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.)

Figure 1. Broadcasters can outsource many tasks to service providers.

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.

The value for broadcasters

Outsourcing playout services management offers increased flexibility to cope with new technologies. Broadcast engineers are experts in linear technology, yet with multiscreen services relying on fixed or mobile internet, there is the potential for competency gaps to appear. Integration with an external team that is experienced in working with IP-based technology means that engineers become part of a dynamic, forward-looking environment.

The business model for working with an external broadcast services team is three-fold:

  • It helps broadcasters to reduce OPEX and CAPEX by assuming responsibility for personnel and technical platforms.
  • Through consultative sales, broadcasters can be guided toward new services, revenue streams and technical solutions.
  • Broadcasters can focus on their core business — understanding the viewers, acquiring and packaging content, and selling advertising (in the case of a commercial broadcaster).

Reductions in OPEX and CAPEX can be achieved with an external partner by leveraging economies of scale. An external company will ideally work with a number of different partners, so there is the opportunity to share investments in new technology, meaning that the same resources — in terms of new equipment and team experience and knowledge — are available to everyone.

Additionally, when new technologies and trends become such a core part of the television landscape, as we are seeing now with the rise of multiscreen and a move to more HD channels, an operator does not need to bring in and form a dedicated team to investigate how these are implemented. This not only reduces expenditure, but increases agility and service velocity — vital tools in such a competitive industry.

Selecting the right partner

When making the decision to outsource the management and operation of playout services, there are a number of key factors that should be considered when selecting a partner company:

  • Financial stability. Firstly, it’s vital to remember that this is a long-term relationship that is being entered into. Therefore, financial stability is paramount. A company with a strong background, as well as a healthy financial outlook, will offer peace of mind when looking ahead to a decade’s time and what can be achieved together.
  • Working culture. Working culture also plays an important role in forming a successful partnership, and it is important that there is a similar mindset and approach between both parties, as well as a high enough level of cooperation and willingness to adopt new strategies. Both parties bring different thinking to the partnership, but there must be an underlying similarity in culture in order to succeed.
  • The size of the partner company. The size of the partner company is a strong consideration as well. A larger organization enables scale beyond what a single operator can achieve. By using common tools, methods and processes, a large external partner can develop and industrialize new ideas rapidly, while achieving greater efficiency in network operations, service platforms and associated operations and business support systems. Furthermore, its purchasing power with third-party suppliers makes it a potentially far more effective negotiator than individual operators can be on their own.
  • Agility. Agility also needs to be taken into consideration. Broadcasters do not want to be concerned about whether existing services will be affected in outsourcing playout management. Likewise, they want to know that when it comes to rolling out new services, these can be done seamlessly and with no delay. There is little point partnering with a company that knows of the technological benefits of new equipment, but lacks the know-how or experience to deploy it.
  • Passion for television. Above all else, however, it is important to work with a partner company that has a true passion for television. That may sound obvious, but it must not be overlooked. You, the broadcaster, should feel safe in the knowledge that your partner company has long-term experience, knowledge and vision for how the industry is changing, and knows the technological challenges and opportunities that are on the horizon. A proactive, rather than reactive, partner will help enable a competitive edge and provide the next-generation services that viewers desire.
  • Partner for change. In that sense, they need to act as a partner for change. The management and operation of playout services is essential, but the right company is the one that will offer advice, provide consultation and actively encourage new steps to be explored and deployed in order to push the viewer service offering forward.

Over the next few years, the shift towards multiscreen will see our industry move closer to realizing the vision of the Networked Society — a world in which all devices that can be connected to each other will be. As we make that transition, managed services can offer broadcasters the support they need to remain relevant and competitive in this multiplatform, multiscreen TV world.

Thorsten Sauer is Head of Broadcast Services at Ericsson.