OTT in 2016 and beyond

Happy New Year!

With at least 33 new OTT (over-the-top) services launched last year in North America alone, and now with #NetflixEverywhere, 2015 was no doubt the year of OTT. Millions of excited fans worldwide can now access their favorite content on demand, whenever they want it. Disney’s CEO Bob Iger said its newly launched DisneyLife subscription streaming service is the future and that they are “seeing more opportunities to reach consumers directly and not through middlemen.”[1]

With that said, here’s our take on what 2016 will bring.

Smart OTT is the new normal

We are already seeing increasing competition in the OTT space, and the number of players will continue to increase this year. “Pureplay” OTT players who aggregate content will face competition from new entrants including traditional pay TV providers, broadcasters and content providers who have started offering their own OTT services (e.g. Viacom’s Noggin, HBO Now, CBS All Access, BBC iPlayer). The need to reach consumers’ multiscreen demand with a direct-to-consumer offering is inevitable. Fox’s COO, Chase Carey said OTT is a big priority and “consumers want this choice, and we have to play a direct role.”[2]

With increasing competition, 2016 will solidify a new normal in which OTT providers compete on being smarter – both in acquiring or producing high concept originals, and in delivering relevant content to the consumer the way they prefer without compromising quality. Smart OTT requires providers to consider the packaging, formats and commercial model that work for the particular customer category. For example, one French broadcaster allows viewers to pay to purchase episodes online before they appear on TV[3]. Other providers allow viewers to download the content so that they can watch it offline. In contrast to the traditional model where the consumer had to select the best fitting (least bad…) alternative out of a few available options, mainly prescribed by pay TV providers and channel bundles, we can expect many more options in the Smart OTT world.

Purposeful advertising

Personalization by ad insertion finds its place in the industry. Ad insertion technology has been particularly popular for live streams, replacing old ads with new ones, leading to new revenue opportunities. We can expect stronger industry adoption of the technology, fuelled by the fast-growing phenomenon known as programmatic advertising. Programmatic ad spend is estimated to grow at 20% annually[4] and digital media spend will, “for the first time, account for more than a quarter of total advertising spend in 2016”[5].

With the vast availability of audience data – from the service providers, media networks, advertisers, and national statistics agencies – TV service and content providers can now combine real-time analytics and ad insertion technologies to provide targeted, personalized experience to viewers at the right time. Peg Jackson, managing director at Mooreland Partners, a leading independent investment bank, pointed to analytics as “the future of the business” and said, “As the industry develops better analytics around content, advertising can adapt and evolve its approach.”[6] Publishers may use insights to hit the sweet spot between monetization and experience to overcome ad blocking, estimated to cost publishers nearly $22 billion during 2015[7].

As we shift TV viewing from big to smaller screens (and with less patience), there will be more scrutiny of the type of ads we see. In the streaming world, the consequences of bad ads – e.g. repeated too often, context unaware – are likely to do more damage to the business than simply channel switching. With so many options, unsatisfied viewers are ready to unsubscribe existing service and never look back. This puts demand on brands and advertisers in reevaluating how to reach their audience cross-device, and constantly delivering advertising content that is relevant, timely and engaging.

We will also likely see more innovations on ad format, such as shorter, interactive ads, as rolled out by Fox last year on Hulu[8]. Advertising with a purpose. For example, asking viewers to select a different ending, ability to instantly customize a product, targeting ad content based on recently watched items, device types, regions, or even if you have a dog. With some creativity (and commercial awareness), the implementation of ad insertion in combination with analytics technologies sees no boundaries.

Actionable analytics

A streaming service enables providers to establish a direct relationship and have conversations with their customers. For example, through requiring viewers to register or sign up for access, the service providers can begin to gather meaningful customer data and gain insights into engagement level, consumption patterns, and so on. Understanding the customer and how the service performs and is consumed is critical to manage the transformation and innovation of new concepts. According to Gartner, IDC and Forrester, by 2018, 35% of IT resources will be spent to support the creation of new digital revenue streams and by 2020 almost 50% of IT budgets will be tied to digital transformation initiatives[9].

With growing competitive and margin pressures, the need for real-time, actionable data in the TV and content provider space has never been greater. Customer satisfaction and quality of experience become increasingly important measures to sustain growth, reduce churn, and monetize content and services. In 2016, we can expect analytics to play a more significant role in helping OTT providers to act smarter – by making informed business decisions and supporting a constant process of testing, learning and monetizing new models and concepts.

Here are some examples where specific application of analytics will be most useful:

  • Identify the cause of streaming disturbances faced by a specific customer whether it is device, asset or network problem
  • Understand content engagement by looking into how long viewers watch a certain asset in order to support content creation or acquisition decisions, or provide insights back to content creators
  • Make quarterly market-driven priorities for the business by understanding the cause of customer churn, for example is it functionality, content or price?

On that note, if you would like to discuss 2016 initiatives with one of our experts or simply have a chat over a cup of coffee, come meet us at these upcoming events! Wish you a successful 2016!

Author:

Ling Koay
Product Marketing Manager

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