Consumer demand is shifting. Consumers’ appetite for content is continuing to increase and how they use it in their life is continuing to shift to ever more parts of their life. They want more content, with control on when they can watch that content. They are willing to purchase, find for free, or allow advertising and certain data collected, in order to have access. The Internet, OTT services, SVOD services from content providers, vMVPDs and many other models are all vying for the consumers’ appetite to consume and use video in their lives.
Shift 2 Stream is uniquely prepared to help traditional MVPD aggregators effectively shift their technology and business model to serve this consumer base, on a cost-efficient basis.
The makeup of the MVPD consumer base today is extremely fragmented. Millennial consumers have shifted their consumption of linear programming to primarily live events like concerts, sports, and awards shows, intertwined with social media. It is no longer acceptable to just program weekly shows to this demographic, for they have now been introduced to entire seasons posted at the same time. This has resulted in the binge-watching phenomenon: a feature that has transcended to other consumer groups through DVR and SVOD content models. Popular shows, such as those on Netflix, Hulu, and Amazon Video, along with the DVR and VOD offerings from the local area cable, telco and satellite service providers is commonplace for different groups of consumers’ video consumption. This in turn induces an even greater erosion of the need for live linear programming, except in cases of live events, resulting in declining traditional MVPD aggregators’ revenue. In addition, the lean-back experience of traditional video consumption still garners the bulk of the declining revenue from baby boomers, comprising a large population of adults with available discretionary spending.
Consumers in general are demanding skinny bundles of different genres to aggregate programming that previously was viewed linearly in the local service provider delivered channel lineup (dependent upon subscription service level). Ultimately, consumers are taking all these programs and combining them into multi-bundles on a consumer-to-consumer basis. Consumers in the same household are bundling their own content to suit their tastes, hence services bundled together as one channel lineup per household no longer serves their appetite.
Traditional consumers have also changed their video viewing expectation priorities where, with the advent of the HFC based cable systems in the ‘80’s, their priorities ran in this order:
Consumers in the ‘80s had only the off-the-air broadcast of an analog signal, with its’ inherent atmospheric anomalies affecting the reliability and quality of the signal received. Given the existence of only a few channels (ABC, CBS, NBC, an independent channel and a publicbroadcasting channel), choice wasn’t really an option: just getting the basics reliably with some quality was the focus since the supply was limited anyway.
With the establishment of Cable and Satellite Systems being capable of delivering more content, the advent of the traditional media aggregator was born and everyone raced to get a channel onto those systems since they proved to have the eyeballs of the consumer. The consumer still wanted reliable quality and wanted it in tiers based on lifestyles.
Then, as more networks started up, choice started to become not only more important, but really exploded when media was made available via Internet. More and more, consumers from all demographics started to prioritize choice of content and content viewing times over reliability and quality.
The “Shifted” consumer values the same characteristics as the traditional viewer, but in reverse order (completely flipped from the previous state and is now from left to right):
The availability of different content whenever and wherever one wants to watch it rather than at the behest of the network programming groups, and even the growth of unheard of or unfunded DIYers, revolutionizes and energizes the need for choice. Quality and reliability are of secondary and tertiary priority at the start, but becomes more important as a content channel becomes more established and monetizes its’ products, e.g. Netflix, and YouTube. Each evolved from great choices in content, but with questionable quality and reliability. However, as they started to create subscription services, the quality of their services became more important. As the tiers and costs of subscriptions increased, reliability also became of more importance.
The latest demographics of consumers with dollars to spend are displacing significant portions of their linear television watching with SVOD. In addition, many expect the long- tail of the traditional 180 channel lineup to move to streaming-only OTT services, where some will be offered as SVOD-only. They expect their technology delivered over IP, this is where they associate with being connected into society and their friends. They also still want to watch live events, even if they have to wait to watch the event on DVR.
The TV Everywhere implementation unknowingly threw the 180 channel traditional lineup to the wind, or in this case to 100s of apps. As such, the traditional cable channel lineup has become to some degree, disaggregated. vMVPDs (virtual MVPDs) are re-aggregating traditional programming along with new programming through Deep Linking of apps, thus making the virtual user experience more accessible to the consumer. Unfortunately to date, this has come at the expense of the traditional MVPDs, who are unable to adapt due to a combination of dedicated video networks and content contracts hindering their ability to react to a continuously evolving consumer environment. Consequently, over the last few years they have suffered from a state of analysis-paralysis. This situation makes it very difficult for traditional MVPDs to determine a product roadmap and business model that works for both their subscribers and their shareholders. Excursions into various OTT-type service models and delivery methods have had some successes, but with little or no persistent uptake by subscribers or any semblance of cohesiveness with other media services offered by the aggregator. Alternatively the SVOD services from the likes of Netflix, Hulu and Amazon, which basically mirror the VOD services offered by the MVPDs with the exception of original non-syndicated content, have made strong inroads into the MVPD’s subscriber base. Broadcasters and Programmers have also entered into a direct-to-consumer relationship model, with IP-streaming dis-intermediating the services of traditional MVPDs by deploying their own OTT and VOD services.
