Is OTT wave becoming tsunami for Pay-TV? Not yet but the wave is getting bigger, bolder and more visible. Netflix remains the poster boy for SVOD revolution with all premium OTT providers expanding to more devices, territories and adding richer content to their portfolios. Major SVOD providers have also surpassed broadcasters and Pay-TV providers in delivering content with 4K, UHD and HDR content.. A recent report from Park Associates shows consumers are watching over twice the amount of online video than they did just three years ago. The year 2015 holds an inflection point in the journey of Online video reaching stardom. It is the year when major media networks decided to break free and launched direct to customer streaming subscription services, e.g. Univision Now, DisneyLife, HBO NOW, CBS All Access and more. The year also saw many bold initiatives like planned premiere of Star Trek on CBS all access, offline viewing by Amazon VOD, un-metered SVOD streaming by T-Mobile and Verizon’s mobile first Go90 service coming to play. Today, US market is a hot bed for over 50 plus online video services with more premium SVOD services getting added every month. Netflix is already in 87 countries with an ambition of reaching the entire world by the end of 2016. With approx. 20% of world population actively involved in watching online video, the medium has now moved mainstream. OTT video in more than one ways has finally arrived.
New chapter in OTT video – Virtual MVPD
What is Virtual MVPD? Virtual MVPD or VMVPD is an OTT based MVPD service provider which can offer live streaming of linear channels. It is new age Pay-TV service provider offering video services by aggregating content licensed from major programming networks. The difference between VMVPD and popular OTT providers like Netflix, Amazon Prime etc. being OTT providers cannot offer live linear channels as they do not qualify as MVPDs b
y the nature of its definition. VMVPD services are challenging traditional Pay-TV on cost and unlike the soft competition offered by TV Everywhere, they offer a real competition to established premium OTT services. This year, most major Pay-TV providers are launching VMVPD services as skinny bundles combining major broadcast and few premium channels like HBO etc, all within a price tag of $15 – $55 a month. Dish surfaced Sling TV, Verizon invented its custom TV and more recently Charter and Comcast introduced Spectrum TV and Stream TV services. Cox is coming with Flare MeTV and TWC is expected to announce something soon. (Note – Comcast Stream TV is not OTT service since it is delivered over IP-cable using Comcast’s cable network). These skinny bundles offer exciting possibilities by keeping “millennial viewers” engaged and presenting options for cord-nevers, cord-shavers, and cord-cutters. For an average subscriber receiving 194 channels from traditional Pay-TV service but watching only 17, arrival of VMVPD services is a revolutionary change but a true a’ la carte option still remains away.
Premium OTT market Categories
Premium OTT market is on the road to fierce competition. Netflix, Hulu and Amazon who have had a limited competition from Pay TV industry are set to face new crowd of VMVPD services. VMVPD is changing the core structure of premium OTT services and today it can be broadly divided into 5 categories
Existing MVPDs / MSOs (e.g. Cox, TWC, Comcast, AT&T, Verizon etc.), large media networks (e.g. Time Warner, Viacom) and major platform players (e.g. Apple, Amazon, Google, Microsoft and Sony ) are all potential candidates in the emerging game of Virtual MVPDs. Among the listed categories, players with large device base, customer relationship, content licensing deals, brand and infrastructure have potential to play role of major VMVPD providers.
Key Factors for OTT market growth
OTT has made strong transition and now positions itself near the last leg of OTT maturity curve. [ref OTT maturity cycle published two year back in December 2013]. While economics and dis-satisfaction for large MVPD/MSOs has played its role – few additional factors as listed below are equally important
- Online video ecosystem is ready with key building blocks. Faster broadband, growing CDN footprint, abundance of content, affordable hardware, increasing compute power and secure payment are all pieces of puzzle which are largely in place today. Growth of connected devices, efficient video codecs and workflow standardization are giving a helping hand to growth of online services. Cloud services which was not on discussion table few years back has emerged as a leading technology and infrastructure enabler.
- Content Richness. Content is still the king and success of original programming has lead to huge committed future investments. Original content is seen both as a strong value provider as well as means to bridge content licensing gaps.
- Fierce competition. Success of existing premium OTT services has forced Pay-TV providers, studios and technology giants to offer online video services. Most players are also investing heavily from fear of being left behind.
- Consumer Awareness and Acceptance. Video consumption patterns are changing , and consumers are happy with more choices, more competition, and greater innovation in online video. A fact that consumers are willing to pay for online content is a big game changer for OTT video players.
- Service Maturity. OTT service platforms have had a long learning curve and have emerged stronger. Great at customer orientation and support, most platforms offer rich features of recommendation, universal search, voice commands, availability across devices and ease of content discovery.
- Consolidation. In 2015, MVPD landscape lead by M&A has changed dramatically leading to creation of much larger players. The consolidated TV providers have much larger consumer base, brand and muscle power to negotiate on richer content and re-transmission fee with studios and TV network.
These are interesting times for TV Industry with aggregate video consumption at an all time high. Video content offerings are surging across the board with consumers having more than enough options to choose from. Original programming, sports, movies, TV Series, Catalog titles, online exclusive and more, the list is endless. Online video is bringing new consumption patterns with flexibility to consume content on multiple devices, on the go, starting and switching content across devices and binge viewing.
What are your thoughts ?
The way viewers are watching TV is rapidly evolving with interest and demand for Online video growing with each passing day. With major OTT players continuing to miss linear content, premier sports and Live News, VMVPDs remain the next big bet to disrupt and potentially displace traditional Pay-TV services. What are your thoughts on future of VMVPDs, Pay-TV and premium OTT services?
- Could skinny bundles cannibalize traditional market of Pay-TV providers ?
- Is getting skinny bundles logical first step for VMVPDs before upsell for additional services (PPV, DVR, security etc.) and higher broadband packages making their way to monthly bills?
- As Pay-TV and premium OTT services converge into a single market, how will it impact content negotiation deals and pay-TV bundle pricing ?
- Could connect selection by consumers for VMVPD services help Pay-TV players to bring innovation and restructure bundle offerings ?
- Almost two decades back cable displaced broadcasting as the most common distribution system for TV, could online video displace cable in next?