Who will be the Next TV Aggregators?

Pay-TV is essentially an aggregation play: providers bundle up channels from a variety of owners into a single, simple package and sell that package to consumers, who value the ease of use of paying a single monthly bill and using a single user interface for a diverse set of content. But current trends in the TV market threaten to break these bundles apart, as both new players and traditional content owners create standalone offerings sold direct to consumers as a response to the size and inflexibility of the classic cable package. Yet, the benefits of bundling haven’t gone away and there’s some evidence consumers would prefer to get these standalone offerings re-bundled when it comes to bills and user interfaces. It creates an opportunity for a new set of aggregators. Who might those be?

Disaggregation and Fragmentation the Order of the Day

One of the single biggest trends in the TV industry at present is disaggregation and fragmentation. We’re moving from a world in which the vast majority of people consume, almost exclusively, pay-TV delivered through a traditional infrastructure and set-top box to one in which people consume a variety of video content through many different channels. Yes, pay-TV adoption remains strong, with over 90 million US households still going the traditional route, but that number declines by 1-1.5 million each year. In many cases, the traditional bundle is part of an increasingly varied video diet which also includes web-native services like Netflix and Hulu and, increasingly, standalone offerings from traditional content owners like HBO and CBS.

Among younger viewers, the traditional bundle and content owners are far less relevant and short-form video content found on YouTube, Snapchat, and other venues is likely to make up much of their daily video consumption. New standalone services are also beginning to emerge for this audience, often targeting fans of a particular genre or interest, like anime or gaming. But whether we’re talking about older or younger audiences, one theme is consistent: the attraction of these new services is they give consumers exactly what they want (and no more) on the devices and with the user interfaces they prefer and at what seems like a reasonable price (which may be zero, in the case of some of the ad-supported offerings aimed at younger viewers). The result is a fragmentation of the industry, with a move away from a single, homogeneous bundle of channels to a much more diverse set of consumption behaviors.

The Limits of Disaggregation

Disaggregation is therefore rising and a defining feature of the modern TV era. Yet, it has its limits. It works great as long as it’s limited to one or two services, easily manageable even if the bills are paid separately and the content is accessed through different devices or in different apps. The problem comes when this shift in usage from the programming guide to the home screen starts to encompass more than just one or two unbundled channels or services.

Maybe you watch Netflix in addition to a traditional provider or perhaps Netflix has taken the place of your traditional provider, but you just can’t live without Game of Thrones and so subscribe to HBO as well. That’s pretty manageable. But what if you also want your Homeland or Walking Dead fix or you’re a closet NCIS fan? Then, you might find yourself getting the Showtime, AMC, or CBS standalone services. Suddenly, you could have half a dozen services to manage, each with its own app and its own monthly bill. Perhaps some might be available on some devices but not others or the interfaces might be different enough to be frustrating, with some offering a powerful search function and others taking more of a navigation approach. Perhaps you’d like recommendations for other shows to watch which transcend these services, so your obsession with Better Call Saul would lead to recommendations for new shows from HBO and not just AMC. When you sit down for an evening, you’d just like something good to watch and you don’t want to hunt through five different apps to find it.

At that point, aggregation starts to look pretty good again and not just to those traditional providers. Even younger viewers tend not to obsess over a single genre, typically watching more varied fare across several channels and apps as well. And though they may be willing to do the hard work to find content when they’re strongly motivated by saving money in their youth, as they age they’re likely to make the same cost/time tradeoffs as their forebears and start to value ease of use enough to be willing to pay for it.

The New Aggregators

At this point, we start to see new aggregators emerge in the TV industry and, of course, this is already happening. Several companies have stepped forward with their own visions of how to do this, though no one has yet made a complete success of it. On the one hand, we have Apple, which last fall introduced the appropriately, if somewhat generically named, TV app for iOS and Apple TV. That app acts as an aggregation layer for video apps available on those platforms, providing a single user interface for keeping track of favorite shows, recommendations, and so forth. It works well for the apps which have chosen to support it but it’s missing Netflix and some other big services which limits the utility somewhat.

On the other hand, we have Amazon, which has taken a different approach, offering various paid channels as tiers on top of its Prime subscription service. It started with one or two premium channels but has since expanded significantly (and arguably quietly) and now offers not just four big premium services (HBO, Starz, Showtime, and Cinemax) but also a long list of more specialized offerings including Acorn TV (British television), Heera (Indian content), AnimeStrike, NBC’s Seeso comedy app/channel, and more. These additional channels are billed to the same credit card as the core Prime subscription and accessed through the Amazon Video app. The recommendations layer isn’t quite there yet but the billing and user interface bundling are.

What we haven’t yet seen, but I suspect we will see soon, is a similar approach to the more youth-oriented programming offered by brands like Crunchyroll, Maker Studios, and AwesomenessTV. For now, these brands remain separate and are consumed by viewers individually, in some cases on an ad-supported basis or, in a smaller number of cases, as paid subscriptions. But over time, there’s an aggregation opportunity here, too, in bundling together content by demographic, genre, or interest in a single package, easily consumed in a single interface and billed (as applicable) once rather than in pieces.

Though Amazon and Apple will be potential aggregators here, we’ll see many others join this throng, including the traditional pay TV providers, big content owners like Time Warner or Disney, and even new companies which target this opportunity as startups. At this point, it’s far too early to know who will win, with the pay-TV providers having a strong history in the space but also lots of baggage in terms of not just preserving old business models but poor reputations with consumers, while tech companies often do user interfaces and recommendations better but fall short on content rights. I suspect this battle over aggregation is going to be one of the most important in the next few years because it’s the companies that do it well that will own, not just the customer relationship, but the primary brands in this space, with all others eventually secondary and becoming, in many cases, invisible over time. As such, all existing pay-TV providers and content owners should be thinking very carefully about where they might fit in such an ecosystem and taking steps to ensure they will be strong players there.

Published by

Jan Dawson

Jan Dawson is Founder and Chief Analyst at Jackdaw Research, a technology research and consulting firm focused on consumer technology. During his sixteen years as a technology analyst, Jan has covered everything from DSL to LTE, and from policy and regulation to smartphones and tablets. As such, he brings a unique perspective to the consumer technology space, pulling together insights on communications and content services, device hardware and software, and online services to provide big-picture market analysis and strategic advice to his clients. Jan has worked with many of the world’s largest operators, device and infrastructure vendors, online service providers and others to shape their strategies and help them understand the market. Prior to founding Jackdaw, Jan worked at Ovum for a number of years, most recently as Chief Telecoms Analyst, responsible for Ovum’s telecoms research agenda globally.

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