5 minute read 29 Apr 2020
EY - Future office

The digital home experience has changed forever, how can you stay ahead?

Authors
John Harrison

EY Global Media & Entertainment Sector Leader

Transformative leader with a passion for media and entertainment. Identifying the opportunities afforded by convergence and disruption. Executing strategies to succeed in a fast moving market.

Rahul Gautam

EY Advisory Global Technology Sector Leader

Accelerating growth for some of the world's largest and most innovative tech companies. Passionate about deploying technology to solve major world problems.

Martyn Whistler

EY Global Media & Entertainment Lead Analyst

Keen observer of all things media and entertainment. Storyteller. Avid reader. Bluff traditionalist, impatient for the future. Fan of sports, occasionally sporty. Fan of the arts, rarely arty.

Vincent Douin

Consulting Customer Principal, TMT sector, Ernst & Young LLP (EY)

Twenty years in telecom and cable. Enthusiastic advisor through the business and digital transformations of my clients.

Emily Reidy

EY, US-East, Performance Improvement – Customer, Consulting, Senior Consultant for Ernst & Young LLP

Consultant with a focus on transforming telecom, media and technology companies’ product and marketing strategies. Hoosier born, currently residing in NYC. Passionate about meditation and mindfulness.

5 minute read 29 Apr 2020
Related topics Digital TMT COVID-19

As people settle into the new normal, how is shelter-in-place driving digital attitudes and behaviors?

These are exceptional times. In a few short weeks, life as we know it looks drastically different — from the way we work to the way we interact with friends and family. Even the online services and content we consume have significantly changed. But once this crisis abates, what will the “new normal” look like?

A study by EY from April 2020 of over 3,500 individuals from US households reveals a quarter of households (26%) believe COVID-19 has permanently adjusted their attitudes and behaviors.

Accordingly, telecoms, media and entertainment, and technology (TMT) companies must plan beyond the current crisis. We’ve identified 10 key insights for these companies to consider as they move forward.

1. Operators are applauded for their COVID-19 response, but can they convert recognition into long-term competitive advantage?

Overall, consumers perceive operators (this includes home internet providers and wireless providers) to be handling COVID-19 well. Two-thirds of consumers believe home internet providers (64%) and mobile phone/wireless providers (66%) are performing well in the current crisis.

70% of the notoriously fickle 18- to 34-year-old population are satisfied with the actions engaged by their home internet providers since the beginning of the crisis. This capital should be leveraged to engender loyalty and build a new generation of long-term customer relationships fostered through customized  offerings, tailored services, and personalized communication.

As a reference point, utility companies are perceived less favorably about performing well during the crisis (59%). Media companies fared even less well, although it’s unclear if this is general perception or a consequence of the crisis — the loss of live programming, especially sports, in the age of social distancing perhaps is taking a toll. Streaming services received high favorability with 62%, but that fell for social media companies (53%), and further for print media (47%).

 

2. As new services gain momentum, now is the time for operators to rethink their value propositions.

In exceptional circumstances, consumers are adopting new behaviors and services for the first time, particularly younger age groups.

Among 18- to 34-year-olds, 12% are using online health services for the first time and 10% have started video conferencing. This generation may be at the vanguard of digital adoption, but all age groups show an uptick in these services.

There is also high interest in educational content and tools (47%). Operators should take note and consider partnership opportunities to bring new and differentiated learning solutions to market. 

Whether this represents a paradigm shift or temporary expediency, the levels of enthusiasm suggest an underlying demand building across many categories of services. This is a unique opportunity for operators to experiment with different service offerings, model behaviors and demand, and feed it back into the design of their future value proposition.

3. Home internet providers that invest in the resilience and reliability of their networks will reap long-term rewards.

32% of households say they are concerned about their current home internet service in terms of reliability, speed and connection. 24% of them contacted customer service since the beginning of the crisis, mainly for issues around network reliability and performance. 

The concern peaked at 50% of the 18- to 34-year-olds and is higher than the concern about wireless providers (23%).

It’s evident that households value reliability, so much so that almost a quarter (23%) admit they are prepared to pay extra for it. 

