Direct-to-TV: the operator dilemma

The virtual set-top box, in the form of an Operator Smart TV, is not about replacing all STBs, and cost savings are not the primary motivation for deployment. This new class of device will help operators segment their consumer base, but they must think what happens when someone stops subscribing to an operator content package, writes John Moulding.

How can an operator replace a set-top box with a Smart TV in a customer home and still maintain its position as the dominant UX where someone starts and ends their content journeys? What are the practical challenges for operators looking to do this?

I moderated a panel at Connected TV World Summit last month that attempted to answer these two questions, having first tackled the subject in this column last autumn. Important new insights were aired, so here is a summary of the thinking that helps move this subject forward.

A key point is that, whether looking to private-label and sell their own television sets or partner with a well-known television manufacturer brand and embed their ‘operator application’ as the primary UX, operators are not necessarily looking to remove STBs from their customer premise equipment (CPE) portfolio.

Expanding the options

The direct-to-TV (or ‘Operator Smart TV’) model is about expanding the options for consumers and should be considered as a new form of market segmentation. Some consumers like set-top boxes and some will prefer to get rid of this peripheral device and watch an operator service with just a Smart TV. Direct-to-TV will become a subset of the go-to-market strategy.

A third option in the CPE/go-to-market strategy (alongside STBs and direct-to-TV) is the standard operator app on a Smart TV that does not provide any special prominence to the operator, where they are just another ‘app among apps’ alongside Netflix, national broadcaster streaming services, other SVODs and so on. This does not require a custom designed operator television set or a special ‘primary application’ relationship with a television maker.

An app-among-apps presence makes sense as a complement to a wider multiscreen offer – making the Smart TV another endpoint like a tablet or smartphone. But the only operators who will rely on ‘app-among-apps’ as their entire presence in the home of the future (without complementary STBs or direct-to-TV offers) will be those for whom television is no longer a primary business concern – maybe because it is a low-margin tick-box exercise to go with a far more profitable broadband service.

Any operator that sees TV aggregation as a primary business line will need to maintain it position as the primary, dominant application on television sets, and ‘app-among-apps’ will not be sufficient.

Not about saving money


Saving money will not be the primary motivation for adopting a ‘direct-to-TV’ model. Yes, selling your own custom-built, private-label television does mean consumers pay for the hardware. And yes, if an operator partners to become the dominant UX on a retail television brand that was going into shops anyway, an operator does avoid having to offer its own hardware.

But both these models still involve development costs – notably software engineering. And streaming-only STBs have lowered the cost of delivering your own high-quality ‘peripheral’ device. There is something approaching a consensus that you go ‘direct-to-TV’ for reasons other than saving money.

Beyond segmenting the consumer base more effectively, the big benefit of direct-to-TV is to remove the danger that the growing ecosystem of connected TV OS/UX/device providers can come between an operator and their customers. This approach removes the possibility that pay TV viewers are distracted by increasingly compelling Smart TV home screens featuring content promotions and rival apps fighting for attention while the user selects HDMI1 (where an operator STB resides).

For this reason, direct-to-TV must give operators similar prominence to what they achieve with a set-top box. Larger operators want nothing less than a virtual STB experience, even if they are harnessing existing retail television sets in partnership with a known manufacturer brand (rather than private-labelling their own models).

No one-size-fits-all outcome

However, there has to be a ‘win-win’ relationship with the television maker in this partnership scenario, and negotiations will decide exactly what falls inside or outside the operator and TV maker domains. An operator determined to be a super-aggregator will want the likes of Netflix and Disney+ (as examples) curated within their operator application, but in other cases these could be outside the operator application.

Some operators may look for physical ‘prominence’ from a branded manufacturer partnership, like an operator branded remote control or remote control button. There is no reason to believe there will be a one-size-fits-all outcome from negotiations involving operators and TV makers of different sizes, each with their own strategic goals.

Every operator must think about what happens if they acquire content subscribers using the direct-to-TV approach and the consumer then ceases to be a content customer. One of the biggest considerations is who maintains the television UX, including app updates and security updates, for the life of the television set if there is no longer a transactional content relationship with the household that bought the television.

There is an assumption that whichever direct-to-TV approach is used (private-label or brand partnership), the television set defaults to a base-level user experience that is equal to a typical retail television set model that never had an operator application running on it. If the operator partnered with a known TV manufacturer brand, the obvious solution is that the TV brand effectively ‘re-adopts’ the television set and the operator application is uninstalled.


The ‘life-after-operator’ scenario is an important consideration before any partnership is agreed. It is especially important for an operator offering a private-label television, since their brand is front-and-centre on the hardware. There is a reasonable possibility that the television set OEM they work with also has retail brands in-market, so ‘adoption’ could be an option here, too.

Any operator embarking on the direct-to-TV journey needs a customer care strategy upfront. With a private-label television, the operator is the ‘front of house’, like they are with a set-top box, but will have to draw on hardware expertise that was once outside of their remit. If moving to a ‘life-after-operator’ stage, care calls must still be resolved or forwarded to someone else, unless you want to risk brand equity.

If an operator is running its operator application on a known retail television make, using the partnership model, it needs to agree how customer care is delineated in advance. Which functions will be resolved by the operator care team, and which functions are resolved by the TV manufacturer, and what are the practical and business arrangements for passing customer care calls between the two organisations?

In terms of technical implementation, a key consideration, and perhaps the most important one, is how you onboard streaming service apps and where you get them from, how they are certified and then maintained. Lots of the work already completed for set-top boxes can be carried over to the direct-to-TV domain but this completely new class of operator ‘CPE’ does provide an opportunity to rethink strategies. If partnering with a retail TV maker, data control and privacy are going to be key considerations, too.

Additional observations

I was lucky enough to moderate a panel at Connected TV World Summit in March featuring Chem Assayag at Orange, KPN’s Alejandro Casal, Lennart Sohst from HD+, Consult Red’s Peter Fox and Anette Schaefer at BIG Picture. If you did  not see it, I would advise you to check the event website to see when the recording becomes available, as they contributed considerably to the ‘body of work’ that is available on this subject. Here are some additional observations on the topic (including from unrelated sources):

  • There appears to be an opportunity for Google to get involved in this market, if they wanted to, with a kind of Android TV Operator Tier for the television set. The company has already established the principle of an operator application running on hardware (set-top boxes) as the primary UX while harnessing the wider Google services ecosystem, and it also provides an OS/UX environment for retail brand television sets.
  • Private-label direct-to-TV syndications could develop where groups of small Pay TV providers make this model viable for themselves. We are already seeing how collaboration could drive this part of the market with the Sky Glass international syndication programme. The private label model is currently considered a ‘big operator’ approach, but it may not always be that way.
  • The most likely implementation for a retail partnership today is an operator application running on a television OS developed or controlled by the television maker. But there is already a subset of this model where an operator can also provide the OS for the television, as witnessed in the U.S., where the Comcast global technology stack (the common OS/UX foundation behind Sky Glass) is used for Pioneer Xumo TVs and Hisense Xumo TVs sold at Best Buy.

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