Grown Up with the Market
— What were the main changes in the Russian interactive TV landscape over the past 10 years?
In the context of the operator solutions, the key process in the market over the past 10 years is the establishment of the market itself. Ten years ago, Russian telecom operators started the implementation of their first major interactive TV projects. One might remember the projects of MTS, Dalsvyaz (at that time one of the seven Svyazinvest interregional companies now integrated into Rostelecom – ComNews), and several other operators.
Until a certain time, broadband operators had the option to grow by connecting new subscribers. But as the market approached saturation, this became increasingly difficult; hence, to maintain growth rates, operators started to ponder on how to get more revenue from the existing customer base. For broadband operators, it became obvious that to maintain their edge they had to continuously add new services to their offering. So, at a certain stage, interactive TV became a competitive driver of such kind.
As a result of varying success in the service deployment, today we can see interactive TV audience in all major operators, ranging from several million to tens of thousands of subscribers.
I would also note decline in service price over the years with parallel substantial growth of their quality. No interactive TV consumer is today surprised by HD content, rich Electronic Program Guide (EPG) functionality and a library of thousands of video-on-demand (VoD) items. This is what major operators give to the subscriber today already. 10 years ago, no one could have conceived such a rich offering.
Casting a cursory glance at the Russian market, one should note that over the past decade the Russian economy has been by-and-large taken under the governmental control, hence the share of private investment has become smaller. This process has affected the interactive TV market: as the market is still emerging, the more money, innovations and investments it receives, the better it is for all its participants.
On the other hand, the market for OTT services and online video has also been growing: it is dominated by Youtube, IVI, Netflix and the like.
— What are the main technological changes and subscriber expectations from interactive TV services that have affected the market over the past 10 years?
Among those, I would mention the advent of IP technologies on the pay-TV market. Ten years ago, cable and satellite TV operators have been perceiving IPTV and OTT as some vague playaround with technology with an unclear benefit. Now it is clear that IP is a mighty force to be reckoned with in the pay-TV market, and although it may not take victory over other technologies, it can snatch a significant market share from them at least. Of course, satellite and cable TV will dominate the market for a long time because of our country's extensive geography and subscriber base distribution, but IPTV and OTT are growing very actively and steadily.
Mobility and Multiscreen have also affected the market. The advent of a Multiscreen-based media content consumption era, much facilitated by a proliferation of smartphones and other smart gadgets, also contributes to the development of IPTV and OTT.
I would particularly note the emergence of independent OTT players in the interactive TV market. 10 years ago, the emergence of such players has been rather unexpected, both from the content and technology viewpoint. However, the OTT landscape has solidified over the years and now is present on the Russian market. Moreover, TV channels and media holdings have started OTT distribution of their content, following the Multiscreen paradigm which is paramount for today's business success.
The content delivery technology is not critical in itself for service value. The value is determined by operator’s offering to the end users. However, the IP-based technology gives a certain advantage: you can offer an interactive product without any content delivery network overhaul (as satellite TV operators have to do, for instance) or new set-top box installation.
IP-based technologies made interactive media content consumption natural and effortless. The subscriber is now ready to consume content anytime, [anywhere] and on any device.
— How has your company changed over the years?
We have been growing with the market all the way from a startup to a serious, mature player. SmartLabs took part in all the major domestic interactive TV projects, including the Rostelecom project.
We started as a platform provider, gradually enhancing our platform by adding new sophisticated functionality. As a result, today we provide an end-to-end interactive TV solution including our content delivery service, subscriber equipment, and a variety of applications tailored to the customer needs. This is an interconnected solution easily integrated into the operator infrastructure.
Since SmartLabs has grown with the market, over the years we have accumulated lots of experience in equipment integration and successful migration from legacy platforms to our state-of-the-art platforms. This skill is a real value, as it allows the operators to breathe new life into their platforms and set-top boxes at a cost that is in no way comparable with a complete upgrade. You can easily imagine the magnitude of the operator's expenditures to replace the entire STB fleet for dozens of thousands of subscribers, not to mention millions of them.
— What are the company's strategic plans for the coming years?
Now the company has entered a new evolutionary stage. SmartLabs business is restructuring and optimizing. We associate our future with the growth on the global market. Over the next few years, we intend to focus on this path to become an international player. This is our priority vector. We have already taken our first steps in this direction and now SmartLabs is a company implementing projects not just in Russia, but also in several other countries.
Naturally, we also do not intend to forget our domestic, Russian market, and will try to participate in all the significant new projects emerging in Russia.
— What are your expectations for the Russia's interactive TV market over the next decade?
The Russian market will grow in parallel with the world market, without any gap. Russian interactive TV solutions are now in no way inferior to international vendors. The level of interactive TV experience in some small Russian country town today is not much different from the similar subscriber experience in New York. And this status-quo will persist.
Both in Russia and globally, the TV audience is becoming more segmented, and while most of the subscribers are getting used to new services, devices and features, the most advanced audience, the cord-cutters, have already managed to drop standard TV in favor of the picturesque world of OTT, now watching almost every show or program in its own app.
From the technology viewpoint, one can hardly expect a qualitatively new level of market development. Indeed, the video content will become heavier and picture quality will rise, and the bandwidth will expand, but basically, nothing will change.
We expect more changes in the context of consumer habits: the audience will increasingly move away from linear viewing to "video-on-demand", although news, sports and major events will still keep to the standard TV format.
— What would you like to wish to the industry based on your work experience, what should the interactive TV players and industrial solutions manufacturers keep in mind to stay abreast of the market?
As in any high-tech market, to maintain its success the company has to ever keep moving, just like a shark. If you linger in any way, you give a chance to your competitor.
One more thing a solution vendor has to remember is to keep the balance in building relationships with the customer. You should be tuned in to the operators' expectations, but still be able to convey your own viewpoint based on your previous project experience. The vendor approaching the customer with an insight, a vision, rather than intending to meet any conceivable requirement, has more chances to succeed in our business.