Amidst the gloom of a global pandemic, the rapid growth of OTT subscriptions has sounded a rare positive note: it is estimated that global revenues for the sector will grow by an unprecedented 55% in 2020, according to Videomind.
Traditional pay-TV and broadcast subscriptions are falling away, particularly in the U.S. Therefore, it would be easy to reach the conclusion that Covid-19 stay-at-home orders have accelerated our arrival at the tipping point where on demand and OTT become the dominant models for video entertainment consumption.
The truth, however, is that the road ahead for OTT brands in an increasingly crowded and competitive market remains uncertain and fraught with challenges. Some of which come in the form of:
Unknown post-lockdown churn with continual changing global circumstances
Potential slowing of subscriber growth as the world returns to a sense of normal
Raised expectations in line with what customers have grown accustomed
Change as the only constant, with the ability to adapt quickly to meet continuously shifting needs
Opportunity from uncertainty
The net result is that subscriber acquisition is likely to be more important than ever in 2021. And the fact is that subscribers themselves will represent a more demanding, constantly moving target.
Our recent OTT playbook explores the opportunities for OTT brands to experiment and innovate at every stage of the subscriber acquisition journey. To succeed, brands need the ability to innovate, experiment and adapt quickly. This capacity has long been held back by everything from a lack of customer insight and inflexible business models to monolithic technology platforms that set limits on the pace of innovation.
However, that is starting to change.
Broad customer insight
No-one yet knows whether the pandemic-era spike in new subscribers will be temporary or convert into long term loyal customers. Subscriber growth– be it short or long term – offers clear financial benefits. However, it also offers something potentially more valuable and enduring: insight.
It seems that recent subscribers were drawn from every section of society, not just the traditional heartland of the 18-35s. In fact, some of the most significant growth was among older age groups, with around a third (32%) of 55-64-year olds and 15% of over-65s using subscription streaming services, according toOfcom.
What’s more, it would be a mistake to assume those demographic changes are entirely transient. Research from EY found that 19% of households agreeing that the pandemic has irrevocably changed their viewing habits.
As a result, OTT brands could attract and engage a much broader cross section of society, accompanied by diverse needs and behaviors. So, success will depend on understanding and adapting to a broader set of demands.
The good news, for those brands able to convert data into action, is that subscriber growth during 2020 has provided the basis for hugely valuable customer data. Interrogating that data, to understand customer needs and behaviors can be the basis for multi-faceted, adaptable and, above all, effective subscriber acquisition strategies.
Agile, flexible subscriber management
The brands best poised to act on that insight, and the ability to keep pace with a constantly moving subscriber sweet spot, will have a significant advantage. The scale of that advantage will depend how far along the digital transformation journey they have traveled.
Those still wrestling with monolithic legacy systems will struggle to keep pace with change. Siloed data will hamper customer insight. And complex systems requiring technical resource will limit the ability to innovate, adapt and experiment in response to change.
On the other hand, a new breed of fully integrated cloud subscriber management platforms will provide forward thinking brands with all the flexibility and agility they need – and at lower cost. These will allow OTT brands to innovate and experiment in every aspect of the subscriber acquisition journey. This will take hours rather than months, without the need for technical skills. These factors offer a critical competitive advantage in the months and years to come, as we all adapt to a new reality.
Experiment and innovate
In the post-pandemic world, there can be no standing still. OTT brands will need to constantly experiment and innovate in every element of the subscriber acquisition journey in response to diverse customer needs and rapidly changing behaviors, coupled with a demand for greater flexibility and choice.
New research from Parks Associates’ OTT Video Market Tracker shows that through Q3 2020, the number of OTT video services in the U.S. has more than doubled since 2014. The market now includes nearly 300 different services. The rate of closure has also declined. It reached a peak in 2018 when 19 services left the market. However, only six have ceased operations in 2020 so far.
Notably, Parks’ latest report examines the impact of Covid-19 on the longstanding practice of theatrical windowing. Many studios have put off premieres until 2021. However, Disney opted to debut two films on VOD, except in markets where its Disney+ service had not yet launched.
Impact on theaters and OTT competitors
As the report points out, Disney+’s Premier Access program initially bypasses all of the major services in the OTT space. It provides a single direct access point to viewing a piece of premium and exclusive content. As such, it not only directly competes with theaters but leading OTT services as well. It looks like Disney’s Premier Access concept is impacting the transactional VOD system and customers alike.
Disney’s strategy with Premier Access is two-pronged:
Drive incremental revenue among existing Disney+ subscribers. They are much more likely than non-subscribers to pay a premium on top of their monthly subscription fee to get exclusive access to a Disney-produced first-run movie;
Drive incremental Disney+ subscriptions among households with younger children who are interested in seeing a blockbuster title from Disney but do not yet subscribe to the service.
Long-term industry impact
Other subscription-based OTT services that produce and distribute original movies, such as Netflix and Amazon, have circumvented the traditional content windowing process with movie theaters, physical media, and other VOD platforms for years. Whichever path Disney takes for its upcoming blockbuster titles, the precedent has been set with the development of its Premier Access program.
The full financial picture has not yet emerged, despite the early success of Disney+. It will be interesting to see whether other studios follow suit and test major OTT premieres. And, of course, the entire industry is watching to see whether this was a short-term strategy to address the impact of Covid-19 or becomes a transformative trend in the film and video industry in the long term.
Throughout the course of the Covid-19 pandemic, media organizations have had no option but to rapidly – and even radically – change their existing processes to keep things running smoothly. despite being unable to work within their usual offices and create content in the manner to which they’d become accustomed.
