Attention pay-TV providers: Testing new content distribution could be the channel for success

January 27, 2015
4 min read

The question of TV’s future resounded at the 2015 Consumer Electronics Show (CES). Experts came together to address the challenges that new ways of consuming content, and younger cord-cutters have placed on traditional pay-TV models. The topics are not new, and pay-TV providers have been considering, and implementing, new techniques to reach an audience whose content sources are increasingly fragmented. This year, Dish added fuel to the discussion by unveiling its response to cord-cutting millennials by announcing an over-the-top (OTT) service, Sling TV.

For $20/month, Sling TV streams a dozen channels, including ESPN, TNT, TBS, Food Network, Travel Channel, Adult Swim, Disney Channel, and CNN – specifically targeting a millennial audience which Dish says pay-TV service has not been reaching.

Dish CEO Joseph Clayton explained, “We do not believe providing [Millennials] with a streaming OTT service will cannibalize our satellite service… because we’re not reaching them today.” He added that Dish recognized a visible gap between the number of households in the US and those that subscribe to pay-TV service. Many of those non-subscribers were Millennials. “This gap is our market opportunity,” he noted, “Sling TV is part of the solution.”

In fact, Mintel’s Pay TV and Home Communication Services – US, 2014 report found that while price was the most-cited reason that individuals did not subscribe to a pay-TV service (45%), the use of subscription video on demand, or sVOD, services such as Netflix and Amazon Prime was the top reason Millennials cited for not subscribing (50%). Dish may be onto something by targeting this group with a reasonably priced OTT service.

If successful, Dish may have found a solution to cord-cutting. However, challenges remain across the industry. At CES, providers and networks focused in on the challenges of a changing industry, driven by the proliferation of content, and the ways consumers consume that content. Several key themes, each with its own challenges, continued to emerge.

  • Content choices proliferate, and consumers want a personalized experience. How do providers help consumers discover content, particularly considering that consumers are following content, not networks? Perhaps spurred by Netflix, many pay-TV providers have started offering recommendations and made changes to their user interfaces to make it easier for consumers to discover content.
  • Consumers are interacting with content across many screens and different screens yield different experiences. Providers and content creators are challenged to present content differently to maximize the experience on each screen. With TV Anywhere offerings, pay-TV providers have embraced multi-screen access making the process seamless and consistent for the consumer.
  • Consumers are increasingly time-shifting content. Time-shifting occurs in many ways, whether consumers are DVRing a show to watch later that week, or waiting six months to binge-watch an entire season. Binge-watching seems to be gaining wider encouragement from the industry. However, providers (and content creators) seem to be grappling with how to handle this popular consumer trend.
  • 4K technology is emerging. Producing content for higher resolutions is more expensive and complicated. Dish seems to be getting ahead of 4K with its unveiling of the 4K Hopper, offering a channel for 4K content.

The majority of issues resurfacing during CES 2015 resulted from consumer behaviors that have emerged or amplified over the past decade. Fortunate for consumers, pay-TV providers have already taken the first steps in embracing these behaviors. Content recommendations, binge-watching fests, TV everywhere offerings— all ways to consume content that didn’t exist ten years ago.

There is certainly a huge segment of the population that is well-served by traditional pay-TV models. But as Millennials mature, and generations grow up behind them, pay-TV providers that don’t take risks and test new methods of providing content will find that the majority of consumers have outgrown their services.

Emily Groch
Emily Groch

Emily Groch is Mintel Comperemedia’s Director of Insights, Telecommunications, providing omni-channel marketing analysis and competitive insights to telecom providers.

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