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The hybrid route

Sylvain Thevenot_pictureHybrid TV solutions are the only models that offer choice for consumers and operators, argues Sylvain Thevenot, managing director, Netgem Europe

The ongoing debate continues to rage around the value of free-to-air versus paid subscription services and what the ideal business model looks like in a disrupted and fragmented TV landscape. But which is the better model for operators who need to generate revenue and consumers who are increasingly demanding more choice, both in terms of content and cost, from their providers? Both have their benefits and disadvantages, however the best option may lie somewhere between the two.

Free offers access for all, but…

The primary benefit of using a free TV service is just that – it’s free. There are no contracts tying in viewers for protracted periods, and a significant number across Europe now offer a wide array programming. This makes it an attractive option, and enables large numbers of consumers to watch free programming. In the UK for example, then top 10 most viewed channels in May were all from free-to-air broadcasters.

In many cases, free TV providers have also launched free on demand services too, enabling viewers to catch up on their favourite free-to-air shows at a time and place that suits them. With such easy access to content, it is possible to argue that an increasing number of viewers will look to free TV services as their primary source of content.

However, while free TV may be able to service the needs of viewers across Europe enabling access to some of the most popular channels, it won’t necessarily offer access to marquee events and shows, such as topflight sporting events and the latest movies, because of the high costs associated with purchasing the licenses to broadcast such programming. The only revenue a free operator can secure is through the channels it brings to the service. Pay-TV providers, capable of securing greater revenues, do have that capital available to them, meaning they can make such investments and potentially attract more viewers. Does this make Pay-TV a better option for those who want to access premium content?

Pay TV can offer premium content, but at a cost

A paid-for TV proposition provides tempting premium content for viewers, including sports, movies and entertainment. In the UK, Game of Thrones proved to be one of the most popular shows in May, a programme only available to viewers who paid to watch it. Such platforms can also offer these shows via catch-up, VOD and OTT within the packages they offer consumers, enabling them to access premium content at a time and place that meets their demand to access content in a flexible manner.

Pay-TV providers can also offer their customers a more personalised service, including bespoke content recommendations that can be surfaced to the main hub based on subscriber data, creating a simpler discovery experience for viewers. Portugal’s Nos TV is one such provider that offers this service, even providing different recommendations for each user in the house as they log onto the service.

But Pay-TV isn’t a perfect model either. With some packages costing as much as £1,000 a year, it can exclude those viewers who are not willing to make such an investment. Providers also need to work tirelessly to ensure their subscribers are consuming their programmes, particularly original content, and not moving to third party services, otherwise they risk losing those viewers to those services and the associated subscription revenues. As such, few are willing to incorporate such propositions on their platforms, which delivers a lesser service to consumers who are increasingly demanding access to Netflix and such similar options Over-The-Top, which creates a risk of losing customers as they cut the cord.

There are opportunities and challenges of both free and pay TV. In a rapidly changing landscape with content consumption increasingly taking place away from the usual sources, new entrants in particular need to investigate models other than this traditional dichotomy of free or pay. A promising alternative lies with a hybrid free and paid approach.

The ‘hybrid’ alternative

With the most popular channels still originating from free broadcasters, but the most popular shows coming from a paid environment, there is an opportunity for operators to deliver new services to consumers that offer a best of both models, particularly for telecoms operators who are looking to develop TV as part of their propositions. By investing in a service that is based on free TV channels and topped up with premium content propositions, operators can offer consumers access to a full spectrum of TV services, including optional access to OTT services such as Netflix and Amazon TV. By implementing such a solution operators can offer consumers the choice they increasingly demand, without forcing them into costly subscriptions.

A hybrid model can also offer the consumer recommendations in a similar style to that of a Pay-TV service. By being internet-based, operators can use the consumer’s viewing history, tied with their user ID to create a personalised offering that surfaces content the user is most likely to be interested in.

A hybrid service with free TV and premium content delivered over IP not only benefits the customer. Operators, particularly telcos with existing consumer broadband models, can launch such a service quickly and with little infrastructure investment as they already have the networks in place to deliver the premium content and the free TV service is readily available to all. Additionally, those telcos with mobile propositions, such as EE with EE TV in the UK, can also offer these services on mobile devices, meaning users can take content away from the TV and onto the second screen at time and place convenient to them, not the programme schedule.

With premium content and low or cost-free accounts, viewers can enhance their choice of programs by building their own hybrid package. Premium TVoD services such as Wuaki.tv, ad funded platforms such as YouTube, and SVOD like Netflix and Amazon provide a top-up to Free TV. This enables viewers to choose the services and content they want, with a pick-and-mix style solution, so they’re no longer paying for what they don’t use – just the programmes they watch.

The TV landscape is changing, particularly in markets where consumers are increasingly choosing alternative outlets to consume their TV content that can offer a range of programming at a cheaper price. Free TV is no longer enough, and the traditional Pay-TV providers simply cost too much and don’t provide access to the new and exciting services available. By implementing a hybrid free TV with access to premium content at the touch of a button model, operators have an opportunity to secure a growing and technologically knowledgeable demographic that is prepared to leave a provider that doesn’t give them what they want – choice.

Tags: EE, Netgem, NOS

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