Last month, the condominium that I live in had its Annual General Meeting (AGM) which turned out to be a lively and momentous occasion, a far cry from the yawn that it was over the last few years.
The main talking point, even days after the AGM, was the ousting of several supposedly “key” members of the Management Committee (MC), voted out by residents who felt that they acted in a manner that did not prioritise their interests and fully represent their concerns.
The former MC members who were not re-elected were unhappy and red-faced, to say the least. It certainly did not feel good being displaced like that. What really took them by surprise was the boldness of the newly elected MC members and their supporters and the readiness of residents to speak their minds and lock horns with the MC old guards in a frank debate over how the estate should be run.
But what really shocked me was how this feeling of being displaced was so hurtful and so deep-seated that it prompted someone (possibly a resident and/or supporter of the MC old guards who were ousted) to write a poison letter, sent to the mailboxes of each and every resident in the condo, disparaging the newly elected MC members, arguing that the election results are null and void and that an extraordinary general meeting be called for another election!
It sure sucks to be displaced and to be rendered unimportant or inconsequential, isn’t it?
DISRUPTION – Can’t Be That Bad, Can It?
But this is exactly what the 21st century economy will do to a lot of people if we are not prepared for it. Disruption is the new buzzword that underlies the strategy of many new internet enabled start-ups. The impact they are having on the economy is significant enough to be singled out as the main THREAT by executives doing a SWOT analysis of their businesses, anxious to come up with strategies that will ensure they stay relevant in the foreseeable future. Thanks, in no small part, to the Internet and the advances made in mobile broadband technology.
Take for example, what is going on in the media landscape, specifically the free-to-air TV (FTA) and pay TV markets, both of which, for a long time, defined very much by the linear programming model.
We all know that FTA TV and even cable TV networks around the world, not just in Singapore, are casting a wary eye over the emergence of Netflix and similar non-linear, a la cart TV content and movie service providers like iflix and Hooq. Will our own FTA channels be displaced by these up and coming service providers?
To really answer this question, we need to understand what Netflix really is about and what it is not.
NETFLIX – What Is It Exactly?
Netflix started its Singapore service on 7 January 2016, increasing its footprint to 190 countries, becoming a truly global internet TV network.
Netflix is a global internet streaming service that provides TV and movie content to audiences in an on-demand basis over internet enabled devices, like SMART TVs, laptops, iPads and smart phones. It comes under a category of internet services called OTT or Over-The-Top which refers to services offered over the open internet (wifi) or on top of a customer’s broadband service provided by an Internet Service Provider (ISP).
It is non-linear – it embraces a very millennial trait – “I want it now, when I am free to watch it and not when it is programmed by someone who dictates the time when I SHOULD watch it”.
In fact, so confident is Netflix about its non-linear model that it predicts that non-linear, internet TV will one day replace linear TV, just like mobile phone has replaced fixed line telephone.
Personally, I am not as optimistic as Netflix on this as I feel that there will always be a place for linear TV as there is a segment of the population of viewers who like watching TV shows on a regular programmed schedule. It is part of who they are and more importantly, it is what characterises their viewing habits.
Reed Hastings, the CEO of Netflix, has gone to extraordinary lengths to clearly specify what his company is NOT. And it is very interesting and I feel that its worth reviewing it here again.
Netflix is not a pay-per-view service neither is it a service that shows ad-supported content. It is a monthly subscription service with unlimited viewing, commercial free.
Netflix is about flexibility, freedom, fun, fuss-free (simplicity) and choice. You are not tied to a long term contract and you can quit anytime and come back on again anytime.
A CATALYST For Change In The Market
This is a far cry from the complex, mind boggling and stress inducing contracts that multi-channel video programming distributors (MVPDs) subject their subscribers to. You only have to look at the many bundles/packages that cable TV service providers, StarHub and Singtel Mio, have available to see how local MVPDs effectively limit choice for their customers according to content types and price.
We are already seeing how Netflix’s entry into the Singapore market has hastened the tightening of regulatory framework here to better protect customer interests. Just recently the Media Development Authority (MDA) introduced changes to the Media Market Conduct Code allowing customers to exit from fixed term contracts without payment of early termination charges where there is:
- Increase in subscription fee
- Removal of material channel(s)
- Removal of material sports content within a channel
- Removal of at least 20 per cent of total number of channels in entire pay-TV service since the point of subscription
But rather than see it as a threat from a malevolent competitor, both the 2 big pay TV service providers, StarHub and Singtel’s Mio, have included Netflix as a channel that subscribers can have as an option on their set-up boxes. This is, in no small way, due to the Netflix’s deep rooted belief in network neutrality which essentially means a quid pro quo scenario whereby internet service providers (ISPs) do not charge Netflix costs of interconnection and Netflix, likewise, does not charge a percentage of the broadband revenue earned by ISPs whenever consumers switch onto Netflix to stream content which, according Netflix, is a significant portion of a consumer’s broadband usage.