Operators that prioritize the reliability of their networks and invest accordingly will witness a meaningful impact on satisfaction, churn and potentially the top line.

In the new 5G era, home internet providers should rethink their network capital allocation strategies. They should accelerate innovation in network monitoring tools, including remote diagnosis and repair capabilities.            

4. Digital acceleration is needed and wanted!

Home internet providers have a great deal of work to do around developing digital and self-service tools, and the COVID-19 context has not yet changed this fact. More than 60% of customers are not using digital and self-service features, simply because the capabilities don’t exist or they can’t find them.

Home internet providers should embrace the promising digital usage trends in bill management and self-install to press ahead with full deployment of digital solutions.

There is also room to improve existing digital and chat features. 46% of customers using them had an issue with the user experience and 36% found that functionality was too limited.

Part of the digital opportunity lies in scaling up client interaction solutions such as chat and virtual assistants. 43% of consumers said they would be prepared to use digital assistants to solve their problems.

Home internet providers don’t need long-term, high-cost programs to make a difference – the market is littered with examples of companies bringing digital service solutions to market in a matter of weeks.

5. Churn levels are falling. Demonstrated empathy = customer loyalty.

During the crisis, consumers are reluctant to switch services. This represents a temporary pause in churn, but it may lead to a post-crisis rush to shift home internet providers. How home internet providers behave now will influence their outcomes.

While two-thirds (63%) of consumers stated that they are currently happy with their internet service, 16% are still considering switching home internet providers soon.

Current outlook

45%

of households agree that the way their home internet provider performs during the COVID-19 crisis will have a material impact on their likelihood to churn.

Home internet providers need to demonstrate sensitivity to the exceptional circumstances of their customers. They need to show empathy by doubling down on their customer retention efforts and avoiding points of friction such as price rises or service blackouts. Finding the right balance will mitigate a post-crisis rush to switch.

6. Home internet providers should address customer concerns about their spending ability or risk paying the price later.

The economic consequences of COVID-19 will be felt in the long term. Home internet providers who assume business as usual risk overlooking the sensitivity of this issue. 

A third of households (33%) state they are trying to pay less for their communications and content services during the current crisis. 

The issue is even more stark among those who genuinely identify an issue with payment. Almost a quarter (23%) of households state they will have difficulty paying their bills in the coming months. This number more than doubles to a staggering 48% for 18- to 24-year-olds.

Home internet providers need to be sensitive to their customers’ financial concerns, now and in the future. They must adjust their offering and pricing, develop a specific approach for the value-conscious segments and position themselves as empathetic to customers’ changing financial situations.

7. Wireless operators have earned the right to broaden ambitions and conquer the home.

COVID-19 is a catalyst for the long-term aspirations, explicit or otherwise, of wireless operators to take more control of the home.

The overall perception of wireless operators is that they are handling the current crisis much better than most. 88% of mobile customers state the quality of their connection to be unchanged or better, while 66% think wireless operators are performing well in the crisis overall. This strong perception may have to do with wireless operators’ abilities to rapidly pivot services to meet current needs. Could this positive halo effect play out longer term?

When asked if they are considering switching their current home internet provider, 28% of households identified they would likely switch to a wireless operator. This 28%, which is significant, correlates closely to age with younger demographics, 18- to 24-year-olds, most likely to switch from fixed to wireless (33%).

Wireless operators should pivot their efforts to position themselves as viable alternatives in the minds of potential consumers, while current home internet providers should take steps to counter insurgent competition.

8. Wireless operators need to do more to convince customers that 5G matters.

If wireless operators are to sell the benefits of their services as an alternative to fixed broadband, they need to do a better job communicating their messages.

With the increased demand for internet use, this is the opportunity to accelerate the 5G push for mobile internet. At one level, the news is positive, with almost a quarter of consumers (24%) saying they are considering a 5G connection as a result of the crisis. Yet, when asked a similar question prior to the current crisis, over a third of consumers were considering switching (37%).

The opportunity, as well as the challenge, for wireless operators is the large group (36%) in the middle who seem ambivalent about 5G. The ability of wireless operators to convert some of this group to have genuine interest in 5G could go a long way to determining the speed of 5G adoption.

