Revolution: A dramatic and wide-reaching change in conditions, attitudes, or operation. This term is overused – and abused – by many in the technology industry. But when it comes to how TV and video service providers are changing how they run their platforms, it's strikingly apt.
Last month, I had the privilege of chairing the Future of TV Operations track of this year's Connected TV World Summit. There, delegates heard how KPN, Orange, Sky Italia, TDC, and YouView were transforming their operations to become more data-driven, software-based, and agile.
The TV operations revolution: Making change the only constant
It's hard to overstate how significant these changes are. Historically, a lack of data, inflexible hardware, and bureaucracy meant service launches and feature upgrades could take traditional TV operators several months, if not years, to roll out. Now changes can be made hourly.
There are three main reasons TV operators need to move faster:
Consumers are demanding more. Innovation elsewhere in the digital technology and services market is setting ever higher expectations among consumers. They want more flexibility from TV and video services, from access to control to ways to pay – and they want it now.
Netflix & co are already there. "Born-digital" players such as Netflix, YouTube, Amazon, and Facebook are already well versed in rapidly evolving their services. The combination of these capabilities with growing investments in premium content will make it more challenging for slow-moving operators to capture consumers' attention.
Content isn't getting any cheaper. Driving down technology costs will be crucial to offsetting harder-to-control increases in content rights fees. To put this in perspective, a forthcoming Ovum study found that annual spend on content by the world's top 31 telcos grew more than fivefold from $2bn in 2008 to $11bn in 2015.
True, many changes are small and incremental today. But as the practice expands and understanding grows, momentum will build, leading to ever more innovation in the kinds of TV services consumers can enjoy. Change will be the only constant.
Here's my view of the key drivers that emerged at the conference:
Radical pricing. Amazon Web Services (AWS) has played a critical role in the TV operations revolution by enabling operators to pay relatively small amounts to rent computing power to develop, test, launch, and grow services without making huge capital investments in their own infrastructure. Now that this model is well established, competition is turning to even more flexible pricing. YouView, for example, described how Google Cloud Platform's per-minute pricing seems more in tune with its workloads than AWS's per-hour model.
Micro-modularity. Despite vendors' obsession with the phrase "end-to-end," many major TV and video service providers are tending toward a more modular "best-of-breed" approach that draws on multiple suppliers and bringing more development in-house. Several speakers agreed that the next evolutionary step will be the growing adoption of "microservices," with platform operators further breaking down applications in their technology stacks into loosely coupled components to reduce complexity and accelerate development.
Machine learning. Operating platforms of such unprecedented flexibility will require great intelligence – and not just of the human kind. Sky Italia described how it was seeking a system that would harness big data and artificial intelligence (AI) to orchestrate its platform's use of public cloud services such as AWS and in-house infrastructure. This ability to optimize will be particularly important to established operators that must both maintain their legacy platforms and invest in cloud technologies, all while driving down costs.
Vendor evolution. To remain relevant, vendors must become more open. The influence of AWS is making technical self-service portals mainstream for major TV operators and not just for start-ups. The desire for more modularity means vendors should consider also basing their architectures on microservices, if not selling access to them. Most importantly, vendors must evolve to become as agile as their clients, fundamentally changing how they sell, deploy, and support their technology to work in ever-closer partnership with operators. Trust will be the new lock-in, said Orange.
True transformation. The sea change is already starting to extend beyond technology departments and their vendors. The most forward-looking operators have already started to form cross-functional teams composed not just of different kinds of developers, but strategists, marketers, customer support staff, and others who help to design and support great TV experiences. KPN's ultimate measure of success, for example, is not a typical operational one, but the "Net Promoter Score." Essentially, it answers the question: Do customers love your product?
Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.