First, let’s set the scene by considering a relatively mature market, the UK, in terms of the level of viewership and revenue from Broadcaster D2C services compared with the rest of the broadcast business.

The following data points are from the UK streaming market in 2020 (source: the UK regulator Ofcom’s Media Nations Report 2021, Enders Analysis of ITV Q3 2021 results). With a population of about 65 million, these figures show how far streaming can still grow even where app-based services have existed for over 10 years, particularly for broadcaster’s live content.

Commercially, two of the UK’s leading broadcasters that are mostly advertising-powered reported results in the last two years, showing the percentage of their total business related to their D2C services.

The summary is that Broadcaster D2C services are still a small fraction of the overall broadcast business – in the 5%-20% range for both viewership and revenue – most broadcasters are at the low end of this range. So while OTT is already a hot subject, it’s going to get a lot hotter.

Content Monetization & The Customer Engagement Model

Against this backdrop of mature D2C markets, as the broadcasters in less-developed digital economies plan to deploy their first app-based service, they face a very different prospect compared to the above examples.

The two primary challenges are basic access to data services (e.g., broadband, mobile) and the relatively high cost of those services versus disposable income. Simply put, disposable income levels do not yet support the same type of online video consumption observed in the more-developed economies. Therefore, the broadcasters’ addressable D2C market becomes a small minority of the total population. Before the D2C services of these broadcasters can reach the majority of the population, the infrastructure must be dramatically improved. But there are early positive signs of the future potential already being observed in some countries – for example, where radio has become digital, and therefore available nationally, broadcasters are already observing demand for radio in new parts of the country. This, in turn, is generating new revenue opportunities for advertising in those parts of the country. The moral of this story is the same as has been seen in the more developed countries over the last 10-15 years – where the technology and price allows, people will use the new services. Digital economies need multi-faceted investment but priority one is to invest in the fundamental technology infrastructure and make it affordable to the general population.

Despite these viewer access challenges, broadcasters introducing new Apps in the early 2020s know their standard of user experience must be high and cover a range of subjects. First and foremost, D2C broadcasting means directly managing the relationship with the consumer. Depending on whether the relationship is a subscription-based relationship or an advertising-based relationship, the nature of what needs to be managed varies. The subscription model requires an excellent user-interface, a good content line-up, helpful recommendations, and the required quality of delivery – these tick the big “value for money” box for consumers, which leads to customer loyalty. The advertising-supported model requires the same ingredients but adds the need to target ads appropriately based on the user profile and preferences.

Advertising-supported services are where broadcaster OTT services are focused, although there is some space for a paid-for, ad-free subscription service. So far, broadcaster OTT services have a low percentage of paying subscribers, and with global on-demand services from Disney, Netflix, Prime and more, it is likely that national broadcasters will remain focused on national-level, ad-supported services.

Because consumer online behaviours easily blend multiple activities including content discovery, lean-back entertainment, information gathering, shopping, socialising, and more, the very latest Broadcaster D2C feature-sets include requirements for online customer engagement tools like chat and email marketing functionality. While there is a lean-back live and linear viewing experience that remains core to streaming services, and VOD services are based on easy search and insightful recommendations, the latest wave of broadcasters see that these customer-engagement tools are necessary to truly know and serve the customer, which is a competence that lives at the heart of being a D2C service provider. In other words, D2C broadcasters must have world-class consumer-handling operational capabilities, and the right technical tools are an important pre-requisite.

There is likely to be a limit to how far these online tools will be used, but the fact that content leads to social interaction amongst family, friends and strangers, and because advertising leads to purchase transactions, then the broadcaster can (and arguably should) have a role in the middle of this “engagement ecosystem”. As a general rule in any business or industry, the trusted brands perform the best. If a household-name broadcaster can position itself as the consumer’s trusted gateway to entertainment, information, and relevant purchase choices, then the OTT service could leverage its brand into wider success.

The requirement for e-commerce integration and payment gateways is at the heart of this engagement ecosystem. Clearly, the pay-per-view transaction model is still valid for some pieces of content – boxing and wrestling matches are the archetypal global pay-per-view success-story. But if the content ecosystem can be organised by the D2C Broadcaster to service and support the customer with other transactions, then shopping and other commercial transactions occurring within the content ecosystem would be a win for the broadcaster. It’s not a natural fit today, but could things move in this direction? It is possible given the natural advertising-led business models of broadcasters coupled with the (generally and hard-earned) trusted nature of the national content brands for great entertainment, objective news, and excellent production of live events. More general commercial transactions could become a major part of the direct-to-consumer content provider business model. Time will tell.

