infrastructure based distributors work hard to develop TV Everywhere services to counter cord-cutting.
The second scenario postulated by Liberty Global is that the development of content discovery and navigation tools that work across multiple platforms will disrupt the existing structure of the industry; in this case, traditional distributors that develop compelling navigation tools that work across online as well as linear content are likely to survive, while online content aggregators may “see their power diminish” as a result of the traditional players’ ability to cement a stronger relationship with viewers.
The third possibility suggested by the cable operator is that traditional distributors and online aggregators will focus on securing exclusive content, increasing the value of sports and entertainment rights and working to the disadvantage of smaller operators that are unable to compete for rights.
The fourth direction the industry could take, according to the report, would be for content rights holders to increasingly adopt ‘direct-to-consumer’ strategies. In this case, traditional infrastructure-based distributors will suffer from increased cord-cutting while online aggregators will also lose subscribers. However, taking this route is also risky for content rights-holders, with those like HBO with a strong library and brand most likely to succeed.
The final scenario postulated by Liberty Global is that online aggregators will move aggressively into linear streaming of broadcast channels, potentially replacing infrastructure-based traditional distributors. This, says Liberty Global, is a danger in mature markets with well-developed broadband infrastructure available.
Taking all five scenarios together, Liberty Global suggests that sports and entertainment content rights-holders are likely to be in a stronger position as the value of their rights increases under all five scenarios. Free-to-air channel providers with strong content offerings are also likely to survive and prosper if they can embrace non-linear distribution successfully.
Subscription channels are likely to face an uncertain future, however, with stronger brands likely to be able to develop direct-to-consumer offerings while second-tier channels face a long-term decline.
In the battle between infrastructure-based distributors – such as Liberty Global itself – and online content aggregators, the report suggests that distributors with strong video and broadband offerings will be well positioned if they can offer improved navigation tools, while smaller operators will need to expand their capabilities through partnerships and mergers to survive.
Online aggregators, on the other hand, must choose whether to launch an all-out assault on linear TV by developing live services as well as choosing whether to focus on advertising-based or subscription models or a combination of the two and whether to invest in building international scale on the Netflix model.
“While there are a range of alternative scenarios for the future of the television industry, we believe that the future is more likely to be revolutionary than evolutionary. The well understood roles within the different value chains will see a significant degree of disruption – and for the players that have traditionally assumed those roles, change will be required,” says the report.
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