The Future of Television requires a Hard Reset

The Future of Television requires a Hard Reset. In all great stories there are five main elements, the characters, the setting, the plot, the conflict and the resolution and the future of television certainly has a story.

The Future of Television is ready for transition, but the early adopters agreed to a business model that was created to exploit archive content, looking to squeeze every bit of revenue out of each available asset, so Jamie Branson at Kapang thought it was time for a Hard Reset.

Summary of the Hard Reset Story

The FAST business model is broken. The evidence for this statement is that few channels receive an acceptable financial return on their content. The current model has not attracted traditional broadcasters or broadcast television advertisers in any great numbers as FAST channels do not have a traditional cable or satellite television-like format, standards, or compliance. More importantly, the business model does not distribute a sustainable proportion of every ad dollar earned.

The FAST2.0 standard from Kapang provides a Hard Reset for content and channel owners to migrate from delivery and distribution deals that no longer add value to one that provides a step-up in performance and monetisation that will excite existing FAST channels and migrate traditional broadcasters and their advertisers to the FAST2.0 solution. 

This migration is provided as a subsidised managed service. 

The Story Characters – The Stakeholders

The travellers in the journey to find the Future of Television consist of six key stakeholders. When these stakeholders work fairly and in harmony then the future of television can evolve at pace by providing a much more beneficial revenue model than the one that has been in existence for nearly a century:

The Content Owner: the content creator or a content distributor acting on behalf of multiple content creators,

The Channel Owner: the brand owner and the curator of video content to create a linear feed,

The Solution Owner: the provider of the technology to present the content into a linear and on-demand format that is compatible with the audience platforms,

The Platform Owner: the digitally located walled garden that an audience engages with to access the channels and the content,

The TV Advertiser: the paying advertiser looking to scientifically place their product or service pitch as a 30 second video in front of the demographically and genre targeted viewers, 

The TV Viewer:- the consumer of content and channels who is looking to be entertained with little or no cost by accepting a balance of targeted advertising that creates little distraction.

Note: in this document, The Solution Owner and the Platform Owner are sometimes defined as ‘tech service providers.’

The Story Setting – The Future of Television is now

Free ad-supported internet distributed television, as a system, has been made possible by the wide availability of highspeed broadband enabling streaming. This opened an opportunity for smaller and medium-sized content and channel owners to get a foothold in television. As such, the sector generally described as Free Ad-supported Streaming Television (FAST) was developed, not much more than a decade ago, with a low barrier to entry to accommodate all sizes and genres of channels at a tiny fraction of normal television broadcast costs. To attract content and channel owners, much of the capital investment in infrastructure required for traditional Over the Air (OTA), cable or satellite television distribution was reconstructed, reduced, or removed.

The outcome has been that FAST is open to anyone with video content. The structures and technologies are less complex and can be provided by atypical solutions, has few standards, is generally unregulated and has underperforming infrastructure in comparison to traditional television. Much of the workflow, roles and responsibilities and structures for FAST were introduced and developed by a few solution owners and platform owners that were the first to see the opportunity. The market and FAST sector were designed by the first adopters and by that means, have become the most dominant of all the stakeholders as the business model was designed by them.

Now is the time to adopt a proven model that provides a better distribution of value across the FAST sector.

The Story Plot – Solution not fit for purpose

Traditional television has had nearly a century to develop a format, workflows, infrastructure and have diverse and established stakeholders from government, networks, channels, advertisers, and viewers. The relationships between each stakeholder and their responsibilities are well understood, are tested, and underpinned by regulations, standards, and compliance. The relationships between stakeholders have had time to generally become balanced, fair, effective and that fully provide what they each need.

The one stakeholder whose needs have not changed over time, is the TV viewer. Traditional television is now available on internet connected devices and in different formats however, the TV viewer can still see those core elements in place such as an understood format, clean clock, true playout, branding, well managed ad breaks and a full Electronic Programme Guide (EPG). Therefore, whatever the TV viewer is using to watch television, they generally expect the same or similar viewer experience, i.e., what they are used to. The traditional solution works and gives the TV viewer what they want, it wasn’t broken and does not need fixing.

The viewer of FAST however, often receives a very different experience without these common television features. This is a result of how the sector was originally set up with the low cost of entry and infrastructure with limited capability. A result of this different experience is a reduced grade of viewer service and experience. The ‘value exchange’ in FAST between the channel, advertiser and viewer has been disturbed as viewers’ valuable time, attention, personal data, and association is given in return for a customer experience that meets and hopefully, exceeds their expectations. The current service does not meet the expectations that are encountered in traditional television and therefore, viewers cannot be expected to act in the same way. The lower grade experience will generally result in shorter viewing times. Subsequently, advertisers distribute high volumes of low value digital ads across FAST channels as they do not meet a traditional television standard and consequently hourly revenues are low in comparison.

