Innovation for broadcasters and operators is not just a matter of survival, but offers a wealth of opportunity for the long term.
It is a set of foundational decisions to increase profitability from core activities and build new business models in the accelerating digital market while leveraging and building upon current advantages and control points.
Though the options and paths to success may differ, shared challenges exist across media and communication service providers and understanding the issues and challenges to solve is the start of the journey. The prize is scalable, sustainable digital businesses.
New market realities for operators and broadcasters:
- Customers are liquid;
- Markets are disrupted;
- Returns from traditional businesses are eroding.
For many firms, the profitability of the portfolio is shifting:
- EBITDA is either flat in the core business; or will soon be after the latest round of simplification;
- Traditional growth strategies through massive consolidation are being scrutinized more and more by regulators;
- The value of all-encompassing, bundled subscription revenues are being questioned as new spenders seek online alternatives with operators trying to find the “next bundled product;”
- There is pressure on traditional revenues such as linear advertising where digital is currently unable to make up the difference;
- Competition for exclusive content is rising, pushing up costs as global, web-scale providers find new ways of monetizing with fewer dependencies on affiliates.
Mapping the solution journey
Today’s rule book is completely different from when operators and broadcasters first became successful.
To remain competitive and prepare for new market realities requires innovation across product, engineering, commercial propositions and content. This must be executed with a transformational mindset that truly leverages the capabilities built up throughout the years. For organisations in broadcast and for the operators’ new consumer and business offerings must be developed, tested and refined with increasing velocity.
Another new reality is finding the confidence to launch propositions – executed at the right time – that may cannibalize existing business models, in exchange for data that can create a different value equation for the industry – all on a foundation that benefits a number of business models as transformation occurs.
Trash the rulebook and thrive
Operators and broadcasters must question their position in the emerging digital value chain while maintaining leverage in the traditional ones.
The key is understanding the disruptions and deciding how to nurture business models that can attract new revenues, minimise the effect of cannibalization of existing customers while facilitating a timely shift to digital growth. We call this journey the S-curve and is a framework for balancing these potentially conflicting goals.
Internally, this will require workforce and cultural transformation unlocked by advantages in technology. Externally, it will require the creation of new relationships with both consumers and business customers in order to be more agile to their needs while maximizing profitability.
When we think about the changing rules of the game, it is clear that operators and broadcasters are experiencing digital disruption to a greater of lesser degree. The super platforms are causing much of the disruption, but disruption can come at any time from a broader set of ecosystem players who are trying to break down the barriers brought upon by the traditional value chain.
Digital companies currently have some advantages. Broadcasters and operators carry sunk capital in broadcast or network infrastructure, need to keep up on content and programming investments, and rely on outmoded processes which support the core business. It is this core which provides most of the revenues but which is experiencing little or constrained grow.
For operators, a significant challenge is the change from being infrastructure-bound and evolving from non-scalable legacy operating and technology models to platform based business, operating, and tech models – leveraging technology not as supporting systems but as assets.
While this can also apply to broadcasters today, without larger scaled bets such as a commitment to more global direct distribution, they are as likely to be experiencing that “me-too” approaches to digital video are failing to offset declines in the traditional business, which could result in more consolidation.
Journey to a new future
Both face barriers to entry and market boundaries that are collapsing. Both need to explore new growth opportunities which involve becoming embedded in the daily digital routine of their customers.
The starting point is a migration from inflexible infrastructure and processes to reduce costs and drive profitability in the core business.
It requires a digital transformation program that is not IT, not product, but all-encompassing across the business – unlocking innovation to experiment while leveraging core advantages.
To deliver this requires a new way of looking at the technology vendor ecosystem. Vendors should no longer be viewed as monolithic systems suppliers but as part of a broader ecosystem – enablers and augmenters of company-owned data-driven platform capabilities that support innovation and new processes to unlock the intelligence and the decision making of an organization, preparing it for new ways of transacting commercially while serving consumer needs.
--Sef Tuma is managing director and global lead, Accenture Digital Video