Showtime in short-haul
Connectivity is changing inflight entertainment. Here’s how
Only a few years ago, inflight connectivity and entertainment offered airlines a real wow factor. But this is no longer the case. As Kurt Weidemeyer, Senior Vice President of Technology at Inmarsat Aviation, says: “IFC is no longer a differentiator. It’s a requirement.”
Here, short-haul presents a very interesting case, as customer expectations are lower than they are on long flights. As we know, the majority of short-haul passengers make do with no entertainment at all (in the form of seat-back screens).
The game changer from a passenger point of view has been personal devices. Airlines are not going to put seat-back screens on planes that fly short routes. But they no longer need to. “For anything up to four hours, airlines will be okay delivering entertainment to customers’ devices such as iPads and phones,” says Weidemeyer. And this increase in BYOD opens up a number of different opportunities particularly for short-haul, driven by robust and affordable connectivity into the cabin.
New entertainment and connectivity options in short-haul
Broadly, short-haul airlines have three choices. The first is to offer no entertainment, as many low cost short-haul carriers currently do. The second is to offer W-IFE. This is content which is streamed from a server on the plane – it means limited entertainment and a ‘walled garden’ without connectivity to the internet. The third is to offer Wi-Fi with full internet access. Carriers can also combine W-IFE and Wi-Fi.
For one group of carriers, offering no entertainment or paid for Wi-Fi or W-IFE are valid options. These are the low cost airlines such as easyJet and Ryanair. Over the years they have built up a very different set of customer expectations – which boil down to the idea that everything is an extra that costs. They are in a position to charge for everything – or offer nothing at all as many currently do.
Full service short-haul operators have increased customer expectations and so may opt for other choices: W-IFE, open internet Wi-Fi or both. Because short-haul flights are shorter, with corresponding lower expectations W-IFE is one possible ‘turnkey’ solution. Here the airline has a server on the plane which offers a small content library of TV shows and films. Although this is the sort of content long-haul airlines have been offering for years, short-haul fliers are less demanding and W-IFE could be seen as adding value to their experience. Indeed, some airlines may still be able to charge to watch films. There’s also a revenue stream in advertising on the portal to the walled garden (as long-haul airlines already do).
However, W-IFE is the low cost option in all senses. It doesn’t cost as much but passengers won’t pay that much for it and the revenue possibilities, while welcome, will be limited. Passenger surveys and reports from airlines show there is demand and expectation of full connectivity and so offering a limited selection over Wi-Fi might actually raise expectations and the same time frustrate customers who expect full connectivity with their devices.
However, offering full internet Wi-Fi via inflight connectivity is a very different matter. One reason for this is that, increasingly, customers also want “their” content in the air, much as they have it on the ground. “If you take Netflix, then people who subscribe to Netflix expect to be able to access it while they fly,” says Weidemeyer.
There is good news for the airlines here. First, streaming services aren’t as bandwidth-hungry as they used to be – Netflix has developed a new codec, for instance. This means the service uses far less bandwidth, giving you the same picture quality at half the bitrate. Secondly, it may make sense for the most popular shows to be stored on the plane’s hard drive and streamed via W-IFE while less popular shows are streamed via IFC.
Streaming services such as Netflix and Amazon Prime Video may be willing to pay to get samples of their entertainment in front of fliers. “We’re seeing content providers prepared to sponsor the service on an aircraft,” says Weidemeyer.
Why would companies do this? The answer is that it would expose them to potential customers. Passengers might start watching The Crown or Black Mirror and decide that Netflix is something they would pay to watch. Having these services available on planes is also a benefit for these companies’ existing customers. A three-hour flight is the perfect chance to catch up on a couple of episodes from a box-set.
If you take Netflix, then people who subscribe to Netflix expect to be able to access it while they fly
All airlines are also in a unique position when it comes to advertising. In the air, the carrier is the sole provider of connectivity. This is something the long-haul carriers have known for years and their entertainment proposition has long been ‘watch some ads and get great movies’. In fact, the captive audience you have on a plane makes the advertiser proposition with full internet very similar to the advantageous position TV advertisers had 20 years ago, before digital channels, time-shift viewing and the internet.
We could be looking at route-dependent advertising
There’s another factor in play here too, because fliers aren’t just a captive audience. Airlines know far more about their customers than broadcasters ever did – and at a much more granular level. Full IFC offers the possibility of hyper-targeted ads. “We could be looking at route-dependent advertising,” says Weidemeyer. “If you take the Los Angeles – San Francisco route, it’s often called the Silicon Valley run, and is predominantly businesspeople.” Similarly, if you were to select UK-Spain flights in July, you’d know passengers were mainly families going on holiday.
However, it doesn’t stop there. “You go even further and advertise by class or even by seat.” Indeed, some US airlines are already looking at this (using data from frequent flier programmes) and it’s only a matter of time before a family of four could be sitting in a row, watching different content on different devices and seeing different ads which are precisely targeted at them. IFC also means that airlines can gather far more valuable data on who is watching what.
With full connectivity the airlines can provide not only a captive audience and the data to understand them but also a stage to complete the sale. Amazon and other e-retailers would pay for the privilege of advertising e-commerce offers to the inflight audiences now that those passengers can click through to purchase as they do on the ground, including checking credit for major transactions. This addressable, known passenger audience can be expected to command a premium in affiliate sales deals.
Finally, we have live sporting events. Here there is already a proven business model where people will pay considerable sums to watch big games. For the carriers, it’s a matter of cutting deals with the media businesses which own the rights to big events. For obvious reasons, live action means the carriers need IFC in order to show it. In fact, there’s a new inflight rights market in sports, spearheaded in 2018, with the opportunity to watch the football World Cup live from your seat.
Stepping back a little, in short-haul there is considerable scope for freemium models, especially on cheaper flights. “If you provide people with a service for free, they will usually put up with quite a lot of advertising,” says Weidemeyer. And this, of course, is before we look at the potential to broker deals with retailers such as Amazon. It’s worth mentioning, too, those airlines that already combine W-IFE with full internet provision. Eurowings offers free entertainment plus a certain amount of complimentary internet time – passengers who want more are required to pay. AirAsia uses a combination of IFC and servers to meet the strong demand of its passengers for seamless connectivity and entertainment.
Clearly, for the short-haul sector, huge changes are underway. Personal devices mean that, for the first time, these airlines can offer entertainment and connectivity without installing seat-back screens. In a sector accustomed to a no-frills approach, the temptation might be to go for the cheaper option and offer W-IFE. But when you look at the far richer mix of revenue streams that full connectivity provides, this is the future-orientated choice with the greatest potential to boost bottom lines. The challenge for the short-haul carriers is to start viewing full IFC as an investment rather than a cost.