Kill Bill vol 1

Video OTT Market Fight: Telco Versus GAFAs

Like in this Kill Bill memorable fighting scene, you may already know who is going to win. Now, imagine in a video OTT remake, who is interpreting Uma Thurman, Telcos or GAFAs? Not that obvious, as you’ll discover in this post.

As described in a previous article “Video OTT Market Explained”, there is a clear interest in the $74,1 Bn (source: eMarketer, Luma, 2017 forecast) video OTT ad market, and a convergence is underway with on one side GAFAs getting content and Telcos technology capabilities on the other.

I focus in this post on how telcos can strengthen their position in the video OTT market after analyzing briefly Google, AppleTV and Amazon fireTV video business model.

Google, Apple and Amazon video OTT business model

Basically, platforms are composed of multiple players acting in specific places. As an analogy, you might think of a market hall selling vegetables where you got on one side supply with producers/wholesalers/peasants and on the other demand with buyers. Well, in the digital world, it is the same logic where you got supply with apps developers, creators, OEMs, advertisers… and on the opposite, demand with users. In a market hall they will exchange money on stalls whereas in digital mode, they do it most of the time on appstores/marketplaces with digital money (credit cards, virtual money, bitcoin…).

To dig more on platforms, I strongly recommend to visit the blog from Sangeet Paul Choudary and read the platform manifesto slide deck.

Now, let’s look at the business model of the Apple, Google and Amazon TV offerings; Apple TV, Android TV and Amazon fireTV.

Apple TV and Platform System overview
Android TV and Platform System overview
Amazon FireTV and Platform System overview

AppleTV, Amazon fireTV and Android TV video services are single platforms which belong to a wider platform systems which make very hard for telcos TV/video products and services to compete.

While Apple and Google platforms mechanics look familiar, the Amazon one is different kind. Let’s have a closer look.

Apple and Google: Platforms system to provide digital content as core value exchanges/experiences.

Started from smartphones, Android TV and Apple TV are edge platforms built from greater platform systems. On the producer side, Google’s Android Studio and Apple’s Xcode offer full suit of developer tools and services that allow to leverage their myriad services (i.e. maps, analytics, ads…), assets (i.e. material design, devices, tvOS and Android TV OS) in the form of libraries and API calls bundled in a native SDK. Both tech giants have expanded their platform system to cover different devices in order to offer fully coherent, comprehensive and consistent ecosystem to developers, marketers and advertisers but also a frictionless user experience (UX) to their users/audience (pull, capture, match virtuous UX circle).

Both tech firms follow an envelop strategy (@PlatRevolution from Parker, Van Alstyne and Choudary, MIT Media labs, 2016) to compete against incumbents’ single product and/or platforms to increase traffic and digital content exchange on their respective platform. It avoids multihoming by increasing user’s platform switching costs (i.e. as an iphone user, you may have acquired many apps and content that can’t be played on Android and vice versa).

Ignite a video platform is really hard, Google video and Brightcove started as a C2C platforms but failed against Youtube. Brightcove has pivoted and offer now B2B platforms for premium video content publishers while Google acquired Youtube.

  • Amazon: Platforms system to provide ecommerce and services as core value exchanges

Amazon core value exchange remains All services and products that Amazon launches is aimed to increase the site traffic, conversion rate, basket value and customer retention. Amazon Web Service was no different. AWS primarily objective was to offer a better infrastructure to scaling engineering challenges. Still, AWS first customer remains Amazon has then developed edge paltforms like FireTV, Kindle, Dash, Alexa, on top of the that acts as the platform system’s centre of gravity.

Think Amazon edge platforms as group of specialized e-retailer:

  • Retail clubs and loyalty customer rewards => Amazon Prime Services
  • Book shop => Kindle Reader and apps
  • Brochures and papers => kindle tablet, silk browser.
  • Video rental => FireTV
  • Music shop => Amazon music
  • Shopping assistant => Alexa
  • Order to delivery =>Dash
  • etc…

Why platform system beats today’s single platform

GAFA and internet players enjoy 5 key advantages over telcos:

- Network Effect (i.e. metclaff law)
- Scale at marginal zero cost (inventories, resources etc.)
- Massive existing eco-system (developers, users, partners…)
- Massive Data (Google and Facebook have the biggest first party data globally and Amazon the biggest shopping customer data)
- User stickyness (high rate of DAU and MAU on firms’ services)

