Survival of the fittest: What’s next for the next generation TV, OTT and Pay-TV marketplace? 


A study from ABI Research suggests that the growth of subscription OTT services has been driving the changing trends in the Pay-TV landscape. According to the research, the OTT growth trend is expected to continue, reaching a subscriber base of 400million in 2018. With Amazon Web Services, Netflix, Hulu, Apple and Facebook, as the top five OTT providers dominating the market in 2018, it’s hard to see this trend reversing.

Such studies bolster Ofcom’s Media Nations report that confirmed the viewing habits of the great British public. For the first time, it found that the number of UK subscriptions to television streaming services like Netflix had overtaken those to traditional Pay-TV. It marked a major shift. Revenue generated from Pay TV also fell, after a period of sustained growth, and public service broadcasting spend on original UK-made programmes decreased too.


To co-exist and compete

Intense competition in the OTT space will fuel a need for broadcasters to differentiate their offer, driving them to release more exclusive content and deliver a superior customer experience.

Nick Herm, director of strategy at Sky, agreed. “The customer should be put first,” he explained. While Mike Darcey, the ex-CEO of News UK, former COO of Sky, and now non-executive chairman of M247, the Manchester-based connectivity and infrastructure provider, argued that the sector is still in its infancy – no one really knows how radically OTT will change the traditional Pay-TV model.

Herm and Darcey are speakers at the upcoming Media Leaders Summit (November 29, London); as part of the 3-day leadership summit, TMT World Congress 2018. The event, sponsored by Linklaters, offers more than 200 media professionals the opportunity to engage with leading figureheads and discuss media investment, M&A strategy and changing trends within the media landscape. Including how next generation services can enable both OTT and Pay-TV broadcasters (such as Sky, EE, Virgin Media, BT, Now TV, TalkTalk, Amazon and TVPlayer) to co-exist and compete in a digital age.

Darcey said: “Is the big bundle dead and will we see a proliferation of independent OTT mini-bundles, with traditional content suppliers abandoning the old model and taking the OTT path themselves? Or does the big bundle survive, gradually absorbing the OTT players into an even bigger content bundle? Or is there some kind of middle ground co-existence, in which everyone ends up doing a bit of everything? Only time will tell, but the history of entertainment media – from radio through cinema, free and Pay-TV – points to new models, ushering in a new equilibrium of co-existence, rather than the old being wholly displaced by the new.”

Herm concurred and stated that many businesses in the media space overlap and will frequently need to work together for mutual benefit. He cited Sky's recent partnership with Netflix to bundle it within a core retail package, as an example.

He continued: “OTT and traditional pay broadcasters co-exist and compete today. Next generation broadcasting services will just be one dimension by which they compete in the future.”

Herm cited Netflix, Amazon, YouTube and Hulu as “major players” in the OTT marketplace, and admitted, perhaps unsurprisingly, that Sky and Comcast are leading the Pay-TV realm with Sky Q, Sky’s next-gen HD and 4K TV service, and Xfinity, a consumer-facing Internet and television brand.


Investment and growth

Despite the popularity of OTT, there remains momentum in the Pay-TV marketplace. You only have to look at Comcast’s recent bid for Sky as proof. According to reports, Comcast Corporation’s Brian Roberts, chairman and CEO, was so impressed with a demonstration of Sky Q that he supposedly followed his gut and paid a winning £17.28-a-share bid for the broadcaster. Outbidding Disney. By drawing on its expertise in technology and content, the acquisition now means that the technology and entertainment company can accelerate investment and growth in the Sky brand and its platforms. Furthermore, the deal – Comcast is now the majority owner of Sky – allows the US giant to grow its footprint.

Herm, who plays a leading role in strategy across Sky UK, including understanding future trends, rights acquisitions and the development of new business opportunities, suggested that media professionals should be aware of further consolidation, growing programming budgets amongst Amazon, Apple and Facebook, and even Google, and the evolution of discovery technology, in particular voice.

He also stated that there are plenty of big players in the market, but savvy investors and businesses should listen carefully in order to grasp the innovation that is most valuable to customers. Better services and innovation, he believed, will bring more paying customers to the market.

He continued: “M&A activity will encourage more businesses to invest more to create content and products on a global scale. The consumer should benefit from this.”

Herm’s opinion is bolstered once more by ABI Research that concluded that OTT video services would add pressure on traditional Pay-TV services. Therefore, content and quality of service will be vital if Pay-TV services are to win the battle against OTT providers.

“I'm not sure it is right to portray the world as an 'us' versus the 'tech giants', the reality is much more nuanced,” concluded Herm. “My one piece of advice is to be careful about being too binary in an increasingly complex world.”

For more information about the Media Leaders Summit, including tickets, please visit Media Leaders Summit 2018 or contact enquiries@tmtfinance.com for speaker and sponsor opportunities.