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








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!








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








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








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

Streamhash.

Revenue Strategies of Large OTT Players








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.








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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Video on demand and its impact on television