REPORT: SVOD and telco – Frenemies or Foes? - Venture Insights

REPORT: SVOD and telco – Frenemies or Foes?

Video is critical for Australian telco’s growth prospects but a standalone strategy is fraught with difficulty. We believe telco’s best strategy is to be an enabler of video by partnering with video operators whether OTT and increasingly traditional (FTA offers a real opportunity as it evolves its multi-screen proposition).
To partner or go it alone? We believe there are two discrete options available to telco’s – they can either follow a partner or standalone (direct) video strategy. While offshore telco’s (which we review in this report) have increasingly opted for a standalone strategy (often in response to Pay TV entering telco markets), we believe Australian telco’s will follow a partner strategy given the differences in our market – namely the lack of sports content (due to anti-siphoning), the increasing control of TV and movie content by Netflix coupled with Telstra’s 50% ownership in Foxtel.
A partner strategy provides opportunities: We see genuine opportunities for telco’s to enable video for traditional (FTA, Pay TV) and OTT operators alike. Telco’s can offer retail distribution (desirable to both) while customer service and billing capability are desirable for FTA as they look to evolve their multi-screen propositions (given the initial success of Netflix in our market, we see a scenario where FTA and Pay TV increasingly look to telco’s for this help). OTT can also benefit from telco’s ability to integrate the OTT service into a single user interface thereby removing the current barriers of use (ie an OTT service typically requires a separate access device to connect to the TV while the user interface differs to the main EPG used in the home).
Network opportunity but net neutrality concerns: Massive growth in video usage, while creating network issues today, can provide future opportunities if telco’s can tier their pricing with usage, and charge video operators for superior network delivery. We believe these opportunities exist for both traditional and OTT operators, but net neutrality concerns (note the recent USA decision) make this far from a fait accompli. The redefined NBN remains a key unknown for video strategies, which we highlight in this report.