Is OTT over-subscribed?

Image credit: Screen Africa


To say that OTT (over-the-top) technologies have disrupted the world entertainment landscape would be a major understatement. Subscription-based, on-demand OTT platforms have risen in popularity over the past couple of years and are fast-displacing traditional TV programming as the preferred medium of entertainment for many. But the huge amount of options has also made streaming TV an expensive and a bit of a complicated mess. With even more streaming services set to launch this year, are we ‘over-subscribed’? And will the newcomers be forced to adopt ad-supported streaming models?

It’s hard to imagine that the OTT space could get even more crowded than it already is, but that’s what 2019 is about to usher in. A number of new streaming services will arrive on the scene, competing with current big players like Netflix, Amazon Prime, Hulu, Showtime, HBO Now and YouTube Premium. Late last year AT&T, the American telecom giant, completed its purchase of Time Warner and immediately announced an October 2019 launch of their own OTT service will rely heavily on content from WarnerMedia and the Warner Brothers library. AT&T doesn’t see their platform becoming another Netflix, but rather a huge warehouse of quality content available for purchase. There are no details on the model to be used nor its pricing as of yet.

Last month Apple announced Apple TV Plus, a brand-new streaming service that, according to its CEO, Tim Cook, “is unlike anything that’s come before.” Apple TV Plus will offer exclusive shows, movies and documentaries and will be ad-free from the start. It will be available in 100-plus countries through a section of the Apple TV app from September 2019 on smart TVs (surprisingly, even on Samsung smart TVs), MacOS and iOS.

Not to be outdone, Disney has also announced the launch of its upcoming OTT channel, Disney+. The channel will feature a second live-action Star Wars series, currently in development, and programming from other Disney brands such as Pixar, Marvel and Lucasfilm – and don’t forget, they also own National Geographic. Not only is National Geographic’s content attractive, they have renewed relevance with younger generations of consumers, with 100 million Instagram followers! Disney has assured potential viewers that their new service will be cheap – with some touting the figures of $6 to $8 monthly.

Even Discovery, Inc. executives have said they’re considering a direct-to-consumer offering, especially now that the company has 17 networks in its portfolio following their recent merging with Scripps Networks Interactive. Although, so far, the executives have said they’ve only considered the options – which could include bundling a number of brands, like HGTV, Food Network and TLC, into one channel. In theory, it could cost as low as $5 to $8 per month, said president and CEO, David Zaslav.

Cutting-edge technologies are enabling OTT players to gather, analyse and generate insights from vast volumes of digital data pertaining to user viewing patterns, mostly thanks to artificial intelligence and machine learning. This not only helps players to streamline the way they curate and recommend content to their users, but also enables them to create original content which is in synch with the viewing preferences of different audience demographics.

Armed with research data, BBC Studos – the commercial arm of BBC and ITV, the UK’s biggest commercial broadcaster – recently launched Britbox, a service that offers high-quality British TV to North American audiences for $6.99 a month. Britbox has 4,000 hours of content on it at present, which makes it the largest collection of British content available to US and Canadian customers. It has some archive classics but also brand-new shows that are available within hours of UK transmission. Essentially, the Britbox model is all about offering subsets of passionate fans the kind of high-quality content that they simply can’t get anywhere else. The less the content resembles what is available elsewhere (e.g. Netflix), the more consumers will be inclined to pay for it, according to the BBC.

Low-cost services may be the key to ongoing OTT success, despite survey results indicating that the majority of consumers will subscribe to only 2.25 streaming services, potentially leaving many players out in the cold. As the growing number of digital publishers and broadcasters enter into the OTT space, it’s becoming increasingly clear that a subscription-based business similar to that of incumbents like Netflix and Hulu would not be able to sustain newcomers.

These newcomers will need to rely on ad-supported streaming models (AVOD) and this presents a tremendous opportunity for advertisers. AVOD models offer ‘free’ premium programming as a viable consumer alternative to a subscription service. However, there are inherent complexities to maintain consistent revenue. OTT advertising is in its infancy when compared to broadcast television. Brands and ad agencies have been slow to ditch the traditional cost measurements (such as CPM) that rely on gross impressions to assess cost-effectiveness and profitability.

For the AVOD service provider, this means success is directly tied to scale—more viewers, more revenue. But building, maintaining and growing a large and sustainable audience can be an expensive marketing proposition.  On the plus side, the OTT consumer trend is not lost on advertisers looking to reach segmented audiences. The ability to deliver non-skippable pre-roll ads that can be hyper-targeted and localised with back-end performance metrics is very attractive to advertisers, but – for the viewer – will this model simply be over-the-top?



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