We reached out to some of the members of Digital Context Next and asked them the following question:
“Given the way companies have been necessarily adjusting and adapting to the Covid-19 crisis, what trends have particularly caught your eye, and which ones do you think are most likely to continue into the post-pandemic digital landscape?”
As you’ll see below, the responses were wide and varied, with each exec offering insight from their own unique perspective. But there were also several distinct similarities of observation, hinting at some potentially noteworthy trends in creative problem-solving, consumption of news and information, and increased productivity in a remote work environment.
“The increase in news consumption among younger demographics has caused an influx of new advertisers to the genre. We have also seen a decrease in keyword blocking over the last month compared to the start of the pandemic. Marketers realized that keyword blocking was being applied too broadly and that they were missing important, brand safe content.”
– Jeff Collins Executive Vice President, Advertising Sales FOX News Media
“Advertisers, agencies and publishers continue to navigate these challenging times with flexibility, speed and increased communication. The rapidity of creating solutions and working together across the industry has been impressive, and surely that nimble nature will be a constant moving forward. Additionally, the power of live news in a digital environment has been a force. Partners are embracing cross-platform service advertising to support necessary journalism while communicating brand campaigns and messages with mission at the helm. The value for partners and consumers alike is inherent, and from here, we’ll continue to see that grow in importance.”
– Christine Cook Senior Vice President & Chief Revenue Officer CNN Digital, WarnerMedia Ad Sales
“I’ve been impressed with how productive our staff has been in a fully remote work environment. I worry that our strong culture supports an effective WFH structure, but that over time, with departures and new hires, that could erode. Even with that concern, I do think that we will be much more accepting of remote work arrangements and lower occupancy in the office.”
– Michael F. Finnegan President Atlantic Media
“In addition to some obvious trends that will stick, involving remote work and public health precautions, I’m hoping that the speed and agility of our response to the crisis as publishers will be long lasting. In the AP’s case, we converted to remote operations worldwide, including complex video newsgathering and distribution. The move required us to move master control rooms to staffers’ homes immediately and implement remote tools for video editing to staffers worldwide. Not every project in the future needs to be run as a fire drill like this, but my hope is that we will retain a lot of the muscle memory from our response to the Covid crisis.”
– Jim Kennedy SVP, Strategy & Enterprise Development Associated Press
“Independent trustworthy journalism has proven itself in the crisis and is emerging even stronger than before. However the advertising markets across the globe have collapsed significantly and we cannot be sure whether they will return or shift even further towards the mega-platforms. Increasingly, a very few mega-platforms decide if, where and how citizens can use and access journalistic offerings and other services. The Covid crisis has accelerated this development. The policy response in Europe and in the US must be faster, more determined and more comprehensive in order to safeguard free, independent journalism and to re-establish fair competition in digital markets.”
– Dr. Dietrich von Klaeden Senior Vice President Public Affairs Axel Springer SE
“The pandemic is forcing us to look more closely at who we’re reaching and when. And it’s making the case for more surgical, performance-based advertising in lieu of broader brand marketing efforts. Going forward, I think we’ll see a more concerted effort to tie media investment to business outcomes, but those business outcomes will still include brand building KPIs in addition to performance focused KPIs.
“We’ll also see an increased emphasis on flexibility and agility across the media industry as a whole, specifically in relation to upfront/annual budget commitments and creative production. With so much changing so quickly, the last several months have created an environment in which marketers want to mitigate risk as much as possible, especially when it comes to media distribution or to creative campaigns that may need to be altered based on micro/macroeconomic conditions and societal issues.”
– Craig Kostelic Chief Business Officer, U.S. Advertising Revenue and Head of GlobalAdvertising Solutions Condé Nast
“Mobile has been a central part of our business but Covid-19 has brought that to a new level – people aren’t in the office so that workday routine is out the window. Our audiences are toggling between mobile devices, laptops, and Connected-TVs at all hours. This means more news during the day (especially streaming broadcasts) but also on evenings and weekends. Offering a great experience across all devices is so important. We’re also seeing the value of effectively pushing content out through app notifications, search optimization, email and third-party aggregators. It’s a very competitive market and you can’t sit back and hope people find your content.
“We’re seeing how important it is to be ready to tell stories with video and with text. Video does well on social media, text does better on search – people have different preferences. By consistently telling stories in multiple ways, we maximize our audience and the engagement we receive. Explainer videos that offer foundational information have been extremely important during Covid-19. Things like ‘What you need to know about Covid-19’ have been consistently among our top videos and most shared on social media. They also have companion articles that share similar information and that’s been a winning formula for us.”
– Marian Pittman SVP, Content COX Media Group
“In our space, OTT and other platforms have seen explosive growth. We are also seeing an uptick on online donations, even in these challenging economic times. This is directly related to an increase in the consumption of PBS content both on air and online. We’ve also seen marked growth in PBS Learning Media as more students and teachers and parents look for online educational tools and growth in PBS Kids content, especially the games app that launched only a few years ago but is now used as much as the PBS Kids video app. For PBS I believe all these trends will continue as consumers adopt new habits and discover the quality content Public Media and our local stations bring to them.”
– Ira Rubenstein Chief Digital & Marketing Officer PBS
“Three trends catch my eye. One is the necessary acceleration of creating value from audiences other than via advertising, which is proving to be a fickle friend. That means specifically paid content/membership strategies, but also the value in analysis and research via first party direct relationships with readers. In a world without a compass, insight into the thoughts and inclinations of key audiences are gold dust, both for publishers and partners.
“The second trend is the changing definition of ‘journalism’ from the spoken, video or written format to a more data-driven and graphical experience. The Covid-19 crisis has been played out – and devoured by readers – in charts and graphs. I think there’s a lot more potential to engage readers in the future with this format.
