There is a simple reason why connectivity providers globally have invested in linear and streaming video content services: large markets; significant revenue upside; higher profit margins and cash flow implications.
There actually are very few consumer connectivity products with near-universal appeal: mobile phone service; internet access; voice services and messaging and entertainment. Add in gaming or music and you have a list of the apps and services that drive nearly all the available revenue for a connectivity provider.
Also, video entertainment has growth rates up to four times that of connectivity services. Where the global telecom industry grows revenues about one percent a year, entertainment grows at about a five-percent compound annual rate.
In some markets, growth is even greater. In India the growth rate has been greater than 10 percent per year for entertainment and media, for example.
The other angle is that media consumption brings the potential for additional revenue from advertising.
Criticism of telco investments in media and content often draw derision. Invest instead in the core networks and services, it is argued. Sometimes that makes sense. But not always, and not always strategically, if one believes growth will remain at the one-percent-per-year level.
Odds are better in markets where core connectivity revenue arguably does grow closer to five percent per year, and where there is much unserved demand.
It is not always appreciated, but revenue growth in media and advertising is virtually always greater than for core telecom services. Also, entertainment is among the biggest connectivity-related services a network can sell.
Aside from entertainment, voice, mobility and internet access, there are few other apps or services nearly every customer might buy from a communications service provider.
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