Two years ago Vodafone announced that it was giving up broadcasting football, revolutionizing the market for telecommunications operators and a sector that had turned sports content into one of its most important workhorses.
A decision that had as many supporters as detractors and that subjected the company to one of its periods of greatest tension in the last decade. First they suffered a significant flight of subscribers, until they became the largest series aggregator in Spain, with agreements with HBO, Netflix, Amazon Prime and Filminamong others.
Behind a large part of these decisions is Ignacio Garcia-Legaz, since 2015 responsible for television of the operator. Garcia-Legaz He was one of the managers who promoted this ‘no’ to football, a decision that, as revealed in a conversation with Invertia, “was made several months before the time of announcing it and with the strategy of betting on movies and series already underway” .
A trip that the numbers guarantee. In September 2018 -when they stopped broadcasting the Champions League– They had 1,261,900 customers and the latest figure for June raised this figure to 1,463,000 subscribers. A growth of more than 200,000 subscribers in less than two years. “The data confirms that we are not wrong”, Garcia-Legaz says.
You have more than 100,000 different contents added. What is the goal of this strategy?
It is true that growth has been quite exponential in recent months, incorporating new platforms such as Viacom or Eurosport. Behind all this effort, the goal is to index the largest possible volume of series and movies, but not just because we have a lot of content, but because we want the customer to have the best experience. That when you want to find something, you have many options to do it where and how you want. We answer all these questions, but we also do it in an integrated way.
When we announced the departure of football, we had already spent months preparing the ground in which all the scenarios were evaluated internally
And in a unified bill…
That’s the other part of this exercise. We incorporate the price for all our services in a single invoice, so that we offer a lot of content and cheaper than if we contracted it separately. In all our offers we try to have more content for the lowest possible price.
Is all your content in demand?
Yes, they are all in demand because we know how the content is behaving. We measure it in two ways: within our platform and with the consumption data that comes to us from our different partners.
How is content prioritized on your platform?
We have a very neutral position when putting our content on the screen. We want everyone to be available and for customers to be able to choose freely. Our system is based on personalized recommendations that are given by algorithms, or by the editorial work we do. We can make highlights related to current affairs, or because we believe there is a series that people should know about. It is difficult to get it all out, but that is precisely our differentiating element.
Your bet includes series and movies, but excludes sports content. How have you digested this transition without sports content in two years?
I think we have a certain advantage here. Even when we had football and the motor, we already included series and cinema in our proposal. This allowed us to adapt our strategy over time and make a much smoother transition. When we announced the departure of football, we had already spent months preparing the ground in which the scenarios were internally evaluated and proactive decisions were made to move towards cinema and series.
But the beginning was not easy, with loss of clients…
It is true that this movement generated an earthquake in the industry, which was very critical, but with the numbers on the table everything is easier to understand. The figures speak for themselves and show that the decision was the right one. On the one hand, it freed us from a cost structure dependency that we did not control and, on the other hand, we already see that the sport begins to be deflationary. Customers are no longer willing to pay as much for this content.
Netflix, Apple, HBO and Disney far exceed 40,000 million annual investment in their own content, which makes it unfeasible to compete with them
What is the last balance?
We have quite a few more subscribers than when we left football. This last year we have gained more than 93,000 clients year-on-year. With football we had 1,328,000 television clients and now we have 1,463,000 subscribers.
Another characteristic of your model is that you have given up producing your own content and series.
The quantity and quality of production that is being done in the world of series in recent years is higher than ever before. In addition, the level of investment there is very high. Netflix, Apple, HBO and Disney far exceed 40,000 million annual investment in their own content, which makes it unfeasible for other companies to compete against them. Can we put 80 million euros on the table? It seems complicated. That’s why we decided that it was impossible to compete with the scale that we have and we tried to work with them to have the best content.
It is the opposite model to other platforms such as Movistar +…
Betting on your own content forces you to prioritize it over other things. And that also creates a difficulty with your partners when it comes to being impartial. We think about the client and bringing the best content from a fairly aseptic and objective perspective. It is our position: to have the best content and focus on finding it wherever it is. Not having gotten involved in our own production helps us feel free in this task.
