Operators continue to see good content as a key weapon in the battle to retain customers and build new revenue – but can it ever be more than just another loss-leader for connection services and subscriptions? Is there a way to make content really profitable, and to monetise the operator’s groundbreaking role in delivering it?

As telco makes its uncertain way forward, content is a component that stubbornly refuses to go away – and with good reason. Telcos know how much customers value music, TV and other compelling content and entertainment – anything, in fact, that fills the small screen and provides even momentary distraction. 

We see this in deals that invite the mobile subscriber to ‘binge’ for free from popular content providers such as YouTube, Netflix and Apple. We also see AT&T, Verizon, BT and other dominant telcos push into the online and pay TV space with full streaming entertainment plays that major heavily on sport (the one form of content that’s guaranteed to pull in live eyeballs and a lean-forward customer) and original content. Tier one operators are increasingly bridging the gap between telecoms and broadcasting and emerging as new kinds of organisations. The age of the ‘telecaster’ seems to be upon us.

For these telcos, original or exclusive online content is more than just another service – it’s a real and very costly move into studios & broadcasting which has little intrinsically to do with telecoms and which requires deep, deep pockets to realise, whether through diversification or acquisition. Given that many TV companies are also struggling to sustain themselves through advertising revenue, it’s not impossible that we could see more telco/broadcaster mergers of the kind that we saw between Comcast and NBC in the US and which are widely rumoured to have been discussed between BT and ITV in the UK.

For most telcos, however, content means striking partnerships that could help them win the battle to retain customers – a battle that is becoming pyrrhic.

Perhaps worryingly, many of these partnerships won’t produce direct retail revenue –they’ll be included as sweeteners in bundles, or provided ‘free’ with higher-end packages, or hopefully floated as ‘freemium’ offers which it is hoped the subscriber will never get round to cancelling. Allowing free access to leading content is effectively loss-leading with products that are valued by the customer but still hard to monetise.

All is not as it seems, however. The customer may benefit from a ‘free’ (or more accurately, bundled) music, video or other content service but such freebies tend not to come cheap. Somewhat paradoxically, the bigger the data allowance and the higher the subscription value, the more data the customer tends to get for free. And given that ‘free’ content access is often not of the highest quality, there is an incentive for the customer to ‘trade up’ to HD and start dipping into that generous data allowance.

So there are ways in which content can act as a Trojan horse for real revenue gains. In addition, the operator will be taking a wholesale payment to compensate for (and subsidise) that apparent loss of revenue. Not the retail dividend that operators will have hoped for as they rolled out high-speed mobile broadband, but revenue all the same, plus the indirect value of retaining the customer longer and more securely.

Perhaps the real game-changer could be in how much of a partner, rather than customer, to the content provider the telco can be.

The telco brings the content partner a big audience for sure, but a big audience that comes ready-segmented and whose behaviour the operator is positioned to monitor and analyse at a highly granular level. For content providers who include advertising in the mix, this is invaluable intelligence. Understanding what different subscribers and demographics are watching, when, for how long, over what devices and in what locations is invaluable in terms of tailoring output, negotiating with advertisers and helping them place advertising much more accurately and profitably. So there is considerable scope for the operator to further monetise the unique role that it plays in delivering content and the visibility that it gains into customer behaviour.

Good content and strong partnerships have a role to play in capturing future revenue, but that won’t be realised by simply giving content away. Applying analytics and intelligence to drive hard bargains and profitable deals is one way, leveraging and further monetising the telco industry’s role in turning simple, scheduled ‘TV’ into ‘TV on Demand- Everywhere’ is another.