The Content Management & Delivery Model

While OTT services started with on-demand content, now broadcasters are clear that linear content and live events must appear on their OTT services. Consumers are fully used to live video being available on any device, and, even more importantly, in the 2020s the Connected TV has fully emerged and is becoming dominant. See the “How Devices Drive D2C Streaming” article here. This means that broadcast-grade quality on a large-screen TV is a must for streaming services – consumers are expecting to see flawless high-resolution video on their big screens. Broadcasters appreciate that their prime-time audiences for live news, sport, and entertainment programming, especially for the most popular content, are very large audiences. Countries with populations of 40 million to 80 million people will easily see 10 million to 20 million people tuning in to breaking news, nationwide political addresses, or major sporting events. National broadcasters know that they must deliver to this size of audience, without fail. It’s part of a public service broadcaster’s charter. So, when live content is offered on the OTT platform, the platform needs to be ready to handle the audience.

This high expectation for content availability on any device also means that pop-up channels and regionally focused channels/content should be accessible. The good news is that with cloud services development and internet-protocols like SRT (see the “Optimizing encoding contribution for Live OTT” article here), there is a more accessible capability to bring contribution feeds from any location back into a processing and playout environment and feed this into any distribution network. Consumers can see any type of live content they wish, and broadcasters can be confident in their ability to produce content to their high professional standards.

While Broadcasters move forward with their new D2C Apps, Telecommunications operators continue developing their offerings to consumers in parallel. In the countries where Broadcaster D2C Apps are just now launching, mobile connectivity, broadband connectivity and associated data plans are rapidly improving to allow for an all-you-can-eat consumption model at reasonable prices. It is interesting to consider that only 10-15 years ago the concept of “fair-use” had to be introduced on mobile and broadband services, as consumers downloaded and streamed excessively and had to be curtailed to allow everyone fair access to the bandwidth. As broadband networks expand to enable digital economies to thrive, consumers can download and stream more and more data without worrying about excessive costs.

The bottom line for Broadcasters is that they need to trust their delivery infrastructure to be up to the task. So, what do their requirements look like?

Delivery infrastructure requirements are subtly evolving in OTT projects that are starting out in the 2020s. A managed video delivery service like a CDN is still a clear requirement for broadcasters, who need trusted partners to handle the day to day running of a high-performance video network. But the concept of the private CDN is quickly becoming a mainstream subject for broadcasters to consider, given the scale of traffic they are now delivering and the need for live streaming to reach broadcast-grade on the big-screen Smart TVs. “Private” in the context of a managed service means two things – first it means dedicated capacity which has the best chance to be congestion-free and high-performance; second it means the capacity can be deployed in various locations to suit the needs of the broadcaster and at a deployment speed that is specifically for the broadcaster’s business requirements (which tends to be faster than general internet expansion). These two characteristics are important for broadcasters, but they also contain benefits for the ISPs providing the all-important connectivity to the consumer. The Broadcaster Video Delivery Network article contains more information about this subject.

Operationally, broadcasters are now combining the operations teams that are responsible for content delivery. For many years most broadcasters have focused on their traditional “linear” team while their fledgling “digital” business has developed. As the most mature broadcasters focus more on their streaming plans, it starts to make more sense to merge the operations. In many ways, this is all about scaling up the Digital side while making the Linear side more agile. Both groups have core technical competencies and operational specialities. Linear TV has a live and playout centric culture, with expertise in delivering to the multitude of platforms where their content is carried – from in-country Pay-TV operators to free-to-air platforms to online video platforms. Digital has a VOD and online-centric culture, with D2C services delivering directly into the broadcaster’s own App across a myriad of device domains that OTT services appear on. As the Digital and Linear worlds become ever closer due to new technologies (e.g., Smart-TVs, DVB-I) and audience behaviour shifts, leading broadcasters see the need to combine their expertise and cultures to build a more integrated operational environment.

Applying the Linear TV operational disciplines to the Digital side of the business is becoming more important as D2C services scale-up. One thing that broadcasters and their network service providers know how to do exceptionally well is deliver high-quality video at the highest possible scale – i.e., to large national populations. The knowledge and skills have been engrained over decades of broadcasting. Streaming reaches a lot of people, it is true of course, but not for live video audiences of traditional broadcast scale. Yet streaming will need to scale, and there are broadcast disciplines to instil for system readiness, system resiliency, quality monitoring, and incident management practices. Arguably, these disciplines require even more focus in an IP-networked environment because the networks sprawl across telco and mobile networks far more than terrestrial broadcast networks do in their over-the-air setting. Broadcasters also need to take account of their public responsibilities like delivering public service alerts and managing audio loudness. These responsibilities need to find a way through the streaming infrastructure just like they have done through the broadcasting infrastructure. Combining operational teams will make this easier as broadcasting continues across an increasingly balanced set of network environments.