The world of digital media streaming is getting cluttered. 2019 will mark the late-entry of more industry giants. An impending OTT market shakeout is coming.
Will viewership behavior be the defining force?
Until recently the Over the Top (OTT) Media space—serving those who watch video content online—was mostly shared between the three pioneers in digital video streaming: Netflix, Hulu, and Amazon Video. Now, major media is playing catch-up. Disney, WarnerMedia and NBCUniversal are all launching new streaming services in 2019-2020. Apple will soon unveil its own video service strategy as well. Social media networks Facebook and Twitter are competing for the exclusive rights of live sports streaming, with Amazon and YouTube betting on pieces of that same pie. Most of these contenders are spending billions in producing original content. We are yet to see who will win the race.
In this new direct-to-consumer (D2C) entertainment economy, there will be as many options as kinds of viewers. Companies are creatively devising different approaches to maximize their chance of staying in the game.
The question is, how this will impact consumers? Will they be the ones to pick who reaches a coveted place on the podium?
It could go one of two ways. Consumers might become dizzy with so many choices and resent having to search where to watch each of their favorite things. Or, they might be happy to be the beneficiaries of an ever-increasing number of options, many of them free.
The power of ads
Experts say this is the year that ad-supported revenue will surpass subscription-based revenue, and will become the default monetization model for OTT. Amazon, Roku, Hulu, Facebook, and YouTube have all launched free ad-supported streaming options. Netflix and Disney, on the other hand, are putting their trust exclusively in their content offering by sticking to the subscription-based model.
The good news is, besides the potential benefit to the their pockets, there is more coming the users’ way.
Ad-supported services will change the way ads appear, compared to the traditional style. For starters, NBCUniversal’s streaming service will have 3-5 minutes of ads per hour as opposed to its current 15-minute average today on regular TV.
Digital ad technology will be reaching consumers in more innovative ways. Hulu and AT&T are considering “pause-vertising,” where an ad is shown when the user pauses their show. Since many viewers binge-watch, this could be friendlier ad behavior than was possible in old-fashioned TV. The new ad formats may involve real-time interactivity, or may impact the viewers’ experience in more subtle ways. For instance, Range Rover had the main characters of Hulu show ‘The First’ drive one of the manufacturer’s concept cars during the entire 2018 season.
The full experience from the comfort of home
There may well be a proliferation of engaging interactive experiences down the line. Real-time interactivity—commenting, voting, betting, and chatting while watching a show—is very much what real life group-watching is about. The ability to emulate such an environment is something social networks are already skilled at. An example is “Fan Vote Fridays” where Twitter users can vote which featured group will be showcased during Friday’s coverage of the PGA tour. The social network has secured free global live streaming with the PGA tour in 2019. Facebook has a feature “Watch Party,” where a user can actually schedule to watch the same episode simultaneously with friends.
Some companies are placing their stakes on the tech-savvy consumer, who will likely want to stick with the best in-home experience out there. FandangoNow offers a complete 4K library and will be the exclusive digital retailer in the US for IMAX content. Amazon and Netflix have partnered with Dolby. They aim to deliver the best audio and video qualities on all sorts of devices, whenever the content they’re portraying supports it.
Sometimes, users are willing to pay the price. These users might resort to the simplicity of a single bill offered by the ‘aggregator’ model for large and exclusive content libraries. This is part of Amazon’s, Roku’s, and (likely) Apple’s strategies, where both original and third-party content can be subscribed to in a single outlet. Facebook is also planning to make an entrance in this model. The social network is under discussions with the likes of HBO, Showtime, and Starz to sell their subscriptions through Facebook somewhere in the first half of this year.
A promising nascent space: mobile-native video
A new category that might soon be newsworthy is mobile-native video. Eight major studios including Disney, Time Warner and Sony have endorsed Quibi (short for quick bites). This upcoming mobile-first platform will havewith Hollywood-quality, short-form episodic videos. Big names in the entertainment industry such as Steven Spielberg, Guillermo del Toro, Chris Rock, and Justin Timberlake are already producing content for this new entrant. They plan to launch by the end of this year.
Competitor Fricto is launching a similar offering early this year, a sign that the short format might be the next big thing. Quibi and Fricto plan on users being willing to pay a small monthly fee for on-the-go high quality content. Instagram is also betting on the vertical video format with IGTV, a free standalone application launched last June. Although parent company Facebook has yet to define what its monetization strategy will be, media companies are paying attention: National Geographic, Discovery, ViceMedia and GQ have started streaming content on the platform.
The OTT market shakeout: in the end…
Unless there is enough force that entices viewers to switch, they usually ‘nest’ in their preferred viewing platforms and develop inertia. Viewership inertia is one of the highest commodities an OTT company can have. We can therefore expect no shortage of compelling content and enthralling technology in the competition for our eyeballs.
All that said, we’ve yet to see if the consumer ends up better off after the OTT market shakeout. If not, we could have users hopelessly frustrated with a fragmented ecosystem, just as was the case with cable TV 30 years ago.
What is certain is that it’s an exciting time to observe how the media and the consumer forces unfold.