It is becoming apparent in the still emerging FAST sector that, due to these factors, there is insufficient revenue for content producers to invest in new content. This is an uncomfortable truth because many content producers and channel owners believe that this is the only way FAST works and have signed up to delivery and distribution agreement that seemed to made sense when there were few if any alternatives. The workflow, business model and route to market had already been fixed in place, and the ‘standard’ agreement was often the one used by many on the first step in television broadcasting. Many content and channel owners may feel it will be too disruptive and be too risky to attempt a change from that even though a common theme heard from them is, ‘my costs are high and revenue low but I’m still here, I can’t risk any change or disruption to what I already have or to the relationships that I’ve made’. There is often little understanding of the opportunity cost (lost revenue opportunity) that is baked-in to the current FAST end-to-end solution that, if it were made clear, they would appreciate that the cost to their businesses will be far higher and prolonged by not changing. The sector needs a Hard Reset, because now, there is a viable alternative.

The sector is now at a tipping-point where this unfairness of ‘high costs and low revenue’ can be confronted by turning to a tried and tested solution that is enhanced by the efficiency of the internet. There is now a robust challenge to the belief that there is no alternative, and it is encompassed in the established, regulated, and higher distributed revenues experienced in traditional Over the Air (OTA), cable and satellite television.

The solution just needs to be packaged so that FAST can transform and step-up to the next level of television, incorporating the best of what is already there, with a product, monetisation and low risk approach that is underpinned by nearly a century of experience.

The Story Conflict – We cannot afford to risk changing

Many existing FAST only channels have a hard time of it, stuck in a system initially made for them to get started but that has not adapted to ensure the value exchange is balanced for all. At the bottom of that value chain are content owners and channel owners who are having to wait too long for revenue payment and with limited statistics on which to plan. The challenge of making a Hard Reset to the FAST solutions currently in place can seem risky. It involves moving away from what is known and ‘what everyone else seems to be doing’, which gives a level of confidence even though it is broken for many content owners and channel owners and does not represent a real opportunity for TV advertisers. But these risks can be overcome and the opportunities opened up.

“If the current solutions do not work for niche audience channels, how is any major broadcaster supposed to have confidence to  adopt the same approach when they have exponentially higher overheads? At the start of the FAST revolution, technology solutions should have been built based on the requirements of a traditional broadcaster migrating to a digital solution. The only difference that should have been evident between any type of channel would have been audience numbers and revenues. The traditional television business model of charging a fixed monthly cost and opex carriage would have allowed channel to benefit from predictable advertising yield and to recoup their content and brand investments.” Said Jamie Branson of Kapang

Any broadcast solution needs to earn the channel enough to sustain investment in original content, and which provides a step-up for FAST with the efficiencies of the internet. Channel owners need to earn enough from each viewing hour to reinvest in new content and want to be able to develop catalogues with smaller percentages of archive content and drive-up new production, which platforms want more of. Advertisers want to have confidence that their brands and adverts are correctly inserted into appropriate content that maximises yield to provide a high return on investment for all. FAST channels and advertisers struggle to achieve this. 

These problems could all be seen as symptoms where the cause is an underperforming tech stack that produces low return on investment however, the tech stack is performing as designed! Also, audiences have not changed what they want to watch and enjoy and have an expectation of how television will be presented. This means that content and channels owners along with advertisers are stuck between tech that is working as designed but no longer fit for purpose and TV viewers who are not getting what they want. Alongside this, there is a proliferation of platforms to select from, many that provide extremely low revenues but still, many content and channels owners want to be ‘everywhere, all the time’ thinking that having their content widely available is the remedy. It is not.

However, there is no need to change, only to integrate and migrate.

The answer is not to try and reverse the last decade of FAST development or increase capital investment to introduce traditional television systems and infrastructure. It is simpler than that. Channels need to look like television always has, advertisers only want to be seen in traditionally formatted television, what viewers are used to, and the Hard Reset is to simply deliver the same traditional formats more efficiently and use those efficiencies to share more of the total ad dollar earned.

Unfortunately, there is little incentive to integrate as it would require agreement by all stakeholders on what was required in a standard, who was responsible for implementing each element and importantly, who would take the first step away from ‘business as usual’. Those with the most power and who could lose the most, may not. However, there is an answer that provides content producers, channel owners, advertisers, and viewers with what they want, and it could be provided by all the tech suppliers – today.

