Video on demand and its impact on television
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Transcript of Video on demand and its impact on television
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Video On Demand And Its Impact On Television
As Over the Top (OTT) video platforms revolutionise the way the world
seeks entertainment, conventional broadcast mediums are losing steam.
Whether it is typical television formats like broadcast and pay TV or its
erstwhile premium alternatives like cable, satellite and telco, OTT
television, spangled with big-ticket players like YouTube, Amazon and
Netflix, are fast replacing traditional televised content. With a $25 billion
industry being spun by these OTT kingpins, filmed content production,
aggregation and distribution as we know it, is about to face a difficult road
ahead.
Definition of Over the Top Content
OTT content essentially refers to content that is transmitted to viewers
over the top of traditional technologies via fixed or mobile broadband
internet, as opposed to broadcast spectrum or exclusive cable, fibre and
satellite mediums.
Impact of Over the Top Content on Traditional Audiences
Content ecosystems around the world are being affected in several ways.
Let’s look at how film production is changing.
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Financial Shift
If you examine the global OTT landscape, you’ll find over 500 broadcasters
attempting to capture a share of the market. Most of these brands are
local, providing relevant regional content to viewers. However, the top 5
spots in the OTT market are occupied by well-known names in the
technology space: HBO, Netflix, Amazon, Hulu and YouTube. About half the
revenues generated by the global OTT market are ploughed in by these five
brands alone. With their financial heft, scale, and technology, the big five
are predicted to expand astronomically in the years to come.
Media Shift
Through OTT, media can proliferate to new markets and audiences. With
economic, strategic and geographic barriers axed, everyone has access to
everything. On-demand content also liberates media broadcasters from the
shackles of time and location-based viewing. And broadcast houses can now
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bolster and personalise their relationships with viewers, something that
content houses were unable to do through the television age.
Cultural Shift
Though this shift is largely intangible, the advent of large OTT players is
making it more challenging for small entry-level broadcasters to make their
presence felt. That said, amateur content is burgeoning on platforms such
as YouTube. Vlogging, a portmanteau of the words video and logging, is
sensationalising ad-hoc captures of day-to-day living.
New-Age Content Creators in the Over the Top Market
OTT reflects content offerings in the television kitty, plus a little more.
Price points, variety of content, location-agnostic viewing and flexibility
differentiate OTT from traditional television. But that’s not all. Because of
the limitations of production and distribution that OTT demolishes, there
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are now more content creators in the fray. Meet the newest kids on the
block.
Amateurs
Amateurs form the fabric of social media, providing a stream of steady
content to platforms like Facebook, Instagram and Twitter. Amateurs don’t
follow a publishing timeline, instead uploading snippets and stories at
regular intervals. They are the newest members of the content ecosystem.
Professional Amateurs
Imagine a hybrid model of amateurs and professionals, and you have
professional amateurs. Otherwise known as pro-ams, these creative sparks
pump regular content into circulation on digital platforms such as YouTube
and The Young Turks. Pro-ams aren’t backed by studios or media houses,
and create content independently, driven by profit. They publish content in
accordance with a self-determined timeline, to garner as many followers as
possible. Many pro-ams set out as amateurs and become more
accomplished with time. There are several enablers in the online market
today, that help pro-ams set up their own OTT platform. Streamhash, a
cutting-edge framework that has made a name for itself in tech circles, is
an ideal addition to any pro-am’s roster. The technology allows a user to
set up an OTT website within just two days, and its fabulous interface
holds a candle to the likes of Netflix and Amazon Prime!
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Media Houses
Media houses have fuelled television content for decades now, and have
remained largely unchanged in their approach over the years. The content
they produce is superlative, costly and underpinned by a network of
studios, distribution networks and production houses. Not surprisingly,
media houses are the only content creators that were around in the
television age.
Revenue Models in the Over the Top Sector
When Video on Demand saw its first wave of monetisation models,
broadcasters sought to employ one of three strategies, namely, advertising-
based VOD (AVOD), transaction-based VOD (TVOD) and subscription-based
VOD. However, as the sector matures, and new broadcast models emerge,
VOD is branching out. With live streaming now a firm inclusion on many
digital and social media platforms such as Facebook and Twitter, the term
VOD, has become redundant. Here are some revenue models in OTT that
are relevant in the present scenario.
Advertising-Led Content
An advertising-led platform is one whose content library is open to users at
zero subscription and no hidden charges. The service may offer a vast
archive of shows, movies and clips created by amateurs, pro-ams and
media houses. Such a service monetises its platform through external
advertisers, who pay the service in exchange for on-demand air time for
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their advertisements. Advertising-led content platforms differ in the
content they provide to customers. While some may broadcast
professionally produced television shows and movies, others may be a
showcase for content created by pro-am and amateur talent. However, a
growing number of advertisers are directing marketing budgets to OTT
platforms, in a bid to spread their marketing presence and to capitalise on
the on-demand nature of the business. MyVideo and Hulu are classic
examples of advertising-led content platforms.
Transaction-Led Services
You’ve likely been a buyer of a product on a transaction-led platform in the
past. iTunes is an apt example of this. A transaction-led service allows a
user to purchase or rent content in exchange for a one-time payment. On
completion of the transaction, the content can be downloaded or streamed
to a user’s device, often enabling offline viewing. Interestingly, the rise of
transaction-led services, which primarily includes long-form content such
as movies and television shows, is inversely proportional to the decline of
physical home videos.
