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January 5, 2016

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2016 CEO Outlook: Trends to Watch

The pay-TV market remains in a state of extreme flux and there is little sign that 2016 is going to reduce the complexity facing service providers across all categories. It is clear though that several key trends are intersecting to drive demand for universal—and flexible—operational platforms that enable operators to manage an increasing range of delivery technologies while keeping options as open as possible.

On one hand, there is a lot of consolidation among operators in all camps, i.e. satellite, cable and telco, with increasing convergence between these sectors. We have the likes of Telefonica, Vodafone, AT&T and Liberty Global all expanding their geographical footprints in the bid for regional and even global dominance.

As well as having to address multiple regulatory regimes, this means some of these multinational operators are having to cope with more than one and sometimes several pay-TV infrastructures, often in a single market. AT&T is now in the satellite business in the US through its takeover of DirecTV, while also offering IPTV services. Telefonica has services spanning all the sectors—satellite, cable, IPTV, terrestrial and OTT—in Latin America.

Operators are also expanding into new service sectors organically or through partnership, with a growing number of MSOs, such as Comcast and Cox, having added cellular communications to their packages as MVNOs, while also selling bandwidth over their own infrastructures to traditional MNOs for Wi-Fi offload.

On the other hand, we see these consolidation and expansion trends compounded by a growth in TV distribution over retail devices such as Apple TV, Roku and Chromecast, particularly in North America, but increasingly in other regions. This is being driven partly by the growing appeal of cord cutting, especially among ex-Millennials as they become pay-TV subscribers, with the effect of taking share away from traditional set-top boxes.

The underlying trend is that operators are creating more paths to the big screen, while at the same time meeting demand for a la carte viewing so that consumers can watch what they want at anytime wherever they are. But the big screen will continue to be the top choice to watch premium content.

These developments are giving consumers ever greater choice over how, when and where they access TV, but they are also adding confusion, given the growing number of places they can go for content both for connected devices and the big screen. An even larger source of confusion concerns Ultra HD, which is supposed to be a positive story for 2016. There is a real danger of consumers becoming disillusioned with UHD just as they did with 3D, in this case not through lack of a worthwhile improvement in user experience, but by conflict between different standards and technologies.

Consumers who have already purchased a TV billed as “4K ready” because it supported higher resolutions will not be willing to fork out another large sum for an HDR (high dynamic range) TV. The industry has been guilty of trumpeting the benefits of higher resolutions and frame rates and then recanting on that with the new message that HDR is what really matters. Meanwhile consumers can watch 4K services today with higher resolution, but without HDR online via Netflix and Amazon yet not from most traditional pay-TV operators.

Operators may be powerless to do much about the 4K confusion on their own and may be saddled with complex infrastructure integrations. But they can at least make life easier for themselves by adopting platforms that do support all the key technology options and help them establish a common high quality experience across multiple services.

Verimatrix has recognized this for some time, and it has driven us toward our universal framework—not just for our traditional business of revenue security, but also analytics. As a result, our customers can obtain a single consistent view of their operations from one point, whatever platforms they have. We have already achieved this for a newly merged group of North American cable operators, bringing together different set-top boxes, user interfaces and program guides within a consistent set of APIs and interfaces under a common analytics framework. It enables push button access to aggregated information on areas such as VoD performance across the different service infrastructures, which aids the process of migration towards a single coherent operation.

One thing for sure is that 2016 is going to see further consolidation of this kind, since it is driven by competitive pressures toward greater scale economies and a stronger position in negotiating premium content deals. Another given is that there will be growing demand for analytics that operates effectively across all platforms to provide clear answers to questions relating to the whole subscriber base.

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