Platform systems (Ps) > TV platforms (Pt) > product/service (p)
Ps > Pt > p

Telcos challenges

Telcos around the world face major challenges as illustrated below:

Telco 10 challenges

However, in this gloomy picture lies 12 reasons to believe:

  • Audience is still hooked to traditional TV (Source: AC Nielseon total audience report, Q1 2016).
  • Access to large amount of first party DATA
  • Authenticated audience (TV/Video paid subscriber services) consumes more video content than non authenticated. In addition, users are more engaged with 2,3X more ad views on long form (>20min) content. (source: Freewheel VMR, Q1 2016)
  • Content exclusivity: mainly dramas, sports and other premium tv programs still attract the bulk of advertisers
  • Pricing power: telcos enjoy big TV/Video price cost advantage with bundles and pricing choices
  • Retail & physical presence
  • Customer support service
  • Strong brand value
  • Quality of Service
  • Strong relationship with content owners
  • Billing relationship

How Telcos can win the video OTT game?

Firstly, we need to understand how platform are composed using the platform stack framework (Platform scale, Sangeet Paul Choudary, 2015).

They are composed of 3 principle layers

  1. Network — Marketplace and Community: this is where the interactions between producers and user are performed (pull, facilitate, match exchanges as shown in Amazon tv, Android TV and AppleTV single platform above)
  2. Infrastructure: those are technologies that support the main valued interactions (i.e. AWS, data centres…),
  3. Data: enabling data collection, insights and monetization (for more info on OTT Data monetization, please check this post).

The GAFA and Internet players generally tend to adopt a top down approach.

Considering Telcos assets, unlike GAFA and internet players, they should go bottom-up

In the TV/Video platform case:

  1. Network — Marketplace and Community = UX delivery pipeline (UX logic including interfaces and meta-data mainly)
  2. Infrastructure = Video distribution pipeline (video transforming processes from head end capture, encode/transcoding, drm, to video player)
  3. Data: Video Tools and Services enabling the full management of first, second and third party data (i.e. advertising, search, network PVR services)
Platform stack framework adapted to TV/Video platfoms

Telcos weakness is the Network — Marketplace — community or UX distribution pipeline

Transforming the TV/Video service with a simplicity big bang articulated around 6 key elements: Multi-screen UX, Unified search, Unified content and aggregation, Personalised and smart curation, Content richness and finally be really Social.

Well, according to analysts (Luma, Forrester researches, Parks Associates), my observation, discussing with Telcos, UX researches and testing, the ingredients to propose a frictionless valuable interaction could be articulated around 6 key elements:

  • Multi-screen user UX: A user should be able to watch content on any screen, anywhere, either online or offline.
  • Unified search: Apple TV, Android TV and Comcast have taken steps to resolve this issue, but it is still clunky. It should be as easy as googling.
  • Unified content and aggregation: Users should be able to access content from ALL video content either live or not, labelled (hulu, netflix, amazon prime video…), or user generated (youtube, youku, viki…) or user generated broadcasted (periscope, facebook live…).
  • Personalised and smart curation: A lot of researches have shown that large choices lead to user frustration. Here is a great TED talk from researcher Barry Schwartz on the subject. He calls it the “paradox of choice”.

Netflix have shown the way, either on their recommendation portal or playlist to provide smart curation and editorial system. Yet, it is still limited and nascent.

  • Content richness: Users should be able to watch whatever content s/he wants on any format (mobile, TV, tablets…) just like Amazon has done for books.
  • Social: Humans are social species by nature. Communication is a basic need. Users should be able to share videos, regardless of their types on any platforms. Blockchain can help here. It is happening on the music industry with firms like Revelator, PeerTrack or open source Muse project allowing music creators to distribute content directly on any platforms and monetize through pico/micropayments. I think it is a matter of time in the video OTT market.

The Video OTT market is far from being closed. Opportunities are out there, telcos can be the Uma Thurman of video OTT market but will require a lot of kung-fu training until reaching mastery.

Any additional comment or observation about platforms, OTT, UX, disruptive business model, please let me know. Reach me on Zishan Mohammad.

The opinions expressed are personal only.




Product Lead II Startup advisor II Researcher II Prof. (^_^)

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Product Lead II Startup advisor II Researcher II Prof. (^_^)

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