Broadcasters must confront Video on Demand to survive

What you need to know:

  • The problem is not price, but that the customer is becoming sophisticated and consumption patterns have changed.
  • I had the privilege to attend a European conference on access to Internet and I gathered that they too are worried about the increasing virtual power of the United States.
  • Existing broadcasters cannot continue to act as if they live in the analogue days.  They will fail. 

Even before the dust on digital migration settles, broadcast disruption is already fast underway. 

Technology is moving from hardware to mostly software, and set top boxes are becoming obsolete. You wouldn’t know it, however, as broadcasters do business as usual. 

Larry Downes of the Washington Post says many in the industry have long predicted the demise of set top boxes. TV companies, both fibre and satellite, are fast migrating to the internet for content services and video. He says customers are also responding to an increasing number of internet-based alternatives.

These internet-based alternatives are creating waves locally. In the past week, DStv cut subscription costs due to rising competition from non-traditional sources like Netflix and Hulu, which invaded the local market through the internet. 

Yet the problem is not price but that the customer is becoming sophisticated and consumption patterns have changed. 

According to Downes, consumers, especially younger ones, are interested in defining their own video experience, mixing traditional and self-produced content, and enjoying it not just on television sets but on every connected device, including tablets, smartphones and other mobile gadgets.

AMERICAN VIRTUAL POWER

The traditional TV business model is dying, to be replaced with streaming Video on Demand that has disrupted TV in most mature markets.   

The new business models do not require affiliates to distribute their content. They reach virtually anybody with broadband throughout the world. Although it looks like problems are looming, it presents a great opportunity for producing local content.

In the absence of local content production, local broadcasters have no chance to compete in the emerging market place. For years, they failed to build capacity to produce high-quality content. Most have underinvested in production resources, leaving them vulnerable to loss of customer base.

This problem cuts across Africa and policymakers aren’t seeing it as a priority. The situation in European is the direct opposite.

There, policymakers, regulators and industry players often seek to understand how they can effectively deal with the increasing American virtual power, with all its powerful social media sites and perhaps all creative economy platforms that form a formidable distribution channel for their local content.

UNGUIDED DEVELOPMENT

I had the privilege to attend a European conference on access to the internet and I gathered that they too are worried about the increasing virtual power of the United States. 

Whilst they don’t want to follow the Chinese way of countering America, they want to invest in research that may come up with new solutions around delivery of content.

They are also investing heavily in future technologies, with targets of all citizens having access to broadband with a minimum of 30 Mbps and as many as 50 per cent with over 100 Mbps. 

Conversely, Africa has no focused continent-wide strategy to use technology to tell the African story.

Some academics argue that there is no need to tell people what they ought to do or ask them to emulate others in order to succeed. They argue against prescriptive scholarship, which they see as presumptuous.

Well, this may have been right in the 20th century but in the 21st century it will not happen. If development is left to evolve unguided, it is possible that the continent may lose an entire generation to foreign cultures propagated through content. 

As the Swahili say, “Dawa ya moto ni moto (the medicine for fire is fire)”. Global content problems can only be solved by more local content. You cannot tell a child not to watch foreign content if there is no local alternative.

TWITTER-SIZED NEWS

Going back to local broadcasters, a study by Accenture on the future of broadcasting argues that understanding consumers and ensuring consumer insights guide decision-making will be key to success. It recommended the following:

  • Premium and cost-efficient content—Acquire and create premium content to meet the needs of the consumers while balancing investment and driving cost efficiency;

  • Consumer optimisation—Create customised content to enhance consumer interactions and constantly look for new ways to engage them;

  • Converged operating models—Develop agile, nimble and lean operating models that can leverage the power of digital for synching content generation and delivery, optimising resources and increasing enterprise agility; and

  • Monetisation—Unlock future value from existing assets to increase profits, and look at launching new products and services that address specific market needs.

These are powerful recommendations but some markets may find them difficult to implement. 

In the past, local broadcasters thought control of broadcast resources would give them an edge but as the future of broadcast begins to be clear, investment in hardware may have been a major, costly mistake. 

They now have a chance to focus on driving cost efficiency perhaps through outsourcing production services. This strategy may lead to building competent capacity while driving down the cost to broadcasters.

A majority of Africa’s population is below the age of 35 and form a generation with diverse interests in media. The below-20 group can hardly sit to watch a local news bulletin, receiving most of their news from social media. 

There are attempts by some broadcasters to engage their customers through social media but rarely do youth interact beyond those programs they consider interesting on TV. 

If need be, news for the youth should be customised by largely breaking it down to Twitter size in order to arouse their interests.

Like many of the global news networks, local broadcasters should develop a network of content providers across the country to enhance their own agility.

ANALOGUE DAYS

These content providers may not necessarily be employed but could themselves be content aggregators that can be used to populate local YouTube-like platforms. This will indeed lead to using resources optimally while increasing enterprise agility.

Perhaps the most complex of all questions that I get is how to monetise some of the local content, given that people hardly sit down to watch a local feature film. 

Failed local demand undermines growth of the creative economy and piracy destroys the little there is in creative industry.

These are huge problems. If they are resolved, the country will benefit in terms of job creation from the sector. A careful study of the market, coupled with policy support, could change fortunes.

The future of television has come. Existing broadcasters cannot continue to act as if they live in the analogue days. They will fail. The new dispensation requires constant engagement with the customer. 

Competition is no longer among the few traditional industry players. Nimble players are emerging and disrupting the status quo and only those willing to accept change will succeed in the emerging onslaught. 

The writer is an associate professor at University of Nairobi’s School of Business. Twitter: @bantigito