Distribution & Delivery Global Viewpoint – May 2016

How Traditional Broadcasters Can Survive the Disruption of Digital Video

A changing business landscape is no secret to traditional broadcasters. The accelerating wave of disruption is transforming the video business and media companies must reinvent themselves for the future in order to survive. Just how to do that is the big question.

Accenture, the world’s largest management consulting services company, headquartered in Dublin, Ireland, has more than 373,000 employees serving clients in more than 200 cities in 120 countries. One of its major areas of expertise is media and technology.

In a new report issued by the company — titled “Bringing TV to Life” — Accenture asks if it realistic that traditional broadcasting and cable TV companies can succeed against formidable online competitors like Netflix, Google, Amazon and other non-traditional media companies.

The report acknowledges that intense pressure is growing on broadcasters and other traditional content providers. Traditional business models are being squeezed by the dual threat of declining audiences (as more viewers become “cord cutters”) and the migration of advertising to online outlets.

At a time when shareholders are expecting growth, this is creating challenges — forcing providers to adopt new strategies and to explore new areas to push growth. The report asks what are the strategic shifts traditional companies need to make now, and how radical should those be?

Considering the over-the-top market pay TV revenues are growing annually five times faster than traditional broadcasting and four times faster than traditional cable TV, it asks if there a sustainable future for the broadcasting and cable TV markets?

Seth Tuma, a managing director with Accenture’s media and entertainment business. He suggests that broadcasters have a future in media delivery--but they must build for it.

Seth Tuma, a managing director with Accenture’s media and entertainment business. He suggests that broadcasters have a future in media delivery--but they must build for it.

The author of the report is Sef Tuma, a managing director with Accenture’s media and entertainment business. Tuma offers an in-depth analysis and recommends how traditional broadcasters and video companies must restructure and re-invent themselves in new and dramatic ways to survive.

The report defines and highlights two capability models that offer traditional content providers and aggregators an opportunity to reinvent themselves and maintain their relevance in the industry’s rapidly changing value chain.

Digital Content Providers (DCPs) are a new breed of business looking to serve content across a wide array of different digital channels, including OTT and IP distribution. Sometimes DCPs will offer content directly to consumers; in other cases, they will provide it through collaboration with Digital Content Aggregators.

Digital Content Providers (DCPs) are a new breed of business looking to serve content across a wide array of different digital channels, including OTT and IP distribution. Sometimes DCPs will offer content directly to consumers; in other cases, they will provide it through collaboration with Digital Content Aggregators.

The first model is to become a Digital Content Provider, or DCP. This is a new breed of business looking to serve content across a wide array of different digital channels, including OTT and IP distribution. In some situations, DCPs will offer content directly to consumers.

In other cases, they will provide it through collaboration with Digital Content Aggregators, or DCAs, the second model described in the report. These are digital video aggregation platforms designed to package multiple DCPs to consumers.

Digital Content Aggregators (DCAs) are digital video aggregation platforms designed to package multiple DCPs to consumers. In contrast to traditional Aggregators, DCAs focus more on providing the data and platforms, such as media distribution and targeting services, that DCPs need to engage with audiences directly.

Digital Content Aggregators (DCAs) are digital video aggregation platforms designed to package multiple DCPs to consumers. In contrast to traditional Aggregators, DCAs focus more on providing the data and platforms, such as media distribution and targeting services, that DCPs need to engage with audiences directly.

In contrast to traditional content aggregators, DCAs focus more on providing the data and platforms, such as media distribution and targeting services, that DCPs need to engage with audiences directly.

The report warns that traditional content aggregators need to act fast to fend off the ever-growing threat of content owners and Digital Content Providers (DCPs) going direct to the consumer. Traditional aggregators also need to quickly establish their position as a Digital Content Aggregator (DCA) in the industry’s shifting value chain, identifying how best to leverage their assets to maximize market share.

Tuma’s report warns that traditional players must transition today or pay the price tomorrow. “Propelled by the proliferation of IP distribution, disruption of the once stable video market is accelerating. Traditional companies have generally navigated their business models around this distribution in order to protect their existing revenue channels.

Become a “Digital Video Business” today—or pay the price tomorrow

“While this conservative and tactical approach may have worked in the past, it is no longer viable. Digital natives have built digital platforms, skills and capabilities that are growing in value as consumer and advertiser wallets shift away from traditional pay TV and broadcast,” the report said.

The report said it is now critical for traditional content providers and aggregators to accelerate investments into strategic digital capabilities that underpin success in IP-based business models.

At the same time, they need to leverage their existing advantages in the marketplace to transform themselves into Digital Content Providers (DCPs) and Digital Content Aggregators (DCAs).

While roles in the traditional value chain haven’t yet materially changed, their relative attractiveness is in flux. To stay relevant in the new industry value chain, traditional Providers and Aggregators will need to consider implementing one of these models.

While roles in the traditional value chain haven’t yet materially changed, their relative attractiveness is in flux. To stay relevant in the new industry value chain, traditional Providers and Aggregators will need to consider implementing one of these models.

They must also re-examine their existing relationships in the value chain to benefit all parties — giving consumers a broad range of content more flexibly and cost-effectively, while allowing the ecosystem to grow and remain profitable.

“These are industry-sized challenges with seismic impacts to shareholder value,” the report said. “But a ‘big bang’ can be avoided, as long as traditional companies recognize the dangers of inaction. If their vision and roadmap are not calibrated to move toward building the right digital capabilities, their ability to react in the future will be tightly constrained — unless they spend heavily.”

The game of serving content consumers with what they want, when they want it and where they want it, future winners will be determined by the choices they make today, the report said.

“One of the most critical decisions companies face is how they can build the capabilities outlined in this perspective and transform themselves into a successful DCP or DCA. The future is digital, and the focus on becoming a digital video business at scale is the ticket to a successful future.”

Download the full report here.

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