Now after introducing the players in the digital video services field in Finland it is possible to start analysing what each of them brings to the table. Theoretically added-value of each player in the network can be assessed by comparing the current situation to one where these company would not exist. Observing such a hypothetic situation in real life is of course impossible. Consequently making a good analysis really comes down to being able to understand what players stand to win or loose from changes in industry dynamics.
For a video service provider the most important thing is to being able to continuously create fair value to the customers. This requires making sure that the selection is and remains of expected quality. Since quality of audio-visual productions is fully subjective matter it suffices to say that the user perceptions of artistic, topical or other value needs to satisfy the expectations. Selection of content producing partners thus play the most important decision in service providers strategy. Changes in this part of the value net ripple out to all the other parts of business network, as it has been very clearly illustrated in the case of online piracy for example.
Since content is so important the suppliers have great power and tend to have their way in negotiations. The way the large producers have built their control depends on a few factors. Most importantly there is the risky nature of financing the productions. Secondly suppliers have multiple strickly controlled publishing channels accessible to them. While the sold items definately have a limited shelflife the players have been able to institute a system of timed windows for maximizing their investments’ value without harmful competition between distribution channels.
Since content is so important part of the equation production economics are worth understanding more deeply. Most of the items produced are not financially profitable and the required investment diversification favors large entities. For the last part service providers shy away from taking this risk themselves. Much of the content distributed in Europe comes from the ten large companies in the USA. In many countries such as Finland there are government funded programs for supporting domestic cinematography and television productions. Badly managed these systems have a tremendous negative effect on the innovativeness of the local industry. On the other hand one could argue that it is detrimental to finnish cultures to retain technical know-how in the country even if the artistic values of all productions may not be upto par.
Where-ever the content is produced service provider’s good supplier can provide a wide array of content. Partnering is a continuous balancing act between richness and reach. Dealing with huge number of independent providers would be a very time consuming, but on the other hand relying on too few sources is risky. If an aggregator partner is lost there are others, but it takes quite a bit of time to negotiate new distribution deals. The biggest risk is that the selection slowly degrades in its attractiveness. Thus the greatest added-value an aggregator can provide is keeping sure the spoiling stock is fresh.
Competitors can provide added-value by providing more visibility for the whole online video services industry. Competitors could also help lower the risks by aggreeing on complying to common technical standards on DRM and user authentication. A competing player can help drive new business models and contract types that would have otherwise been impossible to negotiate with the suppliers. Competing services that use consumers as their content source have diminished the value of professional content and made it little bit easier to convince aggregators to win-win deals.
If competing online video companies were to disappear more of public’s time would likely be spent on other forms of entertainment. The statistics show that the net looser this far has been television and the traditional medium could gain back some of their share of people’s time. Of course totally new past-times may become fashionable. If one of the finnish IPTV services (Elisa Viihdekaista, Maxisat Multinetti or TeliaSonera’s offering) was discontinued there would be very little change to the business environment as they have very little effect this far. All in all at the moment competitors are a blessing and there is just a couple that truly threat business prospects of others.
Complementers’ added-value can be defined by their ability to attract or create more customers. Growing new sports for example can create wonderful possibilities for a new player to attract audience inside a niche. In the past golf and extreme sports have been able to create new customers segments for premium services. In the future up-and-coming sports like downhill mountain biking or floorball could provide opportunities for lucrative pay-per view business. Advancing video technology will bring high definition video (flat screen tv-sets and camcorders) to reach of the masses very soon and will be driving adoption of HDTV in first mover segment.
Missing or bad complementors can also negatively affect the business. For example device manufacturers have been justly criticized for poor usability and general buggyness of digital media adapters. Consequently the adaption of digital television was slow. HD service providers will have to solve this same challenge. On the content side same sports doping scandals or rising game ticket prices can affect the sales. Being able to adapt to such unexpected situations is question of content portfolio management.
From the end-customers point of view service provider’s true added value compared to pay-tv services can be formed by flexibility and free choice. Trying to leverage purely technical arguments will have limited traction, but the claim of better picture quality will be more usable than it was when nation was moving to digital. Another technological megatrend is broadband connections and well executed systems can do very well. Added-value of alternative distribution channels has dimished, but the craving for interactivity is likely to just increase. Social networking is just bound to get bigger. To compete any video service provider needs to embrace peer recommendations.
To enjoy any video services each client needs to obtain some kind of network connection, device and means to identify themselves as a customer. There is a multitude of different options. The connections can be implemented using a cable, satellite or terretrial television network or it can be based on broadband internet technology. Currently each network requires a different kind of device. Consequently there is inertia for moving from one platform to another as it is in the best intrests of the customer to bind as little capital on any single service provider or network.
For the service provider the main challenge is increasing the added-value of the service palette in customers’ eyes. While convinience of bundles and orchestrated billing with other communications services has been a hot topic the triple-play concept has really not made a big impact. The whole viewing experience needs to add value. Customers will need to offered relevant content. Customers value the opportunity to select and pay just for the content they actually watch. These things are becoming increasingly important as the media industry fragments.
In conclusion the main love triangle is between service provider (SP), content aggregator (CA) and content producer. For the content aggregator partner the main added-value is the opportunity to reach even more customers and no need to build and maintain their own distribution network. For the service provider the content aggregator’s added-value would grow if they could bring new customers also to their other services. Content aggregator partners added value to co-operative effort is its strong visibility in the content business. Content aggregators’ suppliers can increase their added-value if they can target their offerings to easy to reach attractive segments and at more reasonable priced packages.