Subscription-Led Services
OTT services are typically typecast as subscription-led, although there are
an array of revenue models a firm may resort to. Subscription-led services
open doors to a collection of professionally-produced content including
movies and television shows, for a monthly or annual fee. The consumption
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mode is usually streaming, and access to the internet is critical for the
sustenance of this format. This league of OTT content providers seeks to
directly compete with cable operators, offering value-added programmes.
Netflix, Amazon Prime and Hulu Plus are examples of subscription-led
services.
Digital Multichannel Video Programming Distributors
Digital Multichannel Video Programming Distributors (DMVPDs) are a
marriage of subscription-led services and traditional cable networks. This
class of OTT services offers pay TV services on a digital platform at
essentially the same price points as television. Many of the players in this
category have a foothold in television already and are entering the OTT
space by duplicating their television offerings online. Customers find this
helpful, because it means that they have access to traditional content, on
an on-demand basis. Sling TV, owned by Dish Network is an extension of its
parent’s television offering.
The Trickle-Down Effect of OTT on Consumers
Television has been toppled from its long-standing pedestal by OTT
content, and naturally, the transformation has been catalysed by the
changing face of the consumer market. There have been three significant
shifts in content production and consumption.
Space Transformation
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As recently as five years ago, you would have probably walked into a
Walmart to pick out the latest chartbuster. With OTT platforms, brick-and-
mortar formats aren’t the only means to quality content. Consumers can
now reach beyond cable and satellite networks to obtain content on
demand, without having to worry about physical logistics. Space
transformation encapsulates the lack of physical warehouse space needed
to stock content, indicating that indicative shelf space is now infinite.
Think of iTunes or Spotify. The platforms aren’t limited by inventory, and
have the capacity to grow their library to millions of tracks. Translate this
concept to OTT, and you’ll see that facilities-based distribution is now
obsolete. The internet has annihilated physical media distribution, ensuring
that consumers have quick and easy access to a vast labyrinth of content.
Time Transformation
Television introduced a linear approach to content consumption. A viewer
was forced to be a subject of time-based viewing, turning on the television
set at an exact time to catch a specific feature or show. With OTT, non-
linear content viewing has promoted flexibility amongst consumers, giving
rise to new trends. Today, a quarter of worldwide content consumption is
nonlinear, and it is projected that by 2018, the US will lead the way in
nonlinear consumption with non-linear consumption contributing to half of
total content viewership. By choosing when to watch what, viewers have
devised new approaches to nonlinear consumption. Binge-watching, a new
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phenomenon indicating back-to-back viewership of television shows or
movies is popular amongst millennials. This has prompted OTT platforms to
acquire and upload seasons at one go, providing users with content en
masse.
Device Transformation
Television consumption is device-specific. Content broadcasted for
television can only be received on a television. With OTT, however, the
rapid multiplication of devices has laid the foundation for users to receive
content on any device, anytime, anywhere. As devices advance and
resolutions become sharper, device fluidity will only become more
relevant. Facebook, for instance, tracks 90% of its membership through
mobile devices, and statistics show that viewership through mediums other
than television has increased by three hours per week, since 2009. Two
interesting trends have emerged from this shift. One, increased video
consumption has broadened the video industry because OTT players aren’t
yet clawing into conventional video broadcasts. Two, mobiles and small-
screens are ideal facilitators of short-form video consumption, like short
videos, trailers and stories. Television shows and movies are still favoured
on larger screens. The good news is that small screen penetration is
possible even for small players with reasonably priced frameworks, such as
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Revenue Strategies of Large OTT Players
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We mentioned the reigning OTT players earlier. And not without reason.
The top OTT players in the market have sealed their spots through unique
strategies for both revenue and cost. Their revenue strategies are
highlighted below.
Globally Relevant Content
OTT bigwigs have the machinery to tweak content to suit local markets.
They also ensure that content is globally relevant as they close new deals
and collaborations.
Clever Acquisition Tools
With more experience and new markets, large OTT players leverage
economies of scale, and learn how to minimise acquisition cost, increase
retention and develop better tools to attract and onboard customers.
Netflix has been a shining example of excellent growth, having reduced
customer churn by 0.9% between 2008 and 2014, and scaling its base to 75
million users.
Audience Breadth and Depth
Specially for an advertising-led platform, the quality of its audience is
imperative. This provides advertisers tools for micro-segmentation and
micro targeting of users, while building a promotional campaign. By
building a diverse audience, an OTT player can offer value to advertisers
across the board.
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Cost Strategies of Large OTT Players
Cost strategies go hand in hand with revenue optimisation methods. Here
are some ways the biggies of OTT manage their costs effectively:
Global Content Acquisition
The main challenge for OTT players is to acquire content for as many
markets as possible. A large OTT player, however, can easily weave in extra
markets into a multimillion dollar deal.
Reduced Costs with Larger Audiences
As an OTT platform acquires more viewers, it develops wherewithal to
write off its fixed costs over a smaller tenure. In turn, this means that the
player can invest money into relevant business areas, such as original
content, new partnerships and marketing and promotion.
The Dawn of an On-Demand Age
As content preferences and viewing patterns change, the existing content
environment is being upheaved to accommodate more. This shift brings
with it greater hope for content creators, broadcasters and viewers.
OTT is a brilliant take on traditional viewership. And finally, everybody has
a forum to showcase their creativity.
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