In a hugely informative session, sharing a wealth of insight and background information, the British TV executive David Abraham unpacked the big and seismic TV trends - and how they are interlocking, at the recent 5th edition of the Digital Dialogue Conference.
He explained how the TV trends impacting America and the United Kingdom - some that already here and those that will be making their way to Africa soon - are fundamentally upending and altering the television and pay-TV broadcasting industry, and what it means for broadcasters and anyone working in television across Africa.
David Abraham, founder of Wonderhood Studios, and who was the chief executive of Channel 4 in the United Kingdom between 2010 and 2017, was one of the speakers at the 5th Digital Dialogue Conference that took place in May in Dubai in the United Arab Emirate (UAE), organised by MultiChoice.
In his highly informative talk about the TV trends shaping the world right now and that will be impacting TV and broadcasters in Africa - and are already - he started at the beginning, saying that the pay-TV market "was based on the premise of dependable walls, economic walls, between content, and the consumer".
"Those walls are either in some instances breaking or cracking - or in some countries even disappearing for a whole host of reasons."
Speaking about the UK, as an example, he said that "analogue TV was free at the point of consumption, regulated by the regulator Ofcom, and the dominant players were public service broadcasters that held public licences and had public obligations."
"Then arrived in the 80's and 90's, slowly at first, analogue satellite TV and then cable TV. And it took many years for those businesses to develop but essentially it was a balanced ecosystem of cable, satellite and free TV."
"And there were polite walls around some of the content, that drove the value equation for the pay-TV operators - primarily sport. But everyone kind of co-operated and in a sense the consumer had to go through quite a lot of hassle to move between the two different systems. So there was a lot of friction and therefore there was a lot of bundling of content."
"The phrase Balkanisation has been used in terms of how pay-TV operators constantly had to put up higher walls around their content in order to justify the exclusivity and the big bundles that they would charge their consumers,"said David Abraham.
"The way that I see these markets moving now, is that these walls are cracking and actually the arrival of the internet has really changed everything for the way in which these operators can plan for their futures."
"So the future is much more messy; it is much more heterogeneous, and what we are going to find are going to be a number of different models co-existing and overlapping in a much, much more confusing way."
"The world that we are entering is much more frictionless, it's much more fragmented. The global pressure of the digital giants, the scale, and the way that everything is far more trans-national than every before, has meant that this rather neat world of walled gardens that co-existed is changing very, very rapidly."
David Abraham said 4 things are driving this in the UK, in an evermore intensive way: increasing broadband penetration, smartphone penetration, tablet penetration, and connected televisions either within the TV set or through set-top boxes.
"So there are 4 interlocking trends that are leading to fundamental changes to how pay-TV models are evolving."
"It's always been the case that younger people watched fewer hours of TV per day and per week. But we have seen a fundamental reduction in the number of hours of TV being watched by younger demographics."
Moving to the United States, he said "for many, many years we saw pay-television subscriber growth in the US - very expensive bundles for consumers - the APU, the average revenue per user was growing, and now the trend is consistently down for traditional pay-television in the United States."
"Now, it's worth mentioning a couple of things. The US isn't this balanced eco-system we've got in the UK because pay-television is in 99% of all homes, also most pay-television channels carry advertising with very, very high advertising loads. The level of interruption of your television viewing is extremely high."
"And the result of that of course is if there is a proposition that comes in at a lower price point and no advertising interruption, then that proposition is going to grow. And clearly that proposition is the phenomenon that is Netflix."
"If you're thinking of the economics of making an expensive drama or buying expensive sports rights, there's a consistent trend of fragmentation of viewing over different time-slices and over different technologies. And that made the environment in which we're operating a lot messier, a lot more complex and a lot more difficult to manage."
Impact of the 'Digital Giants' on content
"The question has now become the scale of the digital giants and what they might do, and are beginning to do, to exploit that scale, in relation to every other business model in every market."
"Effectively each of these digital players - Google, Facebook, Apple, Amazon, Netflix - they can exploit very particular attributes in their technology to draw audiences ever further away from their traditional patterns of behaviour," explained David Abraham.
"So they have all been experimenting with very expensive content. Amazon bought the Top Gear team and rebranded it The Grand Tour, Netflix has The Crown already, Google through YouTube Red and Facebook Watch that has been launched and is being rolled out."
"What this has driven is an original production boom among the existing, legacy television platform players who are all now responding to this competition by commissioning very expensive, very glossy dramas, because effectively Netflix has driven a box-set behavioural pattern which is being perceived by the consumer to have proper value, and which now has to be reflected in the way that traditional pay-TV operators commission their own, original content."
Box-sets and binge-watching
The other big phenomenon is box-sets and binge-watching has effectively been a cultural phenomenon that young people have massively over-indexed in," said David Abraham.
"I'm sure many of you have experienced this within your family, is that a young child growing up now as a so-called "digital native" is actually entering a world where they have very little concept of a linear TV channel with channel continuity and announcers and something going on at a particular moment in the day."
"Everything they're consuming is binge-watched and on-demand."
