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www.ovum.com
© Copyright Ovum 2014. All rights reserved.
The Evolution of Online Streaming
Inaugural Australian OTT Summit, 17/11/2015
2© Copyright Ovum 2014. All rights reserved.
Agenda
Netflix comes to Australia: content choice highlights distribution complexity
Placing OTT SVOD into context
A changing audience for visual entertainment
TV and OTT: the perfect couple
Next-generation bundling and aggregation
TV and OTT futures: towards a brighter tomorrow
3© Copyright Ovum 2014. All rights reserved.
Netflix: driving change and choice for Australian audiences
Ovum was commissioned by nbnTM to examine the Australian TV and video market
Trends, supply chain, OTT service delivery
The OTT video delivery supply chain is diverse, complex and offered by multiple companies who are a effectively a
loose coalition of (usually) shared interests
No single company straddles the entire transport process from glass to glass
Hence it is unrealistic to apply QoS and UX expectations forged from TV - pay TV even - to OTT video
OTT video services and their distribution networks are not vertically integrated…and significantly cheaper
Both a blessing (innovation, no need to ask permission, audience scale, democratised distribution) and a curse (no QoS
guarantee)
2015 is just the beginning
Average monthly data usage on the nbn network rose to 110GB in September, up 51 per cent in six months
SVOD subscribers will grow by a factor of 17 between 2014 and 2019
There will be 4.7 million OTT SVOD subscriptions in Australia in 2019
Fulfilling audience expectations through network investment is a challenge for the entire online video supply chain
4© Copyright Ovum 2014. All rights reserved.
Australian SVOD subscriber growth to 2019: the growth engine for visual
entertainment
0
2,000
4,000
6,000
8,000
10,000
12,000
2013 2014 2015 2016 2017 2018 2019
Pay TV subscribers IPTV subscribers OTT SVOD subscribers Total TV households FTA households
5© Copyright Ovum 2014. All rights reserved.
OTT revenue in context: augmenting, not replacing, TV
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2012 2013 2014 2015 2016 2017 2018 2019
$m
OTT SVOD
OTT AVOD
OTT TVOD
TV Advertising
Pay TV VOD
Pay TV Subs
6© Copyright Ovum 2014. All rights reserved.
The audience is changing: linear is the bedrock but short-form and on-demand
formats are becoming an increasingly important part of the viewing mix
177
92112
5
34
12
0
50
100
150
200
250
300
All adults Children 11-15 Children 6-11
Min
ute
s
Short-form online video
Disc movie, TV show
Downloaded, streamed (paid)
On-demand, catch-up (Free)
Recorded TV (PVR, DVR)
Live TV
Source: OFCOM Digital Day 7-day diary for adults/ 3-day diary for children
Base: All watching activity records for adults 16+ (25272), primary school-aged 6-11 (1249), secondary school-aged 11-15 (1094)
7© Copyright Ovum 2014. All rights reserved.
OTT has provided (overdue) competition for traditional TV…and has had a
hugely, positive impact on the quality of the TV experience
OTT services like Netflix and Youtube have satisfied audience needs the traditional TV industry has
been slow to address
Transactional OTT established (iTunes): supplanting the disc market
Digital media, short-form tube sites (Youtube), social video (Snapchat, Facebook), games streaming (Twitch):
content formats which didn’t exist previously
Standalone SVOD (Amazon, Netflix) gaining traction: on-demand, binge and off main screen viewing
Traditional TV players are also leveraging OTT distribution
Broadcaster, rights owner direct to consumer OTT services proliferating
Improving the core TV product to justify high ARPUs: stacking rights, nDVR
Launching EST to compete in home entertainment release window
Launching standalone linear OTT streaming services: skinny bundling for OTT
Competing through bundling: content, connectivity and telephony…and more
Aggregating third party OTT and mobile video services
8© Copyright Ovum 2014. All rights reserved.
TheatricalHome Ent,
ESTTVOD, PPV
FSPTW SSPTW FTA
“We are evaluating retaining our rights for longer, and forgo or delay content licensing. This
would push the SVOD window to a multiyear period, consistent with traditional syndication”
‘Traditional’
Sky
Sky evolved
Competition
Jeff Bewkes, Warner Bros
9© Copyright Ovum 2014. All rights reserved.
Selling SVOD on a standalone basis is challenging: content services need a route
to the audience
10© Copyright Ovum 2014. All rights reserved.
Netflix needs distribution partners too: from pure online to operator partnerships
(HBO is doing it the other way round)
Country Operator Type Announced
United Kingdom Virgin Media Cable September 2013
Sweden Com Hem Cable October 2013
Denmark Waoo! Telco / ISP October 2013
USA Atlantic Broadband Cable April 2014
USA Grande Communications Cable April 2014
USA RCN Corp Cable April 2014
USA Suddenlink Cable May 2014
USA GCI Cable June 2014
USA Midcontinent Communications Cable June 2014
USA Cable ONE Cable July 2014
Belgium Belgacom Telco / ISP September 2014
France Bouygues Telco / ISP September 2014
France Orange / FT Telco / ISP October 2014
France SFR Telco / ISP October 2014
United Kingdom BT Telco / ISP November 2014
Australia Optus Telco / ISP March 2015
Australia IINet Telco / ISP March 2015
11© Copyright Ovum 2014. All rights reserved.
