Being a broadcaster is a challenging occupation: A dwindling audience for linear TV, slow commercial broadcasting revenue growth, the complexity of OTT distribution and monetization, and concerns about the long-term survival of the traditional high ARPU, high commitment pay-TV market all make for a difficult operating environment. The outlook for broadcasters over the next five years is difficult to predict, but in Ovum’s opinion, they have four key challenges to face in the short term (not to mention the day job of making or licensing great entertainment to entertain audiences):
Determining how far to rely on advertising, content, and distribution, and strategizing appropriately: Are these mature segments to be defended for cash or invested in for growth? How much investment is required? How long is the investment horizon?
Navigating the growing complexity of windowing and maximizing the value of all routes to the audience (TV, OTT, and mobile): Broadcasters must decide whether to realize distribution opportunities on a proprietary or third-party basis.
Defending the role of the broadcaster in the broader visual entertainment value chain: Broadcasters must respond to strong competition from scaled OTT streaming specialists; acquire or acquire access to advanced TV advertising technology; and ensure long-term access to audience viewing and TV usage data gathered at the service provider level.
Thriving post-AT&T–Time Warner merger: Who’s going to look smarter in 10 years? Them or us?
The severity of these challenges and the strategies available to address them vary according to geography and the strengths of the company responding.
Ovum’s TV team believes that although broadcasters must defend the value of live TV, their primary purpose now is to maximize the value of produced or licensed content across all distribution channels. The opportunities stretch far beyond the main screen, and the distribution technologies, charging models, and economics are distinct from traditional TV.
In the run-up to an AT&T–Time Warner merger, every content owner is wondering whether it can thrive, or survive, without owning distribution. And every distributor is wondering how much content it needs to own and produce, and how much it can rely on other companies for.
The TV industry is changing slower than the habits – and spending – of the audiences it serves. It will be years before the TV industry evolves its service models and economics to capitalize on the opportunities available. By then, the suppliers of TV content, technology, and services will have changed noticeably from what we recognize today.
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