"One of the things in the UK is that traditional broadcasters operate according to guidelines in terms of the watershed [time period], protecting children from certain content where the internet doesn't operate like that at all."
"It will be very interesting how African countries will negotiate those taste and decency issues [around content] in an environment where for parents, and for regulators and for leaders there will be a sense of wanting to protect the population in certain environments that are safe and of high quality."
So brand will still matter. Quality will still matter and content will always be king."
Fixed-line operators and sharing sports content rights
"Across Europe the traditional pay-TV markets are becoming more competitive. Telecom operators have proven to be the most potent challengers to those traditional pay-TV operators and competition is heating up around scripted," said David Abraham.
He said fixed-line operators are stepping up too, with some of these operators across Europe also getting into the content acquisition business.
"Interestingly many of these operators are distributing Netflix on their set-top boxes."
"So inevitably you get this evermore complex environment where these legacy players are now bringing in their competitors within their platform propositions."
"Sky that always effectively had the biggest pay-wall around its business model, is going to provide Netflix within its services in the course of the next 12 months which is a strong indication of how things are changing."
"For the first time in the history of Sky, towards the end of last year, they made their Sky Sports channels available to their main competitor BT and BT Sports packages and Sky Sports packages available via cable through Virgin."
"Now the effect of this is very interesting because we had escalating costs of English Premier League (EPL) football rights in the UK that were exponential and that were really challenging the viability of these pay-TV models in the UK - it became almost unaffordable."
"But by allowing to share each others' services, the main players - BT, Virgin and Sky - effectively have put a cap on the growth in the pricing of the EPL packages in the UK."
Consumers using different service simultaneously
"The market in the UK is now driven by two distinct trends: the bundling of pay-TV and telecom services at the upper end, and the rise of cheaper over-the-top (OTT) services at the lower end, said David Abraham.
But besides that, it is also not a black-or-white, either-or model anymore, he explained. Sky now has around 10 million subscribers in the UK, and Netflix UK has over 7 million.
"People are no longer either on satellite, or cable or free TV - you effectively use these OTT services because they're cheaper, and you're using these services whilst also quite probably also using satellite paying your monthly subscription and maybe for broadband as well."
"The inter-relationship between the broadband-relationship, the mobile-relationship, the channel-relationship and then the OTT services is getting evermore complex. Frankly what consumers are doing is switching much more, effectively the switching between services has gone down and consumers are moving around."
"Consumers also don't like to hear about a big show that they can't get. So they might dip in for a month and binge-watch a show and dip out for a while and go to another service. And remember that these services are available on multiple devices - so a much more fluid environment in which these players are operating."
"What this is doing, is putting pressure on margins because obviously the old system of big bundles had a very high margin - there was a lot of friction between consumers moving around and now that is eroding."
"There's an intensification of these trends. So satellite pay-TV is effectively losing customers in the UK. Broadband growth is also slowing and that's also having an effect on the bundling between broadband and TV services, and the winners in all of this are the subscription video-on-demand (SVOD) services."
"A very complex environment is evolving and all of these things overlap and that has big implications for the future of public broadcasting in the UK because this environment is so much more fragmented."
"For public broadcasters investing in journalism and investing in quality coverage and in coverage that is locally relevant will always have a very important role to play."
New players and models
David Abraham next explained some of the new players and models that are emerging.
"iflix from Asia is already in Africa. This is a very interesting model because effectively it's a developing market model that says Netflix will always be too expensive outside the Western world and there are many rights which in the developing world, are being pirated."
"So this entrepreneur in Asia simply built a business model by going around all of the markets in Asia and looked at what all of the pirated material was, and he created lists of the best-selling pirated material but online through streaming data and through DVD sales, and then he went to the studios and said listen, the price point between the pirated material and Netflix is this big, we'll put it on this service and he branded it iflix. It's an OTT service and it's now in at least 25 countries."
"It's an example of a model that says, if Netflix can't succeed in markets with relatively low income versus Europe and the US, then what model might emerge? And the iflix model is one that a lot of people are looking at very closely."
"Secondly, Cheddar in the US is described as a post-cable channel. Effectively the proposition here is what would Bloomberg look like if it was appealing only to millenials? And this is what this channel is," said David Abraham.
"This channel is partly a linear channel, it's partly available through social media. So it has a flexible model - it offers operates through the reach of social media, but it is also available as a internet protocol (IP) streamed service. It's doing quite well, it's small, but it's growing."
"If we are thinking of what is the future of the 'TV channel' in a world where we have that level of broadband and mobile penetration, and that scale of influence that social media has, then something like Cheddar might be a sign of things to come in terms of the notion of a linear TV channel."
"In France there's a service called Molotov that's having hundreds of millions of dollars pumped into it.This is a solution to younger people not regarding live, linear TV as for them anymore."
"Molotov attempts to present television in an entirely new way. It is entirely internet protocol (IP) delivered, with original content and acquired content bundled together. It is making headway in France, it has huge investment behind it and it will be very interesting to see if they succeed."
"So I think that television broadcasters can adapt - but they absolutely can't stand still. And at the heart of this is who is owning the consumer relationship."