2019 is here - what should we expect from the world of OTT? Here are my predictions for the next 12 months and beyond.
#1. Who Owns the Customer Relationship?
Think back to 2005 when the first online video services hit the market. It was a simpler time. Web was really the only device that needed worrying about, and customer expectation was low. Over-the-top (OTT) video streaming was brand-new. Companies didn’t need to hit a specific benchmark; they needed to create one.
One trend that quickly emerged was the desire to control the customer relationship. After all, why hand precious revenue potential to a third-party aggregator when customers have demonstrated they’re willing to pay for interest programming? This led to an influx of direct-to-consumer OTT services from operators of all sizes – from tier one telcos to niche interest content owners. Very quickly a market that had been dominated by a small group of initial players became inundated with hundreds of video services that catered for every interest and demographic imaginable.
However, earning that direct relationship with the end user is a double-edged sword. Sure, you own 100% of the revenue, but you also shoulder all of the technology, marketing, and content acquisition costs. Very quickly, what may seem like a healthy balance book can be drained merely by trying to keep the lights on.
We’ve now come full circle and are beginning to see the rise of pure-play OTT channel aggregators, such as Amazon Channels. In exchange for relinquishing the technical, CRM and promotional workload (plus between 15% and 50% of the proceeds of channel subscription fees), content owners can quickly launch an online video proposition to market and focus on what they’re best at - creating and acquiring great content.
Throughout 2019 and beyond we expect to see many smaller, niche video providers flock to these new platforms and benefit from a faster time-to-market and reduced operating costs, leaving global SVOD providers, telcos and pay-TV operators to compete for the direct customer relationship with the aggregate giants.
#2. 5G Opens Up New Opportunities
As we move into 2019, 5G and the impact it will have on the way the world consumes entertainment will be top of mind for many global operators. It’s already expected that 20 will roll it out over the next 12 months, including all major US carriers. After years of hype, it is now finally a reality.
But what does this mean for OTT video providers?
- Download speeds will increase, potentially up to 100-fold over 4G, meaning that downloading an HD movie will take seconds, not minutes.
- Live streaming in 4K, particularly around high-scale sports and eSports events, becomes much more reliable.
- Reduced latency, increased traffic capacity and better-quality screens as a result of more bandwidth could be just the ticket to help kick-start VR and AR’s journey in reaching critical mass.
What is more interesting to us is how the emergence of this new technology will impact industry consolidation. While content will remain king, distribution will suddenly find itself with a firm step on the throne. 5G providers with vast networks and ready access to viewers, wherever they are, whatever the time, are suddenly in a prime position to command huge fees from the programming providers themselves. We expect to see the relationship between cable providers and network providers become closer than ever before, through partnerships or acquisitions.
#3. eSports - The New Live Frontier
6 billion hours streamed on a single platform in 2017 alone. A market expected to exceed $900 million this year. Sponsorship revenues of almost a quarter of a billion dollars.
I, of course, am talking about eSports.
Once thought of as a pure niche interest, it is now one of the fastest-growing spectator sports in the world. And I emphasise the use of the word ‘sport’ as it shares a remarkable number of the same attributes as its more conventional, physically athletic cousins like football and tennis - the potential to generate huge audiences, both in person and online, competitors that command huge legions of loyal fans, and the attention of some of the world’s biggest brands who want a slice of the eyeballs this 21st century phenomenon seems able to capture to name a few.
For us at Massive, eSports offers one of the most exciting opportunities to evolve the user experience beyond what we know today. Take its inherent ability to foster communities around particular athletes or games. This pushes broadcasters to think hard about the implementation and moderation of features such as live chat and social media integration. Or what about a graphical overall that spits out real-time statistics, scores, and trivia about what’s happening on screen? Even surfacing new games that hit the market and quickly explaining what they are and how they work to users is a challenge that needs to be overcome. When was the last time you had to explain the concept of football to someone?
In any case, it is today that operators have to evaluate how much of a stake they wish to take in this new live frontier – an industry projected to make $1.4 billion in the next 24 months won’t remain relatively untapped for long.
