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OVER THE TOP VIDEO IS COMING OF AGE.But is it prepared for the future?
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In 2007, the video industry officially stepped into the world of digital. Netflix introduced consumers to the concept of video delivery over the internet, and Over the Top (OTT) video was born.
Significant growth and development followed, with digital platform companies jumping into the market and setting the pace—followed by traditional TV companies launching their own OTT platforms so as not to be left behind. Now, a little over a decade old, it is fitting that OTT is in its adolescence—with a solid foundation and enormous potential, but not quite grown up.
AS OTT LOOKS TO THE NEXT PHASE OF ITS LIFE, HOW CAN IT BEST PREPARE FOR THE FUTURE?
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Thanks to OTT, entertainment options have never been so plentiful or flexible—there are over 200 OTT services in the U.S. alone. However, customer expectations have never been so high. Combine these factors with low switching costs and you have a market of fickle and fleeting customers. Accenture’s research on Living Businesses1, found consumers are shopping around more than ever before and are constantly evaluating and re-evaluating their purchasing decisions. In 2017, U.S. companies lost $1 trillion in potential revenue by not remaining relevant to their consumers. However, when it comes to OTT, consumers would prefer to stay put.
Thanks to the industry’s expensive investment in premium content, there is an abundance of high-quality programming audiences can choose from. But OTT services have yet to deliver the level of relevance consumers desire. The irony is that customers want choices, but they don’t want to do the choosing. Consumers want on-point suggestions perfectly customized to their preferences and tastes. Built on a foundation of sophisticated data and analytics, super platforms like Amazon and Netflix are leading on this front, with other OTT providers following suit. However, no one has yet perfected the formula.
So, how can video providers win the customer relevance battle at a time of unprecedented disruption? By adapting to changing customer preferences and market conditions with speed and scale. This means rotating from the current content-focused business model to one that puts the customer at the center—delivering tailored capabilities and offerings that meet customers’ needs and predicting and adapting to future ones. Then, to make it profitable, they must scale this tailored approach across their consumer base, leverage it to grow their audience base and apply it to fuel a multi-revenue strategy to capture additional income streams.
We have identified three key strategic recommendations—including data-driven product innovations across pricing, technology and platforms—for video providers to drive new hyper-relevant experiences, now.
Source: Accenture Digital Consumer Survey 2018
Despite the abundance of choices, 86% of global consumers do not want to juggle multiple services.86%
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Truth is, if you are an OTT provider, you have more pricing power than you think.
Currently, money is being left on the table when it comes to subscription revenues, as evidenced by our findings that consumers who subscribe to both a pay-TV package (a cable or satellite bundle) and an OTT service spend:
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THE POWER OF PRICING
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43% of their total viewing time on OTT content, compared to
only 23% of their monthly media consumption budget.
43% 23%
While a flat rate hike may not be the best strategy in this crowded competitive landscape, there is room to reap additional revenues and provide customers with welcome choices by experimenting with rate structures and product offerings.
Major areas ripe for innovation are the current subscription and advertising revenue models. According to Accenture research, one-third of consumers would pay to remove advertising from their video content—while the other two-thirds would not. Current subscription-based and ad-supported OTT services do not offer consumers the flexibility to tweak or customize their model preferences. It is currently an either/or situation—but why not offer options and let viewers choose?
Knowing what customers value—a lower subscription rate with ads, or a higher subscription rate without ads—is a powerful first step in segmenting the market to understand where customers’ thresholds lay. Or their sweet spot could be somewhere in between, with a hybrid model that trims down ads, or switches up the traditional ad formats. Segmentation and experimentation will be critical to giving customers the options they want and arriving at the right mix that optimizes revenue.
Source: 2018 Accenture Digital Consumer Survey
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The current model, which forces customers to pick between monthly subscriptions or high-priced one-time purchase for DVDs or digital downloads, deters some potential customers from accessing content for which they might be willing to pay.
And, despite the fact that traditional operators have been shrinking video bundles, 51% of consumers still believe that they pay for content they don’t care about.
Not all customers need to be big spenders to drive significant profit margins. There is real value in options that make it easy for customers to pay for what they want. For example, the NBA is experimenting with League Pass, which allows viewers to watch the 4th quarter of a game for $0.99, versus an annual $200 subscription. With 1230 games in the regular season and anywhere from 60 to 105 in the playoffs, these bite-sized direct-to-consumer transactions can add up to big results by broadening the paying customer base, maximizing the ROI for each piece of content, and opening the door to future subscriptions.
