New cloud-based video experiences like cloud digital video recorder, TV everywhere, and streaming video-on-demand sound great on paper. But will subscribers actually pay for them?
The answer is a resounding yes – to the tune of nearly an $11 increase in monthly revenues per user globally (and almost a $34 increase in North America!), according to Cisco research.
But where do those revenues come from?
Boosting subscriber loyalty
Let’s start with what we know: consumers are willing to pay for streaming video subscriptions, and hundreds of millions already do. Many of your subscribers are already paying for a streaming video-on-demand (SVoD) service like Netflix or Hulu on top of their monthly pay TV bill.
Currently those services work largely in isolation from one another. To find what they want to watch, viewers may have to switch between two, three, or more apps and across multiple devices.
Pay TV providers can make these experiences much simpler. Only they can create a truly seamless, universal user interface (UI) that combines all services – live TV, video-on-demand and streaming online video – across multiple subscriber devices. And when delivering these experiences through the cloud, for a start, they could take the lead from over-the-top (OTT) video services by creating more dynamic and engaging UIs. They can make it easy to find content no matter where it resides. They can also use sophisticated profiling to make recommendations based on viewers’ past preferences and behavior.
For pay TV providers, such measures can have an immediate impact on revenue in the form of reduced churn – up to 35 per cent of that projected increase in average monthly revenue per user (ARPU). This makes sense: when you give subscribers more of the content they want, with more personalization and convenience, they’re far more likely to remain loyal. Comcast is a perfect example, seeing a 20 per cent reduction in voluntary churn among customers using its X1 cloud-based platform within two years of launch.
Giving customers more content
Much of the remaining revenue uplift comes from the new increments enabled by cloud-based video services. By introducing universal search and personalized recommendations, as well as bringing services to new devices, pay TV providers empower subscribers to consume more content – and they’re doing just that. The result is increased consumption of video on demand, which in turn means increased advertising revenues as well as electronic sell-through (EST) of on-demand rentals and purchases [see Figure 1].
Figure 1. Cisco MOI Projected Global ARPU Uplift for Cloud Video Services, Year 1
Finally, pay TV providers can realize a major monthly revenue uplift ($4.08 globally or $15.67 in North America within five years) through cloud digital video recorder (DVR). Most providers already offer DVR through a set-top box, but delivering it through the cloud offers two key benefits.
Firstly, subscribers will be able to ‘try and buy’ DVR services – something that’s not possible when recording, storage, and playback are tied to an expensive set-top box. With DVR functions handled in the cloud, ‘try and buy’ becomes available to anyone. Operators who roll these services out are expected to see as much as 50 per cent higher DVR penetration as a result.
Secondly, subscribers who are already DVR customers can purchase additional cloud storage to keep more content for longer. This is one of the biggest requests from current DVR users, as any parent obliged to keep hours of recorded cartoons will understand.
Pay TV providers using the cloud are expanding their base of new customers, up-selling existing customers, reducing customer churn, and generating new incremental revenues from storage, EST, and advertising. Add it all up, and that figure of $11 starts to sound downright conservative!
Find out more
Want to forecast what cloud video can do for your business? Use our Monetization and Optimization Index tool to input your specific market parameters and video strategy, and create your own customized model.
For more information about the Cisco video solution, visit: http://www.cisco.com/c/en/us/solutions/service-provider/cloud-dvr/index.html.