By Paul Pastor
Now that 95% of American households have at least one streaming subscription, providers face new challenges in a nearly saturated market.
On the one hand, you have well-funded, big players with strong brand recognition – we call the Tier 0 providers – making audacious plays to capture market share. On the other hand, Tier 1 players with deep regional and industry roots are punching above their weight by delivering differentiated content and services.
Tier 1 content distributors face unique challenges as they go up against larger providers. At Mobile World Congress last week, we met with a number of Tier 1 services to understand their challenges and opportunities. Here are some of the most common concerns we’re hearing from them and our thoughts on how to approach them with long-term growth and flexibility in mind.
1. Helping consumers navigate the streaming world
One of the biggest challenges for distributors is simply making content discoverable in an increasingly complex ecosystem.
Evan Shapiro reports that Gen Z’s top four priorities for streaming services are relevant content, original content, refresh rate, and library size. It’s easy to interpret this as a sign to invest in more content — but there’s a lot of upside for distributors simply in making content more discoverable.
Source: Media War & Peace and GWI
At the end of the day, consumers want something that looks and feels like Netflix: reliable and easy to navigate. They want to find the shows they know they want to watch and discover new ones that appeal to their interests with personalized recommendations and insights.
Netflix has set the bar high for ease of use, but too few services have met it. I can download a Netflix show over a hotspot to watch on my iPad during a flight, but sometimes I struggle just getting other apps to download.
There’s also an opportunity here for “super aggregators” to capture market share through a high-quality experience that makes it easy for people to discover and consume content. Think: content from across partners and providers is in one place that’s easily discovered and accessed. For MVPDs and Telcos / Operators, this “co-opetition” business model offers them a distinct value proposition, offering in unifying disaggregated libraries. And new LLM models, driven through AI marketplaces, also allow operators to append non-standard metadata to drive yet even greater search capabilities.
The key to addressing this challenge is having the right technology to move quickly and demonstrate relevance to consumers
2. Making the right technology bets
I constantly hear Tier 1 tech buyers express concern about picking the wrong platform. And almost every RFP is developed around a current marketplace understanding, asking if vendors have a certain set of features that they see in today’s marketplace.
The challenge is, today’s feature sets are not tomorrow’s feature sets!
Making the right platform choice starts with understanding not where you are, but where you might want to be in the future. And asking vendors how they have built, architected and will help them keep pace with marketplace changes in the future.
Keeping pace doesn’t mean rip-and-replace, so long as you have an open, modular platform. This architectural principle ensures you can extend and / or replace a set of microservices to quickly adapt your platform to meet new consumer needs.
What can also not be lost, especially for Tier 1 providers, is control. A multi-tenant SaaS solution reduces time to market response, and limits customization, whether integrating with existing systems, or developing / extending new features. A dedicated instance offers control over product roadmaps and ensures when a CEO / Board Member / GM walks in the door with an important new feature request, its not months negotiating with a multi-tenant vendor, its days or a sprint cycle to respond and deliver.
3. Directing AI to the most valuable problems
The hype around artificial intelligence is making some distributors worry that they’re not keeping up, but the sheer range of possibilities can make it hard to focus on a use case.
One example that illustrates the potential of generative AI is Google Cloud’s partnership with Cineverse to drive discoverability. Cineverse used Google PaLM Large Language Model to build a chatbot for movie recommendations. People can engage in conversation with the bot to get suggestions on what to watch based on their viewing history and metadata such as their location, the date, and local weather conditions.
In general, I think discoverability is one of the most compelling use cases for AI in OTT. Discoverability depends on metadata — knowing enough about your consumers and your content to make recommendations that keep them coming back to your service.
AI enables us to improve discoverability by appending data to assets that wouldn’t come through in your typical metadata set (e.g., how Cineverse is using someone’s location, date, and weather to recommend the perfect movie). TikTok has proven the power of AI to drive engagement through content recommendations, and now Cineverse and Google are taking a similar approach to streaming content.
There’s also a lot of interesting potential around yield maximization.
As a provider, you have to decide what you’re trying to optimize, whether promotion, engagement, or monetization. (Or all three!) The new advanced AI models help streaming companies operate as if they have replicated the best programmers on their staff to maximize the long term revenue potential of a given consumer.
No matter what, you need to test and deploy AI-based tools quickly and effectively. You can’t make the most of the new generative AI technologies without a cloud-native, API-driven platform to plug them into.
The most important thing is taking the leap
Market research shows that Tier 1 tech buyers’ concerns come down to three main factors: control, flexibility, and speed. Buyers are torn between the desire to invest in technology to meet market demands and the risk of buying a platform that doesn’t give them the ownership and agility they need to grow.
Ultimately, there’s more risk in not moving than standing still, so the first step is getting the right technology.
Content distributors should choose technology that sets them up for the future – platforms with open and extensible architectures, built by companies that want to help them become leaders in this fast-moving market. Look for a vendor that speaks your language and wants to partner with you to drive the industry forward.
