Operators need to overcome cultural challenges before they can truly succeed in the growing media side of their business, according to Deutsche Telekom’s SVP of global TV and entertainment.
Gerry O’Sullivan, who has spent over 25 years working at broadcasters including the BBC, Fox News and Sky, said the telecoms industry is still failing when it comes to content.
“Telcos don’t appreciate what [content] really means,” he said in a keynote address at the IP&TV World Forum in London.
The SVP, who looks after DT’s IPTV, online video, music and gaming concerns, painted a picture of two worlds colliding: the “egos” of TV and the “conservative” telcos.
He said the year since he joined DT had been “one of transformation” as he pushes the operator towards becoming a “mediaco”.
The need to pursue a media strategy is clear because operators need to increase APRU, improve customer stickiness and deliver a better customer experience, O’Sullivan added.
Last month, DT posted its 2011 results that revealed that revenues and profits registered an alarming fall. The company highlighted TV growth as one of the few bright spots.
DT has launched IPTV services in 10 countries and picked up four million TV subscribers in total.
In particular, O’Sullivan said telcos needed to better understand issues around rights management, which he admitted was a “complicated process”.
Analysys Mason’s Cesar Bachelet said some of the current problems around rights relate to the fact that many deals were done before the multiscreen phenomenon was fully appreciated.
“Both parties are tying to figure out their business models, with content owners particularly keen to ensure they don’t cannibalise revenues,” he told European Communications.
As for telcos, Bacehelet warned that some premium content is very expensive and operators need to make sure they get their numbers right to ensure a return on investment.
Having staff with the experience of O’Sullivan could be a crucial advantage and it is likely operators will increasingly look to hire those with specific media experience who can lead negotiations.
It’s not the only way, however. Bachelet said there were examples of smaller operators clubbing together to form co-operatives to try and leverage better deals.
Outsourcing to managed service providers such as On Demand Group, which manages video-on-demand and pay-per-view services for operators including Virgin Media, SFR and OTE, is another option.
Whatever model they settle on, more investment is needed to ensure that operators deliver the best quality content to consumers, according to O’Sullivan.
Bachelet is in agreement: “Telcos are really the enablers of content,” he said.
“They can add value by assuring quality of service, providing the latest technology, making it easy for consumers to find content and then presenting it in an appealing way.”
Delivery remains a sticking point.
O’Sullivan said slower broadband speeds in Europe were holding operators back.
As a result, DT is pursuing a hybrid IP/satellite strategy. The, however, is very much about all IP solution, according to the SVP.
Looking forward, O'Sullivan said content needed to made more relevant to consumers, but for this to happen operators need to understand more about what their customers want.
Personalised advertising could be a key future revenue stream, he added.
“The future is not just about viewing, it is also about control,” he said.
Ultimately, the relationship between operators and media companies is evolving and we are still in the early stages of this process.
Undoubtedly, both are becoming increasingly reliant on the other and will have to adapt to their individual strengths and weaknesses.
For operators, ensuring that their role in the value chain is more than just the delivery channel is key.