Hey, micro spenders
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51%Despite the fact that traditional operators have been shrinking video bundles, 51% of consumers still believe that they pay for content they don’t care about.Source: 2018 Accenture Digital Consumer Survey
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Digital providers built upon a solid data-driven foundation have powerful upselling opportunities.
Some OTT companies are already wading in these waters by providing premium content or services for an additional fee, such as Netflix which offers three tiers of options for additional streams and ultra high-definition content. Filmstruck’s Criterion Collection also has broader choice and exclusive commentary via a higher tiered package.
What other products and services might audiences want to buy? There is no shortage of opportunities—think one-time payments for immediate experiences, dynamic products like special content, mobile games, and cross-product promotions. And, just imagine the possibilities with AI, AR and VR.
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MAKE ME AN OFFER
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Of course, the key word here is “customized,” and targeting must be precise.
Personalization makes customers feel special and leads to further transactions, but one-size-fits-all offers—or spam—will have the opposite effect. Successfully implementing an upselling strategy requires a deep understanding of your customers and the capability to innovate to deliver dynamic products.
This is a critical reason why OTT platforms need to be supported by:
GETTING YOUR WEIGHT UP, AND KEEPING IT UP
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highly developed data and analytics capabilities that gather and analyze data across the entire consumer journey
agile infrastructures that can turn these insights into action
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In addition to analytics, this customer-focused approach requires capabilities like payment and CRM systems that help facilitate customer engagement and monetization.
And, relevancy is a never-ending process. With liquid consumers constantly upping their expectations and changing their priorities, staying relevant is akin to hitting a moving target. Yet, it’s not a fruitless pursuit. By adopting an agile, data-driven test and learn approach, companies can continuously innovate and experiment with new ideas—such as hypotheses, product features, marketing campaigns, and special offers—to see what works with consumers. Those that are successful can then be scaled up quickly across the consumer base, while those that “fail” can be easily retired with limited exposure to the infrastructure or bottom-line.
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OTT adolescence will soon morph into teenage angst for OTT providers not prepared to build two-way, synergistic relationships with customers. Achieving and sustaining consumers’ desired level of relevancy will require a data-driven operating model that understands what individual customers want, customizes products and services accordingly, and operates with a continuous feedback loop that keeps up with their ever-changing needs. Being early to this party is critical. Not only will customers be willing to pay a premium for this type of relationship but, once in it, they won’t want to leave. Done right, this approach creates an upwards spiral where the seamless exchange of customer insights and information continually tightens the customer/provider bond, putting them perfectly in sync and resulting in increased loyalty, reduced turnover and improved market share.
OTT PROVIDERS THAT CAN SCALE THIS APPROACH AND USE IT AS A BASE FOR A MULTI-REVENUE STRATEGY WILL BE PREPARED TO MEET THE FUTURE.
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Authors
Lynn McMahon North America Media & Entertainment Lead [email protected]
Michael Chapman Media and Entertainment and Video Strategy Global Lead [email protected]
Sef Tuma Global Digital Video Lead [email protected]
Mark Flynn Global Communications and Media Research Lead [email protected]
References1 https://www.accenture.com/Accenture- Living-Business-Research-Report-2018.pdf
2 Accenture Digital Consumer Survey 2018 www.accenture.com/digitalconsumer
About AccentureAccenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions – underpinned by the world’s largest delivery network – Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With 449,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.
About Accenture Digital VideoAccenture Digital Video is an Accenturebusiness unit focusing on helpingcompanies build successful digitalvideo businesses by enabling them tocapture new growth opportunities whilemaintaining profitability in their traditionalbusiness in a rapidly changing market.Working closely with clients, Accentureleverages a portfolio of highly relevantintegrated business services enabledby open technology platforms to deliversuccessful video business outcomes;from thinking to planning to doing. A global industry leader, Accenture Digital Video has a 20 year track record of advancing video technology and business innovation, supported by a globalworkforce of more than 2,000 dedicatedprofessionals helping clients succeed in a complex, volatile landscape.Visit us at www.accenture.com/digitalvideo
