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Report Says Pay-TV Should Focus on Content Recommendation

2 Feb, 2016 By: Erik Gruenwedel

Verizon Communications has launched a program that allows FiOS TV subscribers to try a premium channel free for 48 hours. Dubbed “Free View,” the program lets users activate a premium channel to see if they like it.

Premium channels include HBO, Showtime, Starz, Epix and Cinemax. The “Free View” content is viewable on live TV, on-demand, or on the go with the FiOS Mobile App. Subs are allowed to preview each channel once per year.

“We believe in giving customers more choice, control and flexibility when it comes to their entertainment experience,” Verizon said in a statement.

The free preview underscores challenges pay-TV operators face luring and retaining subs, increasingly opting for over-the-top video services such as Netflix, Amazon Prime Video and Hulu Plus. In addition to lower price, a major selling point of video streaming is enhanced user experience, including content recommendation.

Long ignored by pay-TV, but championed by Netflix, personalized content recommendation technology today uses algorithms to help match content with a subscriber. This perk is why 92% of Netflix subs are satisfied with the service, compared with a 66% satisfaction rate among pay-TV subs, according to a new report.

Digitalsmiths, the data research firm owned by TiVo, said Netflix spends $150 million a year tracking subscriber behavior, compared with $10 million for the average pay-TV provider. Broken down, Netflix spends $2.30 yearly per subscriber on content recommendation, or 2% of average-revenue-per-user (ARPU). The average pay-TV operator spends $1 per sub, or 0.09% ARPU, on content recommendation.

“Why are pay-TV providers not investing even more in content discovery, overall user experiences, and data to power these next-generation viewing experiences?” wrote Digitalsmiths.

While Netflix regularly sends emails to subs notifying them of content they might be interested in, pay-TV relies on superior breadth of content, including new releases.

A typical pay-TV operator has more than 26,000 content selections available on linear TV, including more than 450 sporting events, as well as awards shows and concerts. Pay-TV also features 13,515 pieces of free VOD content (10,290 episodic, and 3,225 movies), 1,551 pieces of PVOD content (including pay-per-view), and 11,964 free TV offerings (primarily episodic), according to the report.

By comparison, Netflix has about 4,000 movies, 35,000 episodes from 950 TV series, and 500 standalone programs.

“What is interesting is that pay-TV delivers significantly greater amounts of choices to the viewer, yet continues to lose ground to Netflix,” Digitalsmiths wrote.

To stop the bleeding, the research firm advocates pay-TV operators increase spending on personalized recommendations and utilize their data to promote personalized content carousels.

With today’s technology, personalized content carousels, which studies suggest generate three-times the clickthrough rates of curated carousels, could help pay-TV distinguish its content offerings.

“When combined with an integrated marketing program, pay-TV [can] better distinguish their offerings from those of Netflix.”

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