By Perry Weinstein, General Manager, Accedo North America
We have all witnessed the huge shift in content availability over recent years. TV viewing is definitely far from linear, with consumers getting access to a whole wealth of entertainment from multiple sources and on multiple devices. TV anywhere and everywhere has truly arrived and with it we are seeing a massive shift in consumer’s consumption habits. That is set to change even more dramatically over the course of the coming year.
At the end of 2015, research conducted by Parks Associates showed that 2015 was the year of OTT. According to the research, the global OTT marketplace comprised of more than 65 players, either already offering video services or due to launch in the coming months. Around 1.6 billion subscribers are actively watching online video worldwide, and on a variety of connected devices.
The trend is set to continue, with revenues from the global Video on Demand (VOD) market expected to top $263 billion by 2016, compared to $207 billion the industry generated in 2014.
Not surprisingly, at the same time, the sales and usage of Connected TV devices are also rising fast. According to Strategy Analytics, 53 million connected TV devices shipped worldwide in Q3 2015 and the firm is expecting sales to reach over 220 million for the full year. In the US alone, the NPD Group expects there to be 231 million installed and internet-connected TV devices in the next three years.
Consumers have had their appetites whet for OTT content, and now that demand will only increase, meaning that broadcasters will have to keep up with this reality more and more over the coming months, in order to keep up with increasing competition.
At the same time as the appetite for OTT content has increased, what we haven’t really witnessed is widespread cord cutting, as many had predicted. Indeed, according to TDG, cord cutting is in fact now in decline, with only 5.7% of adult broadband users moderately or highly likely to cancel their service.
You only have to look at the number of OTT players stated above to understand the reasons behind this trend. With so many different OTT services to pick, each offering something slightly different, many consumers are electing not to limit themselves to one service or provider. Instead, they are selecting a mix of different services to suit their different tastes. They are then subscribing to those, alongside their basic TV subscriptions, which gives them something different again. This trend will become even more pronounced over the coming months, with consumers making the most of low cost services to make their own pick and mix of OTT and TV services.
During 2016, we will see a number of established pay TV operators and broadcasters launching OTT services with a broader range of content available across several consumer devices. This will further build brand loyalty for those providers and make cord-cutting all the less likely. Of course, pay TV operators are in a unique position, with strong customer awareness and billing relationships in local markets. A mix of studio and local content will help engage more intimately with their audiences and mean that those services will become a good additional service for the modern consumers.
Growing appetite for niche content
Part of this trend for multiple OTT services will be driven by a growing appetite for those services offering niche content. As more niche services launch, this trend will be even more apparent. Take, for example the SeeSo service launched recently by NBCUniversal. It provides subscribers with an ad-free service containing a vast catalogue of comedy entertainment. By also featuring exclusive original series and stand-up comedy, it is carving out a niche for itself and further generating consumer interest and demand. Naturally, this was never intended to be a single subscription service, giving consumers all their entertainment in one bundle, unless the consumer only likes comedy. This is a bolt-on, giving viewers somewhere to get must-see comedy in one place, and sits nicely alongside the main channel and other services.
Over the coming months, we will see more and more similar, niche entertainment services launching from other players, which will in turn make the multiple subscription approach all the more widespread.
The effects of multiple subscriptions
This trend for multiple OTT subscriptions will have a number of knock-on effects for the industry. The most significant effect will be that as the potential market grows, we will see more players launching OTT services, thereby increasing competition. Without the move to multiple subscriptions, one could argue that the OTT market is already saturated, with such a wide range of players and services already available. However, if consumers are subscribing to more than one, that paves the way for many more providers to join the party.
For the consumer, that means more choice of content and a great deal of buying power. With that buying power, and given the fact that subscribing to multiple subscriptions means that consumers will not want to pay much for each one. The cost of OTT services will therefore drop significantly over the coming months.
The great unbundling of 2015 will give rise to the great re-bundling of 2016. For those consumers that are overwhelmed by choice, there will be a plethora of skinny bundles coming to market offering a limited collection of deemed must-have services and/or the option to select services a-la-carte, under a single subscription umbrella.
Over the coming months we will see a brand new consumption habit appear, that of seasonal viewing. We all know that more TV is viewed in the winter, when it is cold outside and the nights are longer. If, as a consumer, you are shelling out for several services to get you through those winter months, you may find that come spring, when you are out and about and watching less TV, that it just isn’t worth the cost. Rather than being long-term subscribers, we will begin to see savvy consumers sign up for services for the winter, which they will then cancel in the spring. Come winter, they will then take those subscriptions back up again, and so the cycle is repeated. It is the same behavior we see when a consumer buys a premium service for a single program, and then cancels the service once the season series is completed.
This year we also have the return of the Olympics, notorious for making the entire globe stop and watch their athletes compete on the global stage. In 2012, the opening ceremony drew 900 million viewers. The other trend we saw emerge with those Olympics was the rise in multiplatform viewing, mainly driven by frustrated viewers turning to their tablets, phones, connected TVs, and PCs to watch the action over-the-top, when it wasn’t available on terrestrial TV. In the US, NBC reported that 1.3 million Americans watched their live TV Everywhere stream of Usain Bolt’s race, for example.
This time around, we are likely to again see people turn to internet-connected devices and services to get in on the sporting action. Any sporting subscription services will likely do extremely well, with a massive surge in subscriptions ahead of the Olympics. With the seasonal viewer however this will dip again as soon as the action is over. However, there will always be the next major sporting event to get those subscriptions going again. Service providers will have to get used to the seasonal habits and may even begin to invest in additional marketing pushes ahead of anticipated dips.
Consumers in the driving seat
One thing that is absolutely clear is that consumers are now very much in the driver’s seat. The vast availability of low-cost, high value premium content, available on any device at any time, means that they will pick and choose what they want, when they want it and service providers will need to up their game in order to adapt to new demand models and this seachange in consumption behavior.
About Perry Weinstein
As VP and General Manager, North America, Accedo, a company widely regarded as the market leading developer of advanced multi-screen OTT services, Perry is helping Content Providers, Broadcasters and Operators deliver next-generation user experiences on every screen.
Previous to Accedo, Perry led the launch of multiple business units for two major entertainment technology vendors. As VP of Business Development for Thomson Technicolor, Perry helped the company launch an Anti-Piracy business unit. In this role, Perry worked with the MPAA and all the major studios to win approval of content protection and tracking technologies that are in wide use today. Civolution would eventually acquire the business unit from Thomson Technicolor.
Prior to that, Perry led the launch of Harris Corporation’s Digital Asset Management practice (HRS:NYSE). As both the Product and Business lead, Perry helped Broadcasters and Operators move from analog to digital workflows, then assisted them in extending those same workflow efficiencies into their global enterprises.
- Changing Consumption Habits Will Drive OTT Innovation - April 2, 2016