“The other trend is of course the reinvention of the event space. Digital events were always thought to be a poor relation of the live experience. But I’m seeing audience appetite, bags of creativity, and lots of opportunity to develop engaging, valuable events online.
“It’s a terrifying time for a lot of reasons, but there are exciting opportunities out there, too.”
– Jon Slade Chief Commercial Officer Financial Times
About a third of
households are likely to adopt a vMVPD service within the
next year according to Parks
Associates research service OTT Video Market
Tracker, which analyzes the impact of new and existing video services
in the OTT space. Pluto TV, Crackle, and The Roku Channel are
the leading ad-supported OTT options, though Parks finds that no single service
currently dominates the vMVPD market.
Parks latest report finds that one-third of broadband households have trialed an OTT subscription service in the past six months. The good news is that two-thirds of those trialing OTT services subscribe to one or more of the services that they test.
That said, this is competitive market filled
with an ever-growing number of choices. Thus, Parks finds that churn is “particularly
intense in the pay-TV sector.” They
advise that “building a strong customer base over time and continuing to serve its
needs through content” is the best way to prevent churn. Netflix, Amazon, and
Hulu have substantially lower churn rates than less-established OTT players.
However, they point out that, particularly where differentiation is limited (as
in vMVPDs), tenure in the market may not be enough to produce loyalty.
Parks also finds
that:
Given
that vMVPD services are relatively new, service churn is high as consumers test
the different options available. Significant subscriber losses by DIRECTV Now
(AT&T TV Now) contribute to this figure.
A
preference by some consumers for pay TV, service contracts, bundling discounts,
and the hassle of switching providers all contribute to lower annual churn
rates for pay-TV providers compared with OTT or vMVPD services.
The
Pay-TVchurn figure for Q3 2018 includes all pay-TV services, including both
traditional and vMVPD.
OTT services are increasingly moving beyond customer acquisition as they seek to build a sustainable customer base. The upcoming market entry of Disney+, Apple TV+, HBO Max, and NBC’s Peacock (among others) has caused many industry players to reassess their approach to retention and consumers’ interest in subscribing to multiple streaming services.
By better understanding consumer attitudes, motivations, and
habits related to churn, service providers can more effectively create service
experiences will reduce churn and create a loyal customer base.
Cooking and watching TV: it’s a culinary combination that’s been a
staple of the small screen since Philip Harben whipped up a batch of lobster
vol-au-vents for BBC viewers way back in 1946 (look it up, kids). But try asking Harben to remind you how
many tablespoons of olive oil he said to add to the saucepan and see how far it
gets you.
Of course, Harben died in 1970, a situation which certainly doesn’t
help the promptness of his reply. But to be fair, even when he was still
with us, his program (Cookery) offered little in the way of
interactivity.
Needless to say, digital offers a buffet of opportunities to
enhance how-to experiences like cooking. And, with its multiplatform,
entertaining, and interactive approach, Discovery Inc.’s Food Network Cooking
app aims to take cooking shows to a whole new level.
“I remember watching Julia Child on WGBH in Boston when I was
growing up. Back then, unless your living room TV was near the kitchen or you
actually had a small TV in your kitchen, you couldn’t actually make it
along with her,” said Tim McElreath, Discovery, Inc’s Senior Product Manager of
Emerging Platforms. “Now you can just bring your iPad or Fire tablet or your
Echo show over to your kitchen counter.”
Launched in October 2019, Food Network Kitchen provides on-demand
cooking classes, which incorporate an option for online grocery shopping to secure
all the right ingredients. However, the strategy doesn’t stop there. Food
Network Kitchen also offers interactive cooking instruction with some of the
biggest names in culinary television across a wide range of platforms.
Live and lively
“Right now, we’re doing up to 10 live broadcasts a day out of New
York and Los Angeles. We’re also doing more and more on-location broadcasts,”
said McElreath. “So, we’ll have, say, Bobby Flay up in Chelsea Market on a
Sunday demonstrating how to make a chorizo omelet or something like that. He’ll
walk you through and try to do it at a pace so that you can cook along. And if
you’re watching on a mobile, you can type in a question. It’ll get relayed to
the chef by a monitor and then they’ll answer you. Or if they can’t answer it, someone
will answer it for you. So your question will get answered.”
“What we’ve seen is that our talent really starts to shine in a
live context. They’re great at producing polished scripted programming. But if you
get somebody like Michael Simon in front of the camera, talking
extemporaneously… He’s just a great raconteur. He can just talk your ear off
while he’s cooking. He’ll talk about his experiences, he’ll talk about his
family, he likes to talk about how his dad taught him to cook.”
Sometimes the questions submitted during a live broadcast aren’t about
the recipe being made, they’re about the chef and their experiences and how
they learned to cook. These kinds of questions are also welcome. “It prompts
them to start telling a little bit more about themselves.”
Demanding on-demand
Beyond the live programs, Food Network Kitchen also boasts a
library of more than 800 on-demand classes. Many of these are bundled into
courses, such as Rick Bayless’s traditional Mexican cooking course.
“We also have courses by cooking types, so we have a baking
course, a grilling course, and things like said,” said McElreath. “Each class
within a course has a recipe associated with it. But if you watch the course,
get the gist of the recipe, and then want to make it again later without
necessarily watching the whole course over again, we have regular step-by-step
text recipes that you can walk through as well.”
Listening to audio opportunities
For McElreath, the big focus with Food Network Kitchen has been to
build the smoothest possible virtual smart-screen situation for at-home chefs,
while also providing customers with a value proposition.
The approach McElreath and his team are using for the Food Network
Kitchen app – interactivity, value, and entertainment – is an extension of the
work they’d been doing on Alexa and Google Assistant.