#4. A Fresh Take on TV Advertising
Far and away, SVOD dominates the OTT market in terms of pure revenue power. It’s estimated that in 2018 alone they will generate more than $35.04 billion across 138 countries, more than triple the 2015 total. Low barriers to entry, rolling ‘cancel anytime’ contracts and complete device penetration means that many operators can quickly acquire an audience base that is happy to pay a low monthly subscription for access to a roster of premium programming.
But unless you’re Netflix or Amazon, earning potential is capped by a simple equation; the number of customers on the books multiplied by monthly subscription charge. Revenue growth potential is intrinsically linked to how many new users you can convince to sign up to your service month-to-month. One dud quarter can be make-or-break, particularly in light of rising content acquisition costs and engineering fees.
Here are your options:
- Raise subscription fees. Simple, but how high can you go (and how quickly) without risking alienation of your current audience base?
- Feature pre-roll/mid-roll advertisements. Can enable rapid earning potential, but the trends in the adoption of ad-blocking software and general consumer sentiment towards ‘traditional TV’ advertising indicate this would be poorly received.
- Revenue share with aggregate channel providers, such as pay-TV operator or Amazon Channels. Perfectly valid opportunity but dilutes the direct-to-consumer relationship.
What if we told you there was a new take on TV advertising, one that was entirely scalable, utterly non-intrusive to the end user and completely untouchable by ad-blocking software? Well, there is – and its name is ‘Sponsored UI.’ It’s where brands can purchase prime real-estate in the user interface of an OTT surface, such as a row of premium programming or the account page and display tailored advertisements that don’t interrupt the viewing experience.
Say that you’ve just acquired the rights to the final season of Game of Thrones. In the run-up to its release, a brand can pay to sponsor a content rail that features previous seasons of the hit HBO show – a collection guaranteed to be seen by plenty of eyeballs looking to catch-up before the new season hits the screen. Taking this one step further, an operator with the right mindset and technical stack can look to sell the same piece of real-estate multiple times over to different brands looking to target various demographics in your audience.
It’s our view that monetization strategies like this will continue to be adopted and experimented with by operators looking to maximize their earning potential. But the theory is one thing – having the technological tools to practically implement the above is the key to finding success.
#5. Live-Linear OTT Takes Center Stage
Earlier this year, we were extremely excited to announce that we had become new members of the Deltatre family. The Turin-based company is a leader in the field of live broadcast, having spent the last three decades building the digital portfolios of brands such as UEFA, NFL, and FIFA – their expertise in live broadcast, scaling technical stacks to accommodate millions of concurrent viewers and what makes the ultimate real-time viewing experiences is unparalleled.
Our new relationship opens new doors for both parties. For Massive, we bring a wealth of experience in the front-end experience – how to engage, monetise and retain your users – and clear paths into the world of entertainment through our existing relationships with companies such as Bell Media, Telecine, AT&T and DR. From Deltatre, a deep-rooted knowledge on what it takes to build and effectively run a live-focussed OTT service.
This new relationship comes at a convenient time. The recently released Visual Networking Index from Cisco reveals that the live component of IP-streamed video will grow from 5% of bandwidth in 2017 to 17% in 2022, demonstrative that live isn’t dead – it’s just moving to a new house. And with this move to IP-delivery comes an opportunity for live-linear entertainment providers to deliver more interactive viewing experiences otherwise unattainable via traditional broadcast. This includes things like:
- Reaching the right audiences with the right content, mass appeal or niche, based on their viewing habits and interests – whatever the device, time or location.
- Improving reach through social media engagement, such as by giving viewers the ability to share streams or highlights directly from within the app.
- Enhancing engagement through making it easy to discover relevant, non-linear content that supplements the live broadcast (e.g. exclusive interviews with the starts of a particular programme)
- Put customers in direct contact with the community of like-minded fans through live chat or social media integration.
- Access to younger demographics who otherwise are inaccessible via a traditional television viewing experience.
The above examples and are just some of the opportunities that are now open to live-linear broadcasters in a world of over-the-top video delivery. Now, our new relationship with Deltatre means that we are in a better position than ever before to help television providers navigate this new frontier and grow market share.