Cross-border entrants to further disrupt TV and broadcast industries

01 September 2017 Consultancy.uk

Media and entertainment delivery is changing, throwing traditional television and broadcast companies into a period of uncertainty. Large international diversified technology giants and new pure play over-the-top (OTT) on-demand services are set to be the major winners. Many large international markets, including the UK, are ripe for disruption the report adds, with various enablers already in place. 

Disruption, and revolution, may be about to hit the television market as broadband internet capable of transferring video – as well as a range of new models for content creation and distribution – challenge the traditional television market and its incumbent players. Consumer behaviour too is changing, with younger generations shifting their entertainment time increasingly into on-demand based entertainment, from video games to OTT services. A new report from A.T. Kearney, titled ‘NextGen Video: Winning in the New Video Environment’, explores market changes and how various incumbents and disrupters are acting.

The ‘TV’ landscape is quickly transforming into a ‘video’ landscape, along multiple axis, from the creation of content to the hardware on which content is being delivered. Major disrupters in the market include Alphabet owned Youtube, Netflix and Amazon, which each offer different ways of accessing content, largely in an as needed/on demand way. Content creation has also become increasingly important, with many of the new competitors investing significant sums into the creation of new content for their platforms, with the content branded as Netflix Original being one famous example.

The TV ecosystem

One of the major advantages of the new disruptors is that they offer much of the same entertainment value, plus a wide range of additional content thanks to this original programming. Companies are meanwhile often already well-trusted by consumers. Key negatives – such as a barrage of advertising, long-standing low NPS and paying for redundant content – are avoided.

The upsurge in new entrants to the market is largely driven by consumers, keen to access content when and where they want it, while being able to avoid various negatives associated with more traditional incumbents.

Disruption ready

While disruption is a global phenomenon, which is one of the major hallmarks of the change as content delivery through the internet has global reach, different countries have relatively different development profiles. To provide insight into key metrics implicated in driving disruption, the firm created the TV Disruption Index, based on three key metrics, connectivity, supply/demand and environmental conditions (innovation environment, regulatory environment, English language proficiency).

Top 20 countries in A.T. Kearney TV disruption Index

Sweden is the country most likely to see its traditional market disrupted, with a strong score in connectivity, although relatively weaker scores in demand/supply and environment, at #23 and #10 respectively – the country is relatively active in innovation, with startups such as Spotify, Voddler, Magine, and Mavshack. Australia takes second spot, losing out somewhat on connectivity although coming in at #20 and #7 respectively in the other metrics. Singapore, the United states and Denmark round out the top five.

The UK has a relatively high disruption potential, particularly in the environment where it takes the number one spot (largely due to language capability), losing considerable ground, however, in connectivity.

Three stages to consider

Comparatively meanwhile, countries like Egypt and Pakistan have some ways to go on the path to disruption in this sector, finding themselves at the bottom of the disruption index. Sweden and Hong Kong, meanwhile, have high disruption progress and expected disruption – they fall within the Acceleration segment. China fall just outside the segment, the country is, however, the furthest along the disruption progress timeline. The UK is situated in the adaptation phase, in which the enablers are in place but demand for services is yet to develop.

Leveraging disruption

The future for industry incumbents remains uncertain, the study finds. The major winners are likely to be the major OTT video platforms such as Netflix, Google, YouTube, Amazon, Apple, and Facebook – these companies are able to leverage their considerable international brand loyalty and technical expertise to create and reach vast numbers of consumers across the globe. Production houses too stand to benefit, on the back of increased demand for content and new competition between various major players. Telecoms and cable companies win due to improved demand for internet packages.

Internet companies are expected to be big winners

Pay TV operators and broadcasters are either finding themselves stagnate or losing out. The latter, according to the A.T. Kearney’s analysis, face an array of challenges. Broadcasters will come up against continued overdependence on their legacy business model, deficiencies in acquiring new capabilities, indecision over ‘how and when’ to monetise OTT and on-demand video, and a legacy mind-set about managing customer relationships. This means they remain particularly vulnerable to the new market competitors, who are also able to take risks more nimbly on content.

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