It should be noted that MVPDs have some significant benefits that can be capitalized on, namely the installed base of subscribers and their fixed broadband offering to those subscriber homes. However, MVPDs also have an impediment: the large installed base of video- dedicated capital assets which they continue to operate, but more importantly, including those that are reaching or are past their end of life (EOL). Additionally, removing the shackles of bandwidth constraints can be seen in the re-engineering of cable plants to fully embrace DOCSIS 3.X, whereas legacy services still require large swaths of spectrum to maintain subscription income for those customers who either don’t want or haven’t yet succumbed to the new TV Everywhere service delivery models. These factors lead to an all-or-nothing approach to new service delivery models: forklift out the old and invest more capital in the new. However, this is just not a viable solution for most MVPDs, as capital dries up due to cord cutting and dis-intermediation, along with requirements for tighter controls on the costs of capital and operations. It is in the evolution of these core services where Shift 2 Stream provides and supports the hybrid environment needed to maintain and grow MVPD service offerings. Allowing for the evolution to occur in an optimized IP manner as opposed to an all or nothing approach, evolving as the subscriber base evolves their usage patterns and needs while still enabling existing service models. This might seem hard to believe, but the formula to this is actually possible and available today.
The entire environment that traditional MVPDs are dealing with is a Hybrid Environment, with both legacy QAM/QPSK facilities and IP-based DOCSIS QAM/QPSK supported, as well as direct fiber and Internet delivery.
The environment includes 5 Core Hybrid Principles:
Other factors ensuring a successful hybrid service:
➢ Continued support for traditional consumers as well as the new evolved consumers
(lean back to lean forward viewing). Deliver on new features from EPGs that require extensive metadata for finding the content they want to watch efficiently, i.e. live linear broadcast, transactional VOD and monthly SVOD, PPV and binge-watching models.
➢ A constantly updating set of aggregated applications in the guide, which are deep linked with searchable metadata, such as from Netflix, Hulu, YouTube, Amazon, etc.
➢ Support customer-owned consumption devices such as media players, Smart TVs, game boxes and mobile devices.
MVPDs must be able to navigate these fast-changing environments with quick moves amidst somewhat murky product roadmaps, where passing hypes, changing consumer products/devices, and continued innovation in client-based applications makes for a very rapidly changing product mix. Add to all this the shift from the lean back to the lean forward viewing habits of subscribers, and the MVPDs’ greatest strengths – their access and distribution networks, and their aggregation/packaging abilities – become their greatest obstacles: just to maintain existing services requires continued capital and operational investments that eat into profits, even while subscribers continue to move away from the traditional MVPD-supported broadcast service delivery paradigms.
Given these challenges, the MVPD access and distribution networks need to continue evolving deeper and more towards IP. This can be achieved through many standards available today and will be different for various network operators. Different technologies enabling universal QAMs for video and data combined, with virtualization that enables plant equipment to be dynamically reallocated for video or data and repurposed on the fly, are some of the enabling tools required. Centralized and local management of physical resources, along with customization and automation of configuration changes, is already available through software, as needed.
The uptick in SVOD services will demand more and more unicast IP-based services, and in turn will drive the investment in fiber-deep architectures used to move the converged electronics closer to the consumer, close to the edge.
Video processing and compression today is moving squarely into virtualized products that may be appliance-based or used within commercial clouds. As part of this transition, the workflows for CBR and ABR are converging where ABR workflows may become the source of the CBR signals, creating a wholly unified workflow. This will also provide some of the enabling technology to close in on the CBR/ABR live point time gap.
The transition to digital services, namely OTT, requires metadata to be embellished to support the intricacies of true television programming as well as to enable addressable advertising. This is especially important to be able to support the dynamic rights management required for mobile networks.
MVPDs who have heavy or recent investment in their traditional HFC network can use DOCSIS 3.X to enable full-duplex higher bandwidth enabling them to maintain their investment in their traditional HFC plant and avoid the burden of going full FTTH.
The modeling of the total cost of ownership (TCO) for video processing solutions today has become considerably more complex. The conventional appliance-based, CapEx depreciation model has been very effective from a cost and usage point of view since that usage often spanned longer than 5 years. Yet the cost curves for cloud-based and largely OpEx-oriented video processing is also so steep that it now has come into play in as little as 3 years for the total cost of ownership. So today, we must be able to compare these two distinctly different solution sets in total cost of ownership and find the interaction of hybrid architecture that allows for the best of both to be leveraged very effectively.
And herein lies the key value of Shift 2 Stream, as we have taken into consideration the many shifting elements of the market, business plans and technologies, creating a hybrid TCO modeling tool. This tool is provided as a service from Shift 2 Stream and what we call, "S2S Shift-Modeling".
S2S Shift-Modeling™ takes into consideration elements for the cost effective re-invention of the MVPD system today, and through the shift you plan by design. This modeling will also take into account ways to navigate the dynamics of the shift to mitigate associated risks.
At the core of the S2S modeling service, through the influx of cloud services, we facilitate the combining of broadcast and digital workflows from a cost perspective that works today with little to no capital investment while providing better-than-existing ROI as part of the digital transition.
Ultimately, MVPDs today must plan on multiple shifts of consumer demand, business models and technologies, including the seismic ones happening with traditional subscription linear services. The writing is more than on the wall that the MVPD today must embrace a core shift in business plan to thrive on primarily data services and those that are video-infused. The S2S Shift-Modeling tool can be used to define and validate the cost effective re-invention of the MVPD cable system both today, and through its designed digital transition.