OTT Video is reinventing Television – Part III

We are amidst most radical times in the history of Television with Pay-TV subscriptions experiencing their greatest 12 month losses on one hand and OTT (Over the top) video witnessing overwhelming rise on other. Television which brought visual entertainment to our homes but kept away “when and what to watch” within its control is challenged by OTT which is reinventing Television with freedom to choose what, when and where all for a reasonable price. Over the top video which became popular as a complementary service to traditional TV has started to stand out as an independent medium and for majority of this growing population it is fast becoming the only medium for entertainment. The service platform which was once questioned for its business model and lack of content is finally coming of Age!

Today, consumers want multi-platform delivery, convenience and complete control on content all the while having logistics of providing service, authentication, searching and delivering resting conveniently with the service provider.  In retrospect the key themes which stand out in current OTT context are

1. Acceptance of OTT video as an independent medium for entertainment.
2. Consumers willingness to pay for OTT video.
3. Significant credit to freedom, flexibility and cost of service.

 Key Drivers for OTT’s Elevation

Amazon Prime, Hulu Plus, Netflix, Vudu, Youview, HBO Go, BBC iPlayer, NowTV and YouTube are among the formidable OTT offerings having caught attention and loyalty across customer segments. While these services have made video viewing both affordable and convenient for masses, there are several reasons attributing to their success; key among them are

1. Appetite for pure video services: Consumers want to disassociate themselves from content business and technical logistics while being attentive to service quality and a firm resolve to pay only for what they intent to consume.
2. Freedom and Flexibility: Being not clock driven for content consumption but freedom to pull content at will with convenience across viewing platforms. Freedom to consume what, when and where is becoming a reasonable requirement rather than an exclusive ask.
   

   Key Drivers for success of OTT video

3. Multi-Screen content delivery:  Ability to access video and other content not only from their television sets and set-top boxes, but also their tablets, computers and smartphones. Growing expectation to access content across devices within and outside the house on the move.
4. Advent of Original programming: Having witnessed tremendous consumer appeal and industry recognition, the initiative is expected to further help in brand building while bringing high quality in-house inventory.
5. Delayed TV Everywhere roll out : TVE which started to emerge four years after its grandiose announcements still remains plagued for want of content, access constraints, security and login hurdles, limited awareness and slow adoption rate.
6. Millennials approval : Mounting acceptance from millennials (18-34) falling into “cord never” bucket with endorsement of OTA and OTT pay-TV services has led to a population drifting away from traditional pay-TV services either completely (cord cutting) or with reduced service subscription (cord-thinning).
7. De-acceleration in piracy : Enhanced search ability, access to large premium inventory and reduced ticket cost has resulted in piracy and bit torrent traffic falling below 10% for first time ever in internet history.
8. Value for Money : OTT has presented consumers option to cut back on channel packages with Pay-TV subscription in favour of pure OTT or OTT supplement services. Content, convenience and value for money weighing over brand and loyalty and support.
9. Broadband growth : OTT growth is bolstered with increasing broadband penetration coupled with faster bandwidth speeds.
10. Cloud delivery model : Cloud media services which were questioned for security risks have started to gain favor across studios and content publishers for OTT deployments.
11. Growth in premium content inventory :  The exaggerated fears of losing  long tail value of premium content has started to rationalize with premium content funnel opening up for paid Online audiences.
12. New consumption platforms: Connected devices are increasing with smartphone and tablets bringing content consumption on the move. Tablets have demonstrated immense disruption power given their usage at home, on the couch in direct competition/companionship with traditional TV for attention and eyeballs. Online video consumption is also amplified by massive growth in Connected TVs devices, Blu-ray players and re-introduction of gaming consoles (PS4 , Xbox One) as all in one entertainment platforms bringing video content into the living room.
13. OTT and Hybrid STBs: Rapid rise of OTT STBs with Roku, Apple TV and Google TV becoming increasingly popular to complement service provider STBs. Service providers inclination to upgrade existing field boxes with hybrid STB models and introduce new IP enabled boxes enabling OTT delivery.
14. Adaptive streaming : Adoption of adaptive streaming technologies (HLS, HDS and Smooth Streaming) has helped drive consumption and offer un-interrupted viewing experience even for low-bandwidth networks.
15. Agility : While traditional TV has largely remained devoid of innovation, OTT platforms have done exceedingly well with ability to rapidly evolve, adapt and bring new functionality (e.g. personalization , social integration, content recommendation etc.)

OTT Maturity Cycle

Over the top video has emerged as a mature platform having achieved significant milestones over the years. Looking back, the journey could be summed into below phases.

• Phase 1 (Past) :  Low quality, limited content, unclear revenue model, web only delivery, heavy on advertising
• Phase 2 (Current) : Significantly larger inventory, emergence of exclusive content deals, enters Original Programming , Multi-screen delivery,  maturity in subscription model
• Phase 3 (Near Future) :  Expanding original programming, set to enter Pay-TV walled garden
• Phase 4 (Future) : Subscription and Pay-as-you-go model.  Live and sports content, competes with traditional Pay-TV

While TV still remains the primary consumption device for majority of TV hours, minutes spent watching video on PCs, smartphones and tablets in increasing for both short and long form content (more than 10 minutes) indicating viewers comfort in watching video online. Today OTT video stands at crossroads of breaking away from traditional TV business, but there are major hurdles which need thoughtful moderation. Some key challenges include obtaining broader content rights for streaming to multiple screens, mitigating content security concerns and overcoming legal mesh for content licensing.

What is your perspective?

1. What is the expected time frame for OTT becoming real competitor to traditional Pay-TV service ?

2. Today, premium content consumption is largely consumed on TV,  how is consumption patterns expected to change as OTT adds live and sports content and becomes more social ?

3. As OTT makes rapid transition towards a pay-TV model, how are service providers expected to react ? Will Netflix face major resistance becoming a resident app on service provider boxes ?

4. As data caps become real, how does it threaten OTT providers who had a free run with the existing network infrastructure? Will increased broadband cost have an impact on paid OTT subscription model?