Media-Telecoms: convergence redux?

Disintermediation of programme access?

Beyond economists’ theoretical and already ancient arguments over the limitations of vertical integration strategies, we need to recognise a new and deeply rooted trend that appears to be going in the opposite direction of a return to convergence. In this era of increasingly ubiquitous high-speed and superfast access, increasingly effective competition between access providers, and of scrupulous attention being paid to net neutrality, even though applications and Internet users are extremely polarised between a handful of platforms, there is no telling whether telcos’ and cablecos’ assets have been strengthened in a way that will allow them to become the main providers of TV products. The trend is more towards globalisation and disintermediation.

It is only a slight exaggeration to say that, with a server and a few technical service providers, anyone can monetise their media rights internationally. Hollywood may have dominated the industry, but the major studios still needed cable networks and largely national TV channels around the world to distribute their wares. Today, they see what Netflix, Amazon and YouTube are doing, and Facebook’s ambitions in the realm of video, and are diving headlong into testing and investing in direct distribution strategies. So it is media rights that matter most and, behind that, being big enough to acquire these rights or be able to self-produce, and amortise the cost thanks to tens of millions of consumers. Telcos’ boldest and most ambitious media strategies must therefore be consistent with their size, or with expectations of their sector’s international consolidation.

Investing in programmes: will it drive telco consolidation?

If this summary argument sketches out the, in many ways new, backdrop to the relationship between container and content, it of course does not mean that all of telcos’ or cablecos’ TV initiatives are bound to fail, even for the smaller ones. They have a legitimate role to play in building an ecosystem around triple and quadruple play bundles, as a way to strengthen customer loyalty. Here, technological developments make it less costly to create a pay-TV plan that combines access to TV channels, and well-crafted indexing and marketing of OTT services. But none of this makes fixed and mobile high-speed access providers the natural choice for main providers of TV programming, and the ones that rights owners will turn to (and pay a hefty fee). The largest telcos can invest heavily in acquiring rights and even exclusive rights, with the hope that these investments will pay off. In many instances, these will be marketing investments, with the aim of increasing their share of the high-speed access market, and now accelerating the pace of customers’ upgrading to superfast (fibre, 4G/5G) plans. We should mention in passing that this belief does not cancel out the belief that mergers between telcos and (even more scattered) TV networks, and partnerships between the two, can be part of an industry-wide strategy that prevents Europe from being the mere victim of a new era of TV industry globalisation. Adhering to this analysis would lead us to conclude that perhaps Jean-Marie Messier was right… albeit too soon.

From a more general standpoint, the challenge for telecom carriers still lies in making profitable investments in the new generation networks that our economies need. From this perspective, video in particular and, beyond that, the whole range of cloud applications and services, are all very positive factors. Not only because they offer opportunities to diversify – operators can of course invest in OTT services or seek to monetise their data – but also and especially because they increase the value of having access to these networks, and open up arenas of differentiation by creating competition that is not based solely on prices.