BVS2008: Tactics

In the previous post on broadband video strategy 2008 the main constraints of video service business were described. To create competitive advantage companies should try to overcome these hindering limitations by any means accessible to them. It may be possible to change the rules by developing new technology or coming up with new business models. Alternative option is to attempt to affect the way in which the business is perceived by other players in the industry. High definition video technology is a revolutionary step in video content business and as such playing the cards right is crucial to any player with blind bets on the table.

Introduction of HD services is clearly going to have an impact on video content business. Resulting effects themselves can be revolutionary or evolutionary in nature. They can be triggered by players visible actions or be formed by slow and hard to recognize changes in the business environment. For any company in the video services business it would be a good idea to try understand how HD might affect the overall business environment. What is even more important is of course gaining insight that can be translated to competitive advantage.

Since solving the distribution challenge is the biggest obstacle to starting a HD content services it is also a suitable starting point for our analysis. The first thing to acknowledge is that a telecommunications operator can solve the distribution challenge within its own network. However since consumer ARPU os unlikely to rise compensating for investments into costly fiber or VDSL networks requires new revenue sources. The end result is that telcoms are hard to wow to collaborative ventures by other players than content providers.

Eventhough telecommunications companies often posses considerable know-how from broadcast television distribution, developing new on-demand service businesses is not easy . Once the last mile challenge has been solved the global nature of the content business and open Internet network infrastructure have the compound effect of leveling the playing field. Anybody will be able to challenge a telcom player. So in order to successfully pitch a business proposition to them one could try to reason by exagerating time required for building a service from scratch and risks involved with developing compatible new devices.

The service development costs are quite independent of the number of users. It makes sense to try to achieve maximum penetration with one platform. Since distribution will be the main barrier for some time it will be vital to create a partner network that can leverage negotiating power against telecoms players. Solid service development skills and extensive device deployment strategy know-how will be valuable in order to gain telecoms players’ trust. Many hardware manufacturers are trying to leap to services business and that makes telecoms players especially vulnerable. Playing on this fear factor will ease up the negotiations. 

Perceptions within a business field are slow to change – even if the world outside was transforming. Consequently total outsiders may be faster to make strategic moves. In negotiations extenuating key factors with players coming in from different fields will be possible. For example many telecommunications players just have not been able to build the culture of buying and selling immaterial content yet. The business proposition will be easier to present in favourable light. For a short while it may be possible to still play down on the riskyness of content business or selecting the right micropayment system. Nevertheless all partnerships must rely on trust and sharing the risks involved. 

For the time being finding a telecoms partner willing to take risks is necessary in order to gain first mover advantage. Customers are slowest to change, but adoption of HDTVs and broadband connections would play well into first movers hands. However distribution as a barrier to entry will be totally annihilated in few years time. Since the time window for the HD service opportunity is limited tactics must be focused on gaining the right to play. The scope of the game will be limited by the growth that has been reached before the likes of Sony, Nokia and Apple enter the scene in full force.


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Fideocam is a pioneer in automating video tools for personal experience capture.

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