Can you become profitable?
That is the goal. We’re watching it with Netflix at the last Emmys. Getting a lot of content is relatively easy, the hard part is generating quality. If we tried, investing 100 million in own production, I see it difficult to reach the height of these series and this level of production.
Is it profitable to have the best content with increasingly lower prices?
It is the big question. We are in a market that is not very sustainable over time. All operators, sooner or later, will have to rationalize our bets, because the offers we have seen in recent months are very aggressive and what they do is destroy value.
Until now it has been impossible for the Disney application to be integrated into our decoder, something essential for us
Is it a path of no return?
I believe that this market will become more rational and we will have prices that are a little more in line with the value that we provide, which is a lot. We provide 5G, unlimited data, a fiber that has worked phenomenally in the pandemic and a bestial offer in audiovisual content. We are putting a lot of value and high quality on the table. And that will have to affect prices, sooner or later.
This commitment requires having the best content in a very competitive market, where exclusivity is essential. Is the renewal with HBO closed?
We have never given details of our agreements with third parties and therefore we cannot confirm this information. What we can say is that we have an excellent relationship with HBO and our goal is to continue maintaining what we have with them in the long term. I trust that this will be so.
What happened to Disney+?
A year ago it was published that we were interested in including it in our offer and that has not changed. Within our role of adding cinema and series content, Disney+ has very attractive content, especially in cinema for a family and children’s age segment. We would like to have it. When and how? It very much depends on how the conversations we have with them in the future progress.
Do you depend on technical issues of aggregation of your content?
Until now it has been impossible for the Disney application to be integrated into our decoder, something essential for us. For this reason, we do not care that others have it (Movistar +), if they do not integrate it. The key is that the client has a global experience as we have with all third party services.
From the user’s point of view, having Netflix on a apps or in a decoder it may not make much of a difference.
There are several things here. The most visible part of the apps integrated within the decoders, the most replicable. There is another point that is the transparent integration of billing so that the client does not have to enter his credit card, we invoice all the provision of these expenses. And thirdly, we have what I think is the most important thing, which is the integration of all this metadata into one overall experience.
The great ones are already here, but others will come players with much more niche content
How does it translate into the user experience?
What we do is, permanently, extract from all the catalogs of our partners, identify what content is replicated or what content is on some platforms and others. We have to be able to process different metadata from very diverse sources and not always with the same information. Not only knowing who owns what, but knowing which movies are for rent or are included in another catalog. It is a job where everything must be very organized so that the experience for the client is the best possible and that it works.
In this war for the best content, what is left for us to have?
I think there are still services to come. For example, Apple TV +, Pluto – which has just announced its launch in Spain – are nowhere to be found. The great ones are already here, but others will come players with much more niche content. Services like Planet Horror, a horror specialist that will not have a place or relevance on some major platform, but on Vodafone TV they do have space. Or an Acorn-type service, an example of a clear positioning in British series and differential for a target concrete.
With so many platforms, will users end up getting fed up?
This is precisely our differential value. We built an ecosystem in which our role as an aggregator makes much more sense, very much in line with what the research of insight of customers. We have not opted for something spontaneous, but it has been after analyzing what customers want. What do you want to watch? Above all movies and series, in very large quantities, of the highest quality, it doesn’t matter where it comes from and if possible you can give it to them as cheaply as possible. And in this we are.
On the other hand, it is a bargain for the platforms, because they arrive with a commercial path traveled…
The idea is that this is a win-win for all. In some cases it is more and in others less. What do we offer to OTTs? We give them a brutal commercial channel, with customer service, integrated billing and television experience that makes users more loyal. If we didn’t give this, they wouldn’t want to be with us, that’s for sure. What do we get? We have a better wholesale price than the one that an end customer would have, which we try to generate a profit or improve the customer’s price conditions.
At the time, OTTs like Netflix were seen as a threat…
We do not. From the beginning we understood that they could not be our enemies and that they could be a way of adding value to the client. It can be seen in many ways, but we have taken the path of collaboration.