Broadcast television experienced a rapid global expansion after World War II, and for almost 40 years served as the major medium for entertainment, population education, and advertising.
In most countries, the broadcast network was a government-owned organization, and as such had access to government funding and a competition safety net.
The first potential disruption for broadcast television was introduced in the mid-’80s with the growing availability and affordability of private cable and satellite TV networks. However, instead of competing with one another, the rising Pay-TV companies and the existing broadcasters found a way to cooperate with each other. Broadcasters focused on producing local content, and the pay-TV companies focused on network expansion and acquisition of content rights.
A sustainable coexistence was made possible mainly due to the fact that both of them saw their revenues and profits increase through different business models and a symbiotic relationship: the broadcasters had their content distributed to more people, increasing their value as advertisers, and the Pay TV companies enriched their content offering with local content at a marginal cost, attracting more paying customers to their networks.
But like many other industries, the major disruption came with the increasing availability of the high-speed broadband connection.
When analyzing the trends in the media industry and the key assets of a broadcaster, we can see that the following three elements are responsible for most of the tension and the disruption:
Before our broadband was capable of delivering a seamless, high-quality video stream, global content was distributed in local markets via satellite, cables, or RF (DVB-T). The dependency between global-content-owners and local-network-owners was the foundation of the power balance between the two entities.
Nowadays, with a low-cost CDN, network has become a commodity and the global content owners can access their local audience independently and without going through the local distribution network.
With the rise of the commoditized network, we have experienced a tidal wave of direct-to-consumer content applications: Netflix, Amazon Prime Video, Hulu, HBO Max, Disney+, Apple+, Peacock, and Paramount+ just to name a few.
Armed with a low-cost, pay-as-you-go global distribution network, the global content owners prefer to engage with their audience directly, cut what they see as the “middle-man”, and as part of a bigger picture strategy, the global content owners are no longer renewing the exclusive distribution agreements with local TV operators and broadcasters.
Ad revenue is the key income source for broadcasters and in the last decade advertisers have shifted a significant amount of their ad spend to the internet.
Combined with an increasing content production cost, broadcasters in the ANZ region are seeing both their revenue and their profit decline.
In addition, their audience expects free access to the broadcasters’ content, making it extremely challenging for broadcasters to introduce a different business model.
The global giants set the bar for content quality, catalog size, availability, and cost, making it increasingly challenging for local broadcasters to keep up with the technological developments and the market’s expectations. But by driving the creation, support, and acquisition of localized content, broadcasters can build strong brand relationships with their user bases and are able to ensure a strong position against the richer global service providers.
At a sub-scale environment like ANZ, in order to stay in the game and have a meaningful role with a viable business, we will likely see broadcasters taking one of the following options:
a. Transform to a pure content company
b. Use the giant’s platform for distribution
c. Sharing ad revenue and % of any converted user from free to paid
d. Reduce OPEX and focus on content offering
The potential issues with this approach include dilution of brand as well as a reduction in control over the user experience and a total loss of data relating to your user base – which is arguably the greatest asset a broadcaster has. This approach poses the risk of fading user engagement and brand loyalty but is arguably the lowest risk approach of the four.
a. Similar benefits to above
b. Utilize a single global technology platform
c. Share functions with other regions
d. Potentially retain a local brand and presence
This approach presents a lot of potential to grow and adapt without the cashflow concerns of deploying a bespoke technology solution but results in a loss of local control of strategy which can lead to a more generic offering with less local appeal. The potential dilution of the local brand in favor of the parent brand can be seen as either a benefit (tier one positioning on par with Netflix/Disney) but also a challenge regarding how you differentiate from both local and global competitors.
a. Leverage size to cut unit price
b. Design a platform suitable for the local market
c. Shared post-production and distribution facility
d. Build a global platform to deliver local content
There are many variations of this option, from a government-delivered technology solution through to a co-operative between commercial entities. Freeview is another example in New Zealand and Australia that sits somewhere between a government platform and a commercial collective. This approach can be cost-effective as it allows technology costs to be shared amongst parties, but also presents challenges due to the differing priorities of the participants. Strong governance and a shared vision are key for this option to be successful.
a. Higher costs for platforms and technology
b. Retain a strong local presence and expertise
c. Ensure higher customer engagement
d. Greater flexibility to change and adapt
The final option is the one most often selected by broadcasters and brings the benefits of complete ownership of the platform and roadmap, but can result in much higher costs if not implemented effectively. Leveraging large global technology providers and adapting their global feature and functionality roadmaps, along with their scale can be an effective way to mitigate the cost challenge without sacrificing the flexibility and rich feature set that are expected by end-users. Adopting learnings and best practices relating to implementation and optimization through close partnerships with technology vendors can be the difference between an expensive but inefficient service and an affordable service with a local flavor and feature and performance parity with global service offerings.
With local content likely being the next battlefield for the giants, we may see an increasing presence of the global giants in the form of partnerships and acquisitions, similar to the Discovery/MediaWorks’ TV3 in New Zealand, as the broadcasters have a local presence and better understanding of the cultural and community aspects of their home markets, and can thus engage users in a meaningful way through interactive digital mediums.
Localization of both content and presentation can ensure the relevance of broadcasters to their audiences. This can be driven through local news and current affairs, local reality-based content, and through documentary, drama, and comedy content that is difficult for global players to emulate.
In conclusion, the media landscape will continue to change and the broadcasting model will continue to evolve as the swing towards digital accelerates. How broadcasters respond to these changes will determine their future survival, and the key decisions made regarding technology and content in the short term will determine their long-term success.
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