Video on demand (VOD) partnerships key to growth for telcos
With voice revenues in terminal decline and future data revenue models uncertain, Africa’s telcos have to expand their value-added services portfolios. “On-demand entertainment and infotainment present the next big opportunity for telco VAS business growth,” says Stephen Watson, Director of digital content on demand solutions provider, Discover Digital.
“Our operations and research in the digital content on demand space over the past two years have reaffirmed that the small screen is the next big screen, and that on-demand content is just at the beginning of a rapid adoption curve across Africa,” says Watson. “On top of that, telcos faced with declining revenues have to diversify and collaborate with new partners to bring bundled value-added services to market. Across Africa, telcos are well aware of the growing requirement for on-demand entertainment, music and educational content, particularly via mobile.”
Pyramid Research reports a soaring appetite for on-demand video services presenting significant investment opportunities for European telecoms operators, while research firm Future Market Insights (FMI), says the global VOD services market was worth $48.93 billion in 2015, and is poised to increase at 8.3% compound annual growth rate during the period 2016-2026. In North America alone, VOD services accounted for nearly $20 billion in market revenues last year.
“Improved connectivity and smartphone penetration across Africa is expected to drive a similar surge in mobile VOD consumption,” says Watson. He believes Africa will follow trends in more developed markets, where the majority of consumer viewing is on their smartphones, particularly among teenagers.
Citing the GSMA report that sub-Saharan Africa is expected to see the strongest growth of any global region in the number of smartphone connections over the next six years, reaching 525 million by 2020, Watson believes the mobile screen will be both the primary access device and the ‘TV of the majority’ across Africa. Added to this, Millennials and the rise of Generation Z will entrench mobile as the entertainment consumption device of choice. “In fact, any broadcaster with no push to mobile will become irrelevant in a decade,” says Watson.
Discover Digital’s arrival in the market has brought across-the-board, on-demand digital entertainment and educational content, digital rights management and even converged payment and billing platforms, to the next generation of African entertainment and VAS providers.
“Emerging market telcos don’t have the budget to build massive content libraries and build the necessary technologies, while major international media companies don’t necessarily have the appetite to deviate from their mature market models to accommodate Africa’s unique challenges,” says Watson. Furthermore, small to medium size telco’s don’t have the independent potential to move the revenue needle enough to garner the attention of major global media players and there is little interest or effort to look at reseller or white labelled partnerships. “Add other trading conditions like Withholding Tax, Forex repatriation challenges, different regulatory operating frameworks and costly system integration requirements, and value versus effort can quickly become a negative,” says Watson.
“In the same vein, because Africa’s markets and cultures are varied and unique, international companies cannot just take a ‘switch on and pray’ approach to on-demand content in Africa. We believe packaged data bundles linked to relevant content offerings, supported by the necessary platforms and billing and payment systems aligned with the respective market’s buying habits, is the simplest way for Africa’s telcos to add value through on-demand entertainment.”
Discover Digital International is building its content and service portfolio to enable telcos in emerging markets to easily take branded VOD services to their customers as part of their bundled offerings.”