But to me, the clincher in this battle for eyeballs among the media giants of the world is that Netflix delivers content that people WANT to watch because it is entertaining. CONTENT is still king and it is the overarching glue that holds all other factors of its business model together, delivering a compelling service with a strong USP.
Netflix has essentially listened to customers’ needs and wants and met them in a starkly simple and effective manner.
MEDIACORP’s Response To Shifts In The Pay TV Market
So how have our local FTA channels responded?
Well, MediaCorp is under no illusions about what it is up against. It knows that it has to do better to meet its viewer’s preferences. Linear programming is the first bugbear it has to deal with. And it has attempted to do so by introducing an OTT service called Toggle, where all its FTA channels together with selected Channel 5 and Channel 8’s older series, are available for viewers.
The services, which are free, are branded as Catch-up TV (catch up on TV shows that you have missed on MediaCorp ) and The MediaCorp Collection (older series and dramas from the MediaCorp library).
For paid content, the service is called Toggle Prime, where you have to pay a subscription fee depending on the duration of the contract – monthly, 6 months or 12 months.
Toggle is available on any internet-enabled device and with its Catch-Up TV and on-demand paid content, it has effectively answered the question of linear programming by making use of technology to offer some flexibility to viewers in terms of watching shows at their own time. However, once you start comparing features like ad free content, short-term contracts with fuss free termination and pricing, then it becomes difficult to compete against the likes of Netflix.
But there is one other important factor – content. Are viewers drawn to the content on offer on Toggle? What is the differentiating factor that will urge audiences to watch content on Toggle? To be sure, this is not a zero sum game, whereby the choice between Toggle and Netflix or between Toggle and StarHub or Singtel Mio, is one which is mutually exclusive. Content and the ease of accessibility of that content will decide who watches what on which service.
BUILDING A Content Library That Is Original Versus Licensing Content
Going by estimates from industry watchers, there are around 300-350 thousand unique visitors to the Toggle site each month and about 30-35 thousand visitors each day as of the end of 2015.
Toggle’s content library is less impressive and nowhere near the breadth of variety that Netflix offers, especially when we consider English language content from the U.S., including the latest Hollywood TV series and movies. However, if we were to consider local content and especially Chinese language content and drama series, then Toggle becomes a slightly more compelling proposition.
This constant battle to manage content so that viewers stay engaged and perceive that they are getting value for their money, is what sustains the business model.
Just to underline how important content is to Netflix, Hastings announced that US$5 billion will be spent just this year alone on original content. That is a massive amount of money and Netflix is doing it because it realises that having a strong content library that is your own is a long term asset that can generate revenues for a long time in the foreseeable future with little acquisition and licensing costs.
Netflix already has the experience of producing award-winning original content which has whet its appetite to do more of the same. Just look at these titles – Orange Is The New Black, House of Cards, Arrested Development and Star Wars: The Clone Wars (the last 2 being previously cancelled series) and the award winning documentary, The Square (2013).
Interestingly, Toggle is also paying heed to this strategy and planning to release a slate of 11 original programmes targeting younger viewers within the next 2 years.
Aside from the original content strategy, Netflix uses the advances made in big data analytics to personalise the offerings for its customers. Crucial data collected from their customers will be translated into interesting and relevant recommendations and content offerings on their customers’ homepage.
Credit: Victorio Marasigan
https://www.flickr.com/photos/scrufidog/
Consequently, advertisers who want to reach out to customers on their homepage, will be able to do so in a more targetted manner. So offering ad-free content and depending solely on subscriptions for revenue is not as much a negative factor for Netflix as it may have been years ago, due mainly to the advances made by data analytics.
To sum up, the disruption phenomenon will always be with us. It acts as a catalyst for greater innovation in the marketplace. The winners in the marketplace of today will always be the players who are sensitive to the needs of customers and willing to design products and services which make use of technology to offer a value added proposition. Netflix has done it in a refreshingly direct and simple manner. Fuss-free, flexible and freedom of choice with a clear idea of which market segment it is servicing. Clarity in service identity, compelling content, simple and unfettered access and exit to content on multiple devices. Seems like a winner to me alright. What do you think?
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