9. Massive growth in streaming media usage – including from first-timers – signals favorable future OTT growth potential.

Almost half (47%) of households claim increased use of content streaming services. A large slice of demand is being satisfied by free services (60% say they have signed up for free trials). The heavy consumer usage during shelter-in-place combined with a willingness to test new offerings could lead to accelerated monetization over time. In fact, 15% of subscription video on demand (SVOD) free-trial users say they intend to become paying customers at the conclusion of the promotional period. Further, the advertisement-based video on demand (AVOD) platforms gaining new users are primed to realize revenue growth when the advertising market regains its footing if customer retention metrics hold in the post-crisis phase.

Importantly, streaming service providers must balance the near-term marketing benefit of offering free trials with the rapidly expanding over-the-top (OTT) competitive landscape. Consumer entertainment budgets are finite; securing paid subscriptions and reducing churn is a strategic and financial imperative for OTT players.

In an early look at the longer-term impacts for both linear and streaming media, 27% of total respondents agree that their viewing habits will permanently change as a result of COVID-19. In the 18- to 34-year-old age group, this number is even higher, with 43% saying that a permanent change is coming. If these preliminary indications prove to be durable, the migration of consumers away from existing pay-TV offerings will accelerate; however, the ability to access sports content, which largely resides within the “legacy” video ecosystem, remains a powerful force against consumer change (see #10 below).

Home internet providers should urgently reinforce their end-to-end value propositions around streaming. They should build on the relatively recent marketplace and pivot toward offering connectivity solutions like broadband, in-home WiFi solutions, voice-driven remotes and packaging third-party OTT offerings with existing service bundles.

Streaming service

10. The promise of the return of sports programming may shield the pay-TV ecosystem from an acceleration of cord-cutting – even as consumers tighten their spending.

The allure of live sports is well-known across the media and entertainment ecosystem. As we all navigate the social-distancing phase of the pandemic, where no games are played or broadcast, consumers are still gravitating to sports and sports-related content. “Greatest games,” documentaries and new player drafts are all drawing sizable viewing audiences. Perhaps not surprisingly, even in this environment in which people are spending less and resetting household budgets to align with new economic realities, only 10% of pay TV customers are considering downgrading or dropping their live TV sports bundle. When the games resume, consumers will tune in.

With live sports programming absent, there is a rush to fill the content void with virtual alternatives.  This space remains owned by the leagues, broadcasters and a vibrant mix of companies that includes gaming studios and technology manufacturers – all are eager to reach new markets and establish a foothold.

Home internet providers must act now if they want to play along the value chain and capture commercial opportunities. They have the advantage to understand what consumers want through analytics, and they could be the new “fail fast” laboratory for e-sport and e-gaming services.

Summary

Explore the latest EY research conducted across 3,500 US households on how employees, students and families have used technology, media and entertainment, and telco (TMT) products and services to adapt to the COVID-19 crisis.

About this article

Authors
John Harrison

EY Global Media & Entertainment Sector Leader

Transformative leader with a passion for media and entertainment. Identifying the opportunities afforded by convergence and disruption. Executing strategies to succeed in a fast moving market.

Rahul Gautam

EY Advisory Global Technology Sector Leader

Accelerating growth for some of the world's largest and most innovative tech companies. Passionate about deploying technology to solve major world problems.

Martyn Whistler

EY Global Media & Entertainment Lead Analyst

Keen observer of all things media and entertainment. Storyteller. Avid reader. Bluff traditionalist, impatient for the future. Fan of sports, occasionally sporty. Fan of the arts, rarely arty.

Vincent Douin

Consulting Customer Principal, TMT sector, Ernst & Young LLP (EY)

Twenty years in telecom and cable. Enthusiastic advisor through the business and digital transformations of my clients.

Emily Reidy

EY, US-East, Performance Improvement – Customer, Consulting, Senior Consultant for Ernst & Young LLP

Consultant with a focus on transforming telecom, media and technology companies’ product and marketing strategies. Hoosier born, currently residing in NYC. Passionate about meditation and mindfulness.

Related topics Digital TMT COVID-19