April 16, 2021

Diversification: Does it make sense for telephone companies to explore the entertainment sector? | Trends

Diversification: Does it make sense for telephone companies to explore the entertainment sector? | Trends

For some time, to refer to Orange, Vodafone or Movistar as telephone companies is to fall short. This classification is small for a sector that has intuited that the business of calls and Internet services is not enough and wants to fight the leadership of digital entertainment with television channels and platforms of streaming consolidated.

In 2015, Telefónica launched Movistar +, a merger between Canal + and Movistar TV that can boast of being the subscription television platform with the most subscribers in Spain – apart from on-demand content platforms such as Netflix. Vodafone TV follows, that covers a fifth of the market. The podium is completed by another telephone, Orange, who decided to bet on offering these services more than ten years ago. The three are fighting for the rights of football – although Vodafone has declined to do so this season – and compete to offer the best series, films and programs to their audience.

The investment made by these operators in digital services complementary to their offer of telephony lines-an area in which they have a longer trajectory-frontally clashes with the numbers with which they closed 2018. MásMóvil, the only national operator that does not count with its own television offer, snatched nearly 900,000 internet and mobile lines from rivals last year. The big three lost a good number of customers in the face of the boom of the yellow operator. Are you neglecting the heart of your business or do you succeed in your diversification strategy?

"Television allows us to be even more relevant for our customers, in addition to offering us the opportunity to address a market where the penetration of pay television is still low," explains Óscar Candiles, Director of Strategy of Telefónica in Spain. "The results of the last three years prove it, so much that television and content have become a fundamental part of our offer."

For Manuel Balsera, CEO of AMC Networks in Southern Europe, to achieve a growth in the number of subscribers is important, but it is also important to increase the billing of the services provided. "The audiovisual is a perfect way to increase that level of income. Consequently, the development of an offer or a product of its own that complements the mobile, fixed and broadband offer makes all the sense, "he argues. "There are not many complementary services within the telecommunications environment that can generate a greater increase in the volume of billing than audiovisual services"

The creation of channels of own content gives telephone companies the opportunity to get to know their customers better through their consumption data. But the main benefit that communications operators find when betting on platform models is their scalability. Its growth potential contrasts with that of its main business area, in which most of the new lines that they integrate come from portability from another company.

"The streaming is a facilitator to generate scale and capitalize in a much more effective way the brand image of producers of valuable content ", explains Adolfo Rodero, Director General of Communications, Media and Technology at Accenture. "When the effort to access content is similar, regardless of where it occurs, it is normal to generate a concentration of consumption in the producers who have more prestige."

The streaming It is a facilitator to generate scale and capitalize much more effectively the brand image.

Adolfo Rodero, general director of communications, media and technology at Accenture

The sector is especially juicy for these companies for other reasons. "Telecommunications companies have a privileged position because they are the first point of access to the customer, with greater proximity and geographic capillarity than the platforms," ​​argues Rodero. "This gives them a great advantage for personalization and the creation of innovative products."

The analyst is convinced that, if they want to succeed in their commitment to the streaming, they should not put all the meat in the spit too soon. "To improve their profitability, they must rely on scalable models, with progressive and variable investments, given the need for maneuverability in these businesses."

The consolidation of its current leadership in the paid entertainment sector can therefore be understood as part of a process of transforming its business model in which the strategy is more than defined. There is no need to sound all the alarms in the face of the loss of telephony customers. Nokia was born in the 19th century as a lumber company and turned to electronics in order to continue growing. The evolution of telephone companies towards the broadcast of video in streaming It seems quite organic.

What, then, will be your next step? "The gaming he still has a lot to say in this environment"Promises Balsera. "The streaming of video games and their integration into interactive audiovisual content platforms that allow a gaming experience. " And the main mobile operators have already moved file in this direction: eSports are not an unknown terrain for them. Orange is the main sponsor of the Professional Videogame League, in which teams like Movistar Riders or Vodafone Giants compete.


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