The Story Resolution – The uncomfortable truth

Existing FAST channels should not be afraid of a Hard Reset to their thinking and approach, they are not starting from scratch, they are starting with experience. The challenges facing existing FAST channels who know they cannot carry on with ‘business as usual’, are predominately related to their lack of confidence in any other solution, the risk of migration and upsetting existing relationships with tech service providers and advertisers, additional costs, and acceptance that they need to change. The acceptance of a need to act in the face of these challenges is tough, but this can be faced knowing that, in the past they were not wrong in the decisions made and agreements entered into, it is just that the sector designed by the dominant stakeholders no longer works.

Traditional broadcasters and the advertisers they work with are also dealing with anxiety over digital transformation, although they accept that they need to change to a more efficient delivery method.  They are willing to invest in channels that conform to a recognised and understood standard and until that happens, will refuse to deliver into a sector that often delivers an inferior audience experience.

“Kapang identified a revenue shortfall of between 7% and 65% across a sample of 22 early adopting channels during the last 13 weeks, one losing $80k/month in potential revenue, all of which are easily fixed with the Kapang FAST 2.0 approach” said Jamie Branson, “When the channels were informed of the issues, they were shocked and stated that nobody had previously pointed out these shortcomings and lost opportunities.” added Jamie.

Traditional broadcasters are waiting for stability and conformance before migrating to FAST, although they have already made significant moves via their own private apps to provide a self-regulated environment. In a consolidated multi-broadcaster service, they will need to have the same trust enjoyed in their private environments so that they can predictably compete fairly and be confident they can migrate their existing cable and satellite business models with minimal risk.

Traditional broadcasters stand by the maxim coined by Bill Gates that ‘content is king’ as the world wide web ushered in a new way of making and distributing consumer content. He focused on the content, not the new tech solution and mainstream broadcasters will be wary of any value exchange that is skewed against this. Currently, platform owners take a disproportionate percentage of the generated revenue in exchange for a technology solution that was designed to enable a low barrier to entry and which has not substantially changed since it was developed. Content and brand deliver audience, which attracts advertising, this is where the value lies.

Kapang is one of the first platforms that has implemented a standard, FAST2.0 for stability and conformance allowing a fairer business model for FAST and traditional broadcast content owners, channel owners and advertisers with the aim of giving TV viewers what they are used to and want. 

Kapang released its FAST2.0 broadcast standard in the last quarter. The standard documents well-honed broadcast ‘business as usual’ practices used by traditional broadcasters.

“FAST2.0 brings a common standard to the Kapang platform allowing channels to broadcaster a predictable experience for its audiences and its advertisers, which in turn provides a sustainable business model for its channel owners and investors that pays dividends, which can be scientifically related to quality and effort, just like traditional TV always has.“  said Jamie Branson of Kapang.

Kapang is aware that the costs for early FAST adopters migrating to FAST2.0 could be significant and would not be easily accepted without some form of guarantee that the value of implementation outweighed the risk and cost. So Kapang has ‘skin in the game’.  

“For all parties to adopt FAST2.0, Kapang must provide confidence to existing FAST broadcasters who are already squeezed. We felt it was easier to finance and conduct the migration instead of trying to justify the balance or risk and reward, as we have the evidence to support the opportunity and resources to commit immediately to quicken the pace of alignment across the sector.“ said Jamie Branson

Kapang has built ‘Kapang Studios’ to finance and facilitate channel migration of customer channels’ business to FAST2.0 by using a subsidised managed service approach.

Kapang Studios has announced the ‘Reboot Package’ for FAST and traditional broadcast content owners and channel owners that are using non-FAST2.0 compliant suppliers. The package, when contracted, will be supported by a short-term financing solution to cover migration.

Kapang Studios will rebuild or help you to rebuild your channels to FAST2.0 for hosting on Kapang. Once live on Kapang, the same channel can be delivered to any CTV/OTT platform globally in the local time zone. There are three packages starting with a guarantee to be profitable, no costs approach up to a $50,000 minimum revenue guarantee for channels willing to provide exclusive third-party distribution.

“In our experience migrating a channel to FAST2.0 makes the channel look better, they are watched by considerably more people  and advertisers are happy to commit to above remnant yield, which in most cases results in exponential revenue growth using the same content and brand.“ said Jamie Branson

Get from FAST1.0 to Kapang FAST2.0 with Kapang Studios and reap the rewards, fast!

Email ian.crawford@viewtvgroup.com or click on the link below for a copy of the Kapang Partner Agreement.