“We’d been working on voice
platforms since early 2016, and it’d been largely kind of a research and
development type group for experimenting with the capabilities of the platform,”
said McElreath. “The voice multi-mobile platforms were so new that, across the
board, people were just kind of making things up as they went to try and figure
out how it fit in with their digital strategy. But we’d done a lot of
experimentation for things like searching for recipes and recommendations on
both the voice and the smart-screen platforms.”
Ease and extensions
For Food Network Kitchen, part of this strategy is making the app
available on Amazon Alexa and Echo Show, Fire Tablets, Fire TV streaming media devices,
and Fire TV Edition smart TVs. This gives McElreath and his team an opportunity
to integrate some of the work they’d already done while also extending the
platform out to a very specific situational interaction.
“You know, if somebody’s looking to take a cooking class, and we
have a set of ingredients, it should be very easy to get the exact ingredients
delivered very quickly,” he explained. “And since we’re on TV, Mobile, and Smart
Screen, you can watch something on TV and say, ‘Okay, I want to save the recipe
I’m watching right now,’ which shows up in your saves on Mobile while you’re
out shopping so that you’re able to use that as your shopping list, after which
you’ll go home and be able to walk right over to your kitchen counter and be
able to pull up that recipe on Smart Screen without having to search for it
again.”
Mind you, with audiences expecting such interactivity between
their devices, content companies are going to have to step up their game.
Fortunately, McElreath has already considered the many possibilities that exist
beyond the kitchen.
“We have a lot of short-form
how-to videos like how to chop an onion, how to poach an egg, and things like
that. And if we have a content template, then I think there’s a pretty big
opportunity to start thinking about applying it to some of our other Discovery
brands.”
From the boom of direct-to-consumer (DTC) brands to the introduction of new OTT streaming services such as Disney+, 2019 brought significant innovation to the digital media space. As we begin 2020, it’s time to think about which media trends will shake up the new year. Here’s what the MediaRadar team sees on the horizon.
The year of paradox for linear TV
In 2019, it was estimated that 6.4 million paid subscribers stopped paying for television. In 2020, as OTT streaming services continue to gain control, an almost equal, incremental decline in number of paid subscribers is predicted. However, despite “cord-cutting” in the TV industry, linear cable and broadcasters are poised to have a successful year. This is due in part to several major TV events set to occur throughout 2020.
The 2020 presidential election will have politicians spending significant amounts of ad dollars to get their messages across. Some estimate that spending will approach as much as $10 billion – or almost $6 billion more than the 2010 election. Advertisers are also predicted to allocate heavy ad spend towards the Tokyo Summer Olympics, as well as other large tent-pole sporting events like the Super Bowl. This year’s Super Bowl is expected to deliver strong financial results, as Fox reported in early December 2019. In fact, 80% of the inventory had already sold at a reported $5.6 million per 30 seconds. That marks a 7% jump from last year.
Amidst the evolving TV landscape, providing viewers with
real innovation will become crucial for success. Keeping that in mind, in 2020,
it’s believed that nearly all major broadcasters will either reboot or unveil
their paid streaming businesses. While this is just the start, this shows
broadcasters are committed to re-engaging with their audiences and future
proofing subscribers.
Politics’ role in digital media
An exploding ad spend isn’t the only way the presidential
election will shape the industry this year. The election is expected to take
over much of the news cycle and political ads. Every platform will be
scrutinized for accuracy more than ever before. Ahead of the election, digital
ad companies are expected to face strong public pressure to ensure their
political ad policies are tightly “buttoned up.”
Twitter recently announced they will be opting out of politics, disallowing political ads entirely. Google announced that they are restricting targeting capabilities for political ads and Facebook is predicted to follow suit, despite pressures to go further.
Based on these companies’ decisions, it’s likely that other
media will feel the same pressures in 2020. It will be up to these companies’
leadership to navigate this evolving digital landscape during the election
cycle. Foremost: an emphasis on clear and ethical business decisions.
OTT remains hot
Over the past few years, investment in the OTT space has been heavy and rapid. It shows no signs of slowing down in 2020. UBS estimates a combination of 16 media firms will spend $100 billion to produce content in 2020. Of that $100 billion, just three firms – Netflix, Disney and WarnerMedia – are projected to account for 25%, producing unique content for their viewers.
For the financial health of the companies competing in the space, it’s likely that this investment cannot last long-term. Bob Iger, Chairman and CEO of The Walt Disney Company, has acknowledged that Disney+ will probably not break even for at least the first five years. Meanwhile, AT&T has said the same of upcoming streaming platform, HBO Max.
Eventually, it’s predicted that end user prices will rise,
ad-supported models will become more common – SVOD versus AVOD – and spend on
content will decrease to ensure profitability. Being in the early days of the
streaming wars, however, the major players are willing to gamble with losses
now to gain profits later. In the fight to capture the attention, and monthly
payments of consumers around the world, and to make the investment worth it,
not all can win.
2020 outlook
2020 looks to be both an exciting and transformative year
for digital media. The TV industry will shift focus as they seek to re-engage
with audiences through paid streaming businesses and offerings. Major TV
events, specifically the 2020 presidential election and flagship sporting
events, will help sustain linear cable and broadcasters through the year.
Investment in OTT is only expected to increase, especially as “cord cutting”
continues.
Perhaps the biggest change in 2020, though, will be as a
result of the state of politics. With politics playing a larger role in the
space than ever before, media companies will begin adjusting their strategies
and policies accordingly – a change that could have a lasting impact on the
future.
It’s a big month for streaming. The launch of Apple TV+ and Disney+ are finally upon us. So it’s a good time for an update on the state of the streaming wars.
