The television industry that we’ve long known is gone—or at least, it’s looking mighty different. Forget the days of gathering around the living room TV for a favorite Saturday night show. Today’s viewers are pulling out tablets, laptops, and smartphones, accessing video content when—and increasingly where—they choose. This transformation hasn’t been subtle. And for industry players, neither are the consequences. In growing numbers, consumers are replacing their traditional cable and satellite TV packages with smaller, more customized, and often less expensive mixes of programming, cobbled together from an array of online and on-demand services. (See Exhibit 1.)
The convenience of such “over the top,” or OTT, TV and video has sparked a major shift in how content is produced, delivered, and consumed. (See The Digital Revolution Is Disrupting the TV Industry, BCG Focus, March 2016.) But for telcos—many of which have only recently seen their interest and presence in this sector grow—it has spurred something else: an opportunity. Broadband infrastructure, the bread and butter of fixed and mobile telcos, has become a key asset in the new TV and video landscape. Already we are seeing some cable companies get that message. Those that are packaging broadband with smaller, or “skinny,” OTT content bundles seem to be weathering the online storm better than their more traditionalist competitors.
If telcos can combine connectivity with compelling content, they can play a central role in the emerging online video value chain. And as they capture new customers, they can boost the penetration rates of their mainline broadband products. That’s a tempting proposition, and a potentially lucrative one. But turning opportunity into growth will require telcos to make careful choices—and to make them soon.