Outsourcing: Is it for your operation?

As viewers look for new ways to integrate TV and video into their social and personal lifestyles, the role of television is evolving and advancing beyond the confines of the living room. As a result, there is a lot of discussion about how service providers and operators can replicate the success of multichannel home TV services with new multiscreen offerings.

Ericsson ConsumerLab research published in August 2012 confirmed that the viewer demand for next-generation TV experiences is already here. The ability to watch content whenever they like is of paramount importance to viewers. On-demand and time-shifted viewing are now ranked as the service that viewers are most willing to pay for, even over high picture quality.

Despite new players entering the market, it is the existing TV service providers that are in a superb position to build on their brand profile and viewer loyalty to take the lead in the next generation of television. To address this, they need to transform their packaged services to meet viewer demand for access to content on any screen. New solutions require tight integration in the back office to harmonize and interconnect every possible screen with one another and any content. This is where working with an external playout services management partner can be effective. (See Figure 1.)

By outsourcing service management, broadcasters can concentrate on their core business: providing great content to their customers. A successful partnership will ensure high-quality operational performance, as well as keep the service offering in line with new viewer trends and usage patterns.

The drivers behind outsourcing

When addressing any changes that are occurring in the TV industry and exploring the roll-out of new services, OPEX is a key focus for broadcasters. Whether they are advertising-funded, public/state broadcasters or pay TV operators, they all face their own unique challenges, yet all share a common aim — to keep pace with the market and new players, and offer the experience that viewers expect, while closely managing their expenditure when enabling new services.

Advertising-funded broadcasters currently face several external factors affecting their revenues. TV viewers are using different devices to consume video, while advertisers are also presented with a number of different platforms on which to reach their target audience. Nielsen’s Global AdPulse Report, published in July 2012, reported that Internet advertising saw the biggest year-on-year increase, with advertisers spending 12.1 percent more in Q1 2012 for the same period in 2011. During that time, ad spend overall increased 3.1 percent globally.

With ad spend spreading to different platforms and new devices, it is essential that broadcasters embrace these avenues and keep up with emerging trends.

Similarly, pay TV operators face challenges of their own, particularly with services such as Netflix and Hulu entering markets around the world. Viewers are now presented with a great deal of choice, yet they are cautious about spending more money on their subscription, or even considering cancelling their service altogether for more flexible options. However, the 2012 Ericsson ConsumerLab research shows that over the last 12 months, the number of people who have actively reduced (“shaved the cord”) or cancelled (“cut the cord”) their traditional TV packages in favor of newer services has been minimal. On a global scale, just 15 percent of respondents either cancelled (7 percent) or reduced (8 percent) their TV subscription.

Not addressing the changes in the market, however, will lead to increased frustration among viewers. They don’t care about the technology behind the services; they will simply expect to be able to start watching a movie on their main TV set and finish watching it on their tablet in bed, for example. Viewers’ evolution in expectation will continue at great pace.

Likewise, public or state broadcasters are also under pressure to keep up with emerging trends and the new players, but are under pressure to reduce, or at least not increase, spending. With convenience and experience the key drivers of next-generation experiences, viewers will expect the same possibilities for watching content anytime, anywhere, regardless of who their service provider is. This puts a great deal of pressure on public or state broadcasters to look to make OPEX savings wherever possible.

All of these changes mean that we are starting to see more and more broadcasters — whether ad-funded, pay TV or public/state — decide to outsource their infrastructure management so as to focus on their core business of delivery next-generation TV services to viewers.