‘Adjacent markets’ and ‘horizontal convergence’ opening up for operators

Media content and distribution companies have an opportunity to branch out into new markets that are adjacent to the traditional entertainment business as growth in their core market tapers off, according to Lee Chow, chief marketing officer, video product line at Huawei.

Speaking at TV Connect in London this morning, Chow said Huawei was playing a critical role in enabling media companies to compensate for declining box office and pay TV revenues, through security solutions and innovation in the user experience, among other things, she said.

Chow said that theatrical box office returns and pay TV revenues are growing only slowly if at all, tailing off even in formerly high-growth markets such as China. “Operators have responded by providing skinny bundles like DirecTV Now and Sling TV, and even YouTube TV,” she said. “These represent innovative business models. We are also seeing different bundling models, with multi-play emerging.”

OTT is continuing to expand, with 60% of US homes expected to have one or more SVOD subscriptions by 2020. However, OTT is not expected to exceed 10% of pay TV revenues, meaning that it is more a complement than a threat, she said.

Chow said that delineation between producers and distributors is shifting, with distribution platform like Netflix investing in content production and Time Warner merging with AT&T. On the other hand, content production companies had moved into distribution.

“We are seeing saturation of pay TV penetration in mature markets, but there is still room for growth in emerging markets,” she said.

However, Chow said Huawei believes there are opportunities in adjacent markets such industrial video, UGC  and communications video as well as entertainment.

Chow said the Chinese market presents interesting opportunities, with an ageing population creating opportunities for services targeted at assisted living environments, with new services such as communication video, housekeeping services and in-home dining services layered on to a core entertainment offering.

Huawei has built its own  Video PaaS offering on the basis that the same video technology can “be leveraged in adjacent markets”, she said. “This strategy enables service providers to first engage in the entertainment space and then grow into adjacent markets,” she said.

In addition to adjacent markets, there is an opportunity to grow by “horizontal convergence”, she said. “This horizontal convergence enables cross platform features and a seamless user experience” across mobile, fixed and OTT video, she said.