In this strange new world, tech companies like Apple are investing in content, and media companies like Disney are investing in technology. So how does? all this effort stack up? A closer look at the content and ad spend of these new OTT major players provides some insight into the future of streaming.
Content spending among new OTT services
At launch, Disney+ unsurprisingly boasts a sizable catalog of Disney-owned content. The company has also announced that $2.5 billion will be allocated to producing more original content for the platform over the next 5 years.
Conversely, Apple has opted for a small but mighty catalog. At launch AppleTV+ was armed with considerable “star power” to entice subscribers. The platform will host entirely original content exclusively available to AppleTV+ subscribers. And pre-launch advertisements reveal some of the biggest names in acting and directing.
Although these two major players bring promising new content to the OTT lineup, they will have to continuously find ways to retain value in the eyes of consumers.
Monthly subscriptions to the top seven streaming platforms will collectively cost $61. Consumers will more realistically pick and choose the platforms they actually want to pay for. These leaves companies pitching both price point and content.
Clearly, these numbers indicate that Disney and Apple are attempting to join the royalty of OTT, made up of existing streamers like Netflix, Amazon, and Hulu, which all have their own originally produced hits. With the launch of HBO Max in 2020, AT&T’s WarnerMedia may join the club soon.
With content creation underway and platforms officially launched, OTT services can now shift focus to conveying value to win the favor of consumers, who have more options than ever before. And that is where marketing and advertising come in. What does advertising an OTT option in an already crowded space look like?
Apple and Disney spend big ahead of streaming launch
For now, let’s look at the two headline makers: AppleTV+ and Disney+.
Here at MediaRadar, we found that both platforms only started running ads in late August. AppleTV+ quickly overtook not only Disney+’s ad spend, but the entire streaming space. In the month of September, AppleTV+ was the top ad spender out of all streaming platforms. This includes established players like Netflix, Hulu, and Amazon Prime Video.
To date, Apple TV+ has outspent Disney+ five times over on paid media. What’s more, AppleTV+ has not slowed their efforts now that the platform has launched. Ten days into November, AppleTV+ is on pace to once again be the top ad buyer out of all the streaming platforms this month.
The two companies differ in strategy, as well. Disney has promoted its new streaming platform as a whole, using clips from owned content to pitch the breadth of the platform. While Apple has been promoting its original content in stand-alone spots. So far, it has focused ad spend around eight shows in particular.
AppleTV+ may be outspending Disney+ on paid media. However, that does not mean Disney’s marketing push has been insignificant in any way. In fact, Disney has been orchestrating a massive marketing push using all of their various channels.
This push includes everything from on-air endorsements from Tom Bergeron (host of “Dancing With the Stars” on the Disney owned ABC network), to billboard and bus ads around Disney’s theme parks, to QR codes on lanyards worn by Disney’s 7,000+ retail workers at various Disney store locations. In one of the more interesting moves, Disney posted a video on YouTube titled “Basically Everything Coming to Disney+”, using snippets of movies available on the platform. The video was over 3 hours long.
On top of this, Disney has rolled out packaged deal after packaged deal thanks to its extensive holdings and powerful partnerships. For example: Verizon announced a year of free Disney+ for both new and existing customers, and more impressively Disney announced a $12.99 bundle with Disney+, ESPN and Hulu (both of which are majority-owned and controlled by house mouse). Visa card holders who have a Disney branded credit card can even lock in a discounted price for 2 or 3 years. Apple, for its part, is including a year subscription to Apple TV+ with the purchase of any Apple product.
Apple is almost on the defensive in this new world, playing as a tech company against media giants like Disney. No one says the best movies come from Apple today. They have a real deficiency in terms of changing perception that they are a place where you should go to watch your content.
In a bid to make that case, Apple has spent $20 million advertising its two biggest shows ahead of the launch.
In contrast, Disney’s robust offerings, combined with constant messaging across Disney properties, may immediately drive Disney+ to the top. “Think of Disney like a giant pinball machine, with content and initiatives pinging between divisions in an effort to drive up the ultimate score,” Gene Del Vecchio, a marketing professor at USC, told The New York Times.
With all this activity from the new platforms, and platforms like HBO Max and Peacock yet to join the fray, the streaming wars are heating up. It will certainly be interesting to watch how these companies market themselves as they fight for subscribers who will have many providers to choose from.
OTT players and channels are changing faster than the seasons. The spring will bring a crop of new streaming entrants, joining an already crowded market. Still dominated by Netflix, a growing number of major players are drawing video viewers.
In the publishing industry, a remarkable level of transformation is happening by way of mergers that are driven, in part, by capacity to produce video. Recently, Vox Media and New York Media joined forces. This followed close on the heels of the recent tie ups of Group Nine Media and PopSugar along with Vice Media and Refinery29. An underlying theme is upping the production of quality video programming for seeking OTT platforms and rising streaming channels battling for subscribers. So, the question is: How will consumers be watching?
Get SmartTV
The answer is on a Smart TV—whether a Vizio with WatchFree powered by Pluto TV or an LG with LG Channels powered by Xumo—the CTV universe is made up of a growing number of streaming channels (or so-called FAST services). Now, major OTT platforms are following suit with Fire TV’s IMDb TV and Roku’s The Roku Channel.
In this dynamic, programming from media companies is produced in a seller’s market as FAST services look to differentiate with new and, if possible, exclusive content. The goal is to set themselves apart from aggregated CTV ad budgets. The result is that programming is starting to be distributed on 24/7 streaming channels (like the advent of cable news). The end game is to develop an audience that can be channeled to an owned and operated network/app.
Streaming channels that take form of the lean back TV world are also coming over-the-top via leading cable/MVPD companies. For example, Spectrum recently released a skinny bundle that allows viewers to choose what they actually want to watch. And that’s for approximately the same price as an SVOD service like Netflix. The skinny bundle is trending.
