As O2’s CEO Ronan Dunne says that the firm won’t be rushing into the quad play space we look at 4 reasons why quad play isn’t worth the risk…
1) Risk outstrips reward
With broadband available from as little as £2.50 a month is this really a market where you can truly differentiate? Likewise in television where content is king the effort it would take to obtain exclusive rights would require a huge amount of investment before the revenue starts to flow the other way. That’s before you even begin to consider the amount of marketing that would be needed in order to establish a presences across the other incredibly competitive quad play markets.
The risks exist on both sides of the quad play fence because mobile is also an incredibly tough nut to crack for television and broadband companies. Large investment and low margin are the realities greeting any new player in the mobile space.
2) Market penetration is already high
As O2 Ronan Dunne has pointed out in all of the quad play areas market penetration is already incredibly high in the UK. This means any company looking to move into a new area will have to wrestle its market share from a rival. In any industry it is far harder to win a customer from a rival than to sell them a new service. In this environment every customer costs money to win over, which can be very expensive.
3) Content has changed
The way in which people consume entertainment has changed remarkably in the last 5 to 10 years. With a few notable exceptions people don’t view content in a time-centric way they used to. The weekly appointment has been replaced with anytime access and family’s now sit down together to watch different things on different screens. It’s meant that for any company looking to tap in the television market things are a lot more complex than the used to be. As ever Sky hold most of the gold nuggets of exclusive content that convince people to pay for a TV service, which makes things difficult for a newcomer. Another trend that is gaining increasing importance is the need for media companies to produce their own programmes. Virgin Media owner’s Liberty Global recently purchased media production company All 3 Media a sign perhaps that it is set to follow Amazon and Netflix in developing its own original content. Another expensive complexity to quad play? Most definitely.
4) More players more money
As all the reasons stated above demonstrate deep pockets are essential for any type of quad play aspiration. But there is another possibility too; the more household names join the quad play space the higher marketing costs will rise and the potential for a price war increases. EE and Vodafone are both gearing up to spend significant amounts to compete with the established players, but you have to wonder how much money this will actually take. As Vodafone have pointed out more money lies in the televisual and broadband revenue streams which cuts both ways: It will be harder for non-mobile firms to recoup revenue by entering that sector, but it also places them in a stronger starting position.