Next generation bundling initiatives are emerging…from USA’s T-Mobile
addressing audience reservations about mobile network streaming costs…
• SD video data usage zero rated on
higher tier data plans
• Usage of any video service scaled
down on T-Mobile network
• 480p “optimization” enabled by
default…
• Even on unlimited data plans
• T-Mobile will work with ANY LEGAL
video service
• No commercial deal between video
service and distributor
• 30% off DISH Sling TV sub for a year
• (but no Youtube)
Netflix
HBO NOW
HBO GO
Hulu
Sling TV
Sling Box
ESPN
Showtime
Starz
Movieplex
Encore
T-Mobile TV
Vevo
Vessel
Univision Deportes
Major League Baseball
Go90
DirecTV
Fox Sports
Fox Sports GO
NBC Sports
Crackle
VUDU
Ustream
12© Copyright Ovum 2014. All rights reserved.
…to a small MVNO in Denmark, Telmore, bundling third party OTT video and
digital media in a great value data bundle
• Telmore Play: the next
generation mobile content
bundle
• All these components separately
cost over €120
Service Telmore
Video, TV
HBO Nordic
TV2 Play
C More Play
Min Bio
Music Telmore Musik
Ebooks mofibo
News, magazines
Various including Denmark’s biggest
tabloid, broadsheet newspapers,
magazines
DEVICE Customer supplied handset
NETWORK4 hours voice, SMS
5GB mobile data / mo
COST €21/mo
13© Copyright Ovum 2014. All rights reserved.
Network owners offer content services a route to the audience: from app
distribution, to aggregation, to super-aggregation
Distribution
•PRICING: a la carte selling of third party content services individually priced
•DATA USAGE: metered, sold separately
•DISTRIBUTION: drive 3d party app distribution by favoured positioning, promotion on distributor hardware eg, STB, streamer
•CUSTOMER ACQUISITION: separate registration process for third party content services
•BILLING: Separate billing for distributor and content provider
•CUSTOMER DATA: No customer data sharing relationship
•UI, UX: No deep integration into distributor UI, UX
Aggregation
•Discounted price for bundled content services
•Cost of entertainment data usage bundled
•3d party content services curated, partnered for appeal to particular distributor’s audience desires
•Customer registration automated by distributor sharing subscriber information with bundled content services that the audience signs up to
•Single integrated bill across multiple content services and data
Super-Aggregation
•Fully integrated discounted entertainment and fixed, mobile data bundle
•Data usage abstracted from entertainment consumption, possibly zero-rated
•3d party content services templatedwithin consistent distributor UI: audience is no longer disappearing into fragmented app environments
•Unified UX across all content services: (voice) search, recommendation, discovery tools
•Customer data shared and used to target content, advertising across ad-supported services
•Distributor platform technology applied across all content services: seek, startover, recording, nDVR
14© Copyright Ovum 2014. All rights reserved.
A brighter future for the audience, content and networks
Paid OTT and mobile video services of all stripes benefit from a route to the audience, aggregation,
integrated billing…
…and the audience benefits from simplification and UX consistency
Current fragmentation is beneficial neither for content services looking to grow or audiences who don’t want to
manage multiple subscriptions across different services with varying levels of UX
Potential bill shock for mobile video usage stymies market growth
The audience appreciates the value proposition of visual entertainment more than data and is moved
to spend accordingly
Cost of data is falling and will become increasingly commoditised
Leaving aside the possibility of an Elon Musk or Google driven “moonshot” working
“OTT will eat TV” is an oversimplification of a nuanced reality
Not a zero-sum game: OTT services tend to augment and complement traditional TV
Besides we won’t be saying OTT anything in a few years time…
15© Copyright Ovum 2014. All rights reserved.
The future: personalised, dynamic, accountable…data-driven
Audience segmented
to individual level
Content delivered via
dynamically constructed
personalised streams
Advertising is targeted,
accountable, dynamically
inserted into linear, VOD, OTT
Great content doesn’t
change
Streams…000s of them
Ad targeting Content selection
Brands buy audiences not
time slotsRelease windows persist
OTT/TV distinction meaningless
Data used to value advertising and content.
To determine which ads and content to
show to each viewer.
Linear TV
DVR
OTT catch up
OTT linear
OTT FVOD &
$VOD
Legacy
consumption modes
are still available
16© Copyright Ovum 2014. All rights reserved.
Thank you
Ed Barton
TV Practice Leader, Principal Analyst