Netflix vs. niche
So, here we are. We find ourselves at an interesting intersection of an on-demand world (with active content discovery and viewing) and a programmed channel world with passive watching of round-the-clock streaming content. The king of OTT and SVOD, Netflix, is ad-free. It also set a high bar with premium content licensing and quality original shows as it outspends the competition.
However, we see an emerging universe fueled by
advertising/AVOD and channels that run 24/7 content of essentially any genre of
choice as an expanding orbit of media publishers become producers of OTT
programming. On the sidelines, streaming
sports and leagues are expanding their own OTT plus channels. This delivers
their content straight to fans or through digital upstarts that make sports the
core of their offerings, like Fubo and DAZN.
The best of the bunch
The pendulum is going to swing in a direction that improves the TV experience the most. At the heart of it all is content discovery and recommendation. The next show you’re going to watch is still the biggest unknown. According to the State of Viewing and Streaming study released by Horowitz Research last year, just over one-third (36%) of viewers consider personalized recommendation algorithms helpful in discovering shows. Whereas TV ads, word-of-mouth, and social media are attributed with 35%, 34% and 26%, respectively in frequency of new discovery. The better the content recommendation, the more that will be watched on-demand.
From there, the more
“connected” your TV experience, the more it will look like a digital network
versus a TV network. It will become a more social and shareable experience. The
advertising that puts the A in AVOD will increase in value as it becomes more
data driven complying with user privacy and better in targeting viewers. The
better the social integration, the more that will be watched on constant programmed
channels.
The lessons have been learned
by media companies is that they must maintain their own brand and operated
environments in the world of platforms. However, they must continue to
experiment with publishing channels to direct audiences and own distribution (and
monetization). In the grand experiment of OTT programming, content is being
produced and distributed in 24/7 streams to start up on platforms that garner
the greatest audience for the brand. The future of OTT is here, flipping your
favorite channel.
Digital Content Next (DCN) has released findings from its new research, DCN Digital Subscription Economy*, that indicate a healthy and rapidly-growing digital subscription marketplace. The DCN study surveyed 1,000 U.S. consumers regarding the array of direct-to-consumer paid digital subscription offerings across numerous media sectors and genre.
On average, digital media subscribers are paying for more
than four unique subscription services. And two-thirds of subscribers (64%)
perceive high value in connection with their subscription(s). Consumer value is
high no matter how much they spend, how many services they have or how much
they earn.
The market is transitioning with several big-brand entrants like
Disney+, Apple TV+ and HBO Max joining the booming marketplace. However, it
doesn’t appear that consumers are anywhere near reaching a tipping point of
“too much” spending or “too many” services.
Streaming subscription value is driven more by video
streaming services than by live TV streaming, digital audio or digital print
subscriptions. This is fueled, in part, by big-budget original productions,
significant media publicity, “must have” status and consumer’s
attraction to bingeing content.
Value also appears to be driven more by consumers enjoying
the ability to choose from among a variety of streaming services than by desire
to shed their cable service. For those who continue to subscribe to cable,
their driving reason is that they’ve always had it and are “used to it.”
Subscription spending
A majority of digital media subscribers are not immediately
sure how much they spend on their digital subscriptions each month. This is
another indicator that they have not yet reached a sense of over-spending. When
asked to think about and to calculate their monthly spend, their $54/month
average expense suggests a willingness to add to their news and entertainment budget.
In other words, pricing of many of the most popular digital streaming
subscriptions – particularly video subscriptions – seems to be perceived as
reasonable and affordable, at least for the time being.
Drivers of subscriptions
Across the board, subscribers of all digital media types (video, audio, print) prize their control(direct, personalized, anywhere/anytime access) above everything else. Propensity for show bingeing, a manifestation of control, also means consumers are frustrated when complete seasons of what they want to watch aren’t available. Content discovery appears to be a non-issue with just one-quarter of video streamers (28%) reporting difficulty with discovering video content worthwhile to view.
DCN will continue to track this dynamic and shifting marketplace of digital assets consumed à la carte to provide publishers with insight into the dimensions of consumer value and to help inform their subscription strategies, offerings and messaging.
* An abridged version of the findings from the DCN Digital Subscription Economy Study is accessible to the public. Please note the full 48-page DCN Digital Subscription Economy Study is only available to DCN members. If you are a DCN publisher member, please be sure to log in or register to access this special members-only research, which will appear below this notice once you have logged in.
Digital video in 2019 looks like digital content at the dawn of the information superhighway when it started to be commercialized in formative ways. With booming audiences for streaming video, new OTT video services are gearing up to ‘party like it’s 1999’. While the industry has been overshadowed by Netflix for quite some time, a slew of new “Princes” is making their presence known, including Disney, WarnerMedia, and NBCUniversal.
The OTT service establishment today—spearheaded by Netflix along with Amazon, Hulu, and Apple—spend a staggering $20 Billion plus dollars annually on original content. At the same time, up and comers like Pluto TV are trying to replicate the success of traditional TV over the Internet. And, under the ownership of Viacom, they’ve started to stream premium original content in a channel lineup that now includes BET, Comedy Central, MTV, and Nick.
On the other hand, YouTube is attempting to crossover from being a user-generated network to a general entertainment content destination. And numerous video services have emerged that cater to more niche audiences or content segments. These range from Vimeo’s traction with small business organizations like yoga studios to offerings like Lifetime Movie Club for original drama fans and Britbox for domestic fans of British programming.
The point of saturation will inevitably arrive and the number and mix of AVOD and SVOD will eventually play out. If this concerns you, remember that cable boasts thousands of channels. The digital tuner on a TiVo can access over 1,300 of them. Nationwide, without duplication, there are tens of thousands of channels and over 500 premium scripted shows.
History is a
reliable predictor of the future. Looking back, linear TV grew five-fold in channels
and shows during the golden age between the 90s and early 2010s. Even so, total
viewing time increased by just 15% as monitored by TV measurement companies
like Nielsen. Ultimately, free time and content consumption are on an X-and-Y
axis.
The heaviest TV viewership comes from a core of the total TV
viewing population, which is comprised of those over 55 years old in age. However,
the median age of a viewers for newer and more tech savvy OTT platforms is just
over 30 years old. Clearly, the preferences and expectations of younger
audiences are going to shape plans for premium content offerings in the future.
Keep in mind that the proprietary premium content offerings
of services like this will be a clear differentiator. Consider the much hyped
Disney+ OTT service. In addition to boasting its deep well of animated and
family programing, Disney is also the owner of the Star Wars franchise, which
provides an intergalactic bridge to the post-millennial generation. And let’s not forget that WarnerMedia
will soon distribute the Star Wars of our time: Game of Thrones. That franchise
alone could provide the foundation for a significant OTT presence.
So, what will happen next in OTT as established and upcoming
services prepare to battle? Most likely, the future will not belong to a
handful of OTT services alone. Rather, we’ll see the proliferation of OTT
brands that cater to niches of interest and genres, as well as those providing
general TV style content offerings. These services will range widely in terms
of content and tactics and the growing OTT audience will allow them to propagate
on the Internet like TV channels did on cable.
It is less about who is going to take over OTT and more about who is going to take their audience for a great ride on the TV superhighway.
Consumer interaction on digital platforms is a key driver of
revenue for entertainment and media companies. With increasing affordability
and availability of broadband, mobile continues to be a strong contributor to the
growth of this segment. However, according to the new PwC’s
Global Entertainment & Media Outlook 2019–2023 Report, further
innovation and personalization will significantly change how we access and use the
Internet.
PwC predicts that creative new offerings and business models will increasingly revolve around people’s personal preferences. New applications will involve artificial intelligence in combination with digital assistants. Media companies will strive to build products that empower consumers to set their individual preferences and curate their own context.
The PwC Outlook Report cites personalization as a central theme in overall entertainment and media revenue growth. Global spending is expected to rise 4.3% over the next five years, with revenues hitting $2.6 trillion in 2023. The report provides a strong and notable resource for revenue estimates in the both the US and global markets.I
Additional forecasts from PwC’s Outlook Report include:
Subscription TV revenue in the U.S. will experience a 2.9% CAGR (compound annual growth rate) decline to from $94.6 billion in 2018 to $81.8 billion in 2023. Much of the loss comes from cord-cutting and SVOD competition. Interestingly, the US remains the biggest Pay-TV market accounting for 46% of the total global revenue in 2018.
SVOD’s continues its popularity as more streaming services are introduced and unbundling continues to grow. Newcomers to the market will need to differentiate themselves to attract subscribers.
The OTT market is also dominated by the U.S., contributing to more than half (55.6%) of global OTT revenue in 2018. OTT video revenue in the US reached $14.5 billion in 2018 and is set to double by 2023.
The U.S. virtual reality (VR) market registered $934 million in revenue in 2018 and is expected to grow at a 16.6% CAGR to reach S$2 billion by 2023. Gaming remains the primary application of VR, accounting for 57.4% of total VR revenue in the US in 2018. VR video, however, will see the most growth in the forecast period, climbing at a CAGR of 22.4% to reach $861 million in 2023.
There’s an important effort in
today’s entertainment and media marketplace to meet consumers where they spend
their time and to deliver what they need wherever they are. These sorts of personalization
efforts cut across OTT, SVOD, and VR. While evolving business models around customer
behavior is far from new, the renewed focus amplifies the importance of placing
consumers at the center of the media experience.
The advance of high-speed networks and affordable data plans hasn’t only whet audience appetites for unlimited anytime, anywhere access to the content they desire. It has created ideal conditions for data-hungry streaming apps to proliferate, displacing traditional broadcast TV, and driving the meteoric growth of on-demand video. The phenomenon is global in scale, but nowhere is the impact as profound as in India, the fastest-growing video streaming market in the world. In India, on-demand entertainment services are forecast to account for more than 74% of mobile data traffic by 2020, up from 47% in 2014.
Streaming viewership is soaring, but it’s Hotstar—part of the Walt Disney entertainment empire and India’s largest premium streaming platform —that is seeing numbers climb into the stratosphere. In June Hotstar set a new global benchmark for live events. It reported a record 18.6 million users simultaneously tuned into the company’s mobile website and app to watch the deciding game of the Indian Premier League (IPL) cricket games. This sort of high-octane content has allowed Hotstar to grow the number of monthly users across app and web to 300 million, up from 150 million the previous year.
Hotstar balances a mix of blockbuster entertainment (including rights to popular movies and shows from ABC, HBO, and Showtime) with a bouquet of content aligned with India’s obsession with Bollywood and demand for local language translations. (Note that India hosts hundreds of dialects and over 20 official languages). As a result of this winning combination, Hotstar dominates India’s on-demand video streaming services market. The latest research from Jana pegs Hotstar’s total market share at 69.7%, compared to Amazon (5%) and Netflix (1.4%).
Using data to differentiate the customer
experience
At first glance, it’s remarkable that large global players with deep pockets continue to struggle in the Indian market—despite significant investments to ramp up local content. But look under the hood, and you may be surprised. Hotstar’s success may start with broadcast rights for live premium sports paired with high-quality vernacular content that attracts record numbers of viewers. However, it’s driven by a strategy that harnesses personalization, recommendations, and psychographic segmentation to keep them coming back.
Finding
the right balance between acquisition and retention is crucial for a company
like Hotstar, which thrives on live events. It pays to spend millions of
dollars to acquire audiences at scale—but only if users don’t leave in droves
when the event is over. Hotstar turned a potential problem into a massive
opportunity by mapping individual user journeys to move audiences across the
funnel from freemium viewers to paid subscribers.
How
Hotstar moves viewers from fremium to subscription
In an
exclusive interview, Mihir Shah, VP of Product & Marketing Growth at
Hotstar, distills the company’s data-driven approach into the four fundamentals
companies must get right to turn casual users into committed fans.
1. Personalize the entire user experience
It’s
important to look beyond demographics to gain a deeper understanding of who
your user is, what job your product solves in their lives, and how they use
your product, Shah explains. In this scenario, actions are just as important as
inactions to develop relevant engagement and re-engagement strategies. How many
times has the user opened the app or viewed the content? How long has it been
since the last interaction? How quickly or slowly is the user moving through
the funnel, and what“nudges” might convince and—ultimately—convert them?
Shah says these are critical questions marketers can only answer if they get a
firm grasp of behavioral segmentation models aimed at understanding and
predicting user attitudes and outcomes. “Once you establish a degree of
predictability around how your users behave, the way is clear to progress users
through the funnel with the help of content that is packaged and promoted based
on a deep understanding of user personas and psychographics,” he says
2. Recommend your content along the customer
lifecycle
User
acquisition burns money if audiences don’t stick around to explore and consume
the breadth of content available on the platform. This can be a major marketing
challenge, and why a big part of Shah’s job revolves around “converting the
sports fans who come to our platform—about 70 to 80 million daily for live
events like IPL—to start watching more of the entertainment we offer. And,
ultimately, get them to commit to a subscription.”
Achieving
this objective requires the ability to identify and segment users based on
digital details, including their browsing and viewing history, content
consumption patterns and other preferences. “Based on a collaborative filtering
method, we recommend entertainment titles that other sports viewers watch,”
Shah says. “If the user is a free user on our platform, we move them through
the funnel by recommending content from our Premium library that they are most
likely to appreciate—content suggestions based on freemium viewership patterns.
The relevant recommendations are then delivered to users off-platform as part
of an omnichannel campaign strategy that spans push notifications, social and
programmatic.
3. Messaging must be personal and perfectly
timed
Keep
up the momentum with campaigns that seek to influence user behaviors, not just
move metrics. Shah illustrates using the example of users who have streamed
live cricket matches. “We know that sending them push notifications based on
the actual game event will encourage them to relaunch the app and view the game
in progress.” In practice, he says, this means “delivering over 100 million
push notifications tailored to the moment and timed perfectly within a very
small window of just a few minutes.”
It’s a critical timeline that Shah says Hotstar reaches with the help of CleverTap, a customer lifecycle management and engagement platform that is capable of delivering more than 25 million push notifications a minute/ Shah says it was essential to reach Hotstar’s app install base of over 250 million. Significantly, “event-centric” campaigns appear to resonate most with audiences, boosting engagement and the average watch time per session by 12% and more.
“As we
cross-sell entertainment content, let’s say a movie, to our sports viewers, our
marketing creatives bring out a connection between the sport and the
entertainment content, thus making the content more appealing to a sports fan.”
But making the connection is just part of the strategy. Shah stresses it’s also
a good idea to pinpoint the days and times of the week that different user
segments are the most active and receptive to push notifications. Hotstar used
these insights to optimize send times, increasing click-through rates by 3x in
the process.
4.
Engaging with users in real-time is a game-changer
RFM
(Recency, Frequency Monetary) analysis is a behavioral segmentation model that
examines user activity to identify how recently and frequently they performed a
key action. To make sure the effort marketers invest in this model also drives
returns, RFM also looks at the monetary value of the action (such as purchasing
an item or, in the case of Hotstar, subscribing to programming). Shah is a huge
proponent of RFM, a framework his company has harnessed to bring context to
user engagement campaigns and, more importantly, predict churn. In both cases,
Hotstar segments users in real-time based on certain actions or inactions they
undertake within the app.
Imagine
a scenario where users who were watching a particular episode of a series
simply leave the app for some reason. “We see that as a trigger and send them a
customized push notification encouraging them to come back to finish viewing
that particular episode at precisely that moment.” Similarly, users who have seen previous episodes of
a series but not the latest one, are sent a contextual push notification as
soon as the latest episode is released. The outcome, he adds, is “more
conversions and increased content consumption.”
The future is interactive
As Hotstar continues on its impressive
growth trajectory, Shah says, the company is ready to take on one more bet:
that “the future of all sports streaming will be social.” As he sees it,
there’s no reason to limit the flow of content to push or pull. “Why should
content consumption be one way?,” he asks. “Why can’t it be immersive and
interactive?”
To enable two-way exchange, Hotstar is
laying a new layer on top of its platform. Last year it introduced Watch`N`Play, a game that challenges
users to guess cricket gameplay and outcomes, as well as social features and
streaming using virtual reality (VR) to make the match more immersive. This
year Hotstar is going one better, adding “another layer of chat” to the
platform, allowing fans to invite their friends from their Facebook account or
phone book contacts to the platform.
Effective user acquisition ends in
advocacy, and that means meeting and anticipating needs that consumers
themselves might not be able to identify. “It’s becoming increasingly clear
that customers are hungry for more, even though they don’t know what they are
looking for,” Shah explains. It’s up to companies like Hotstar to pave the road
for this future, building a platform and adding what he calls “unique,
inevitable and incremental experiences” that go beyond just entertaining
content.
