From its earliest days, television has been a medium in motion. We’ve seen VHF and UHF, the shift from black and white to color, the explosive growth of cable, the move from standard definition to high definition and more. TV has always evolved as new technologies emerge.
Now there’s a trend that will force new ideas to the forefront: the shift toward digital video streaming, or over-the-top (OTT) content, will add a new level of fragmentation—and opportunity—for media companies and video publishers to address.
This shift has been trickling down for years, but it appears to be hitting critical mass. Streaming video offers more choice than ever and is driving some “cord-cutters” to ditch their cable subscriptions altogether. According to data from The Convergence Consulting Group, the number of households paying for TV peaked in 2012, when there were 97.6 million U.S. households with TV subscriptions. That number declined by about 150,000 in 2013, and by another 260,000 in 2014.
Over-the-top television could be seen as a threat, but innovators are seeing it as an opportunity. According to Statista, online video will reach close to $20 billion in revenue by 2020 at 4x the growth of the online music market. Brands like Netflix and Amazon have turned into forces for media production and distribution that couldn’t be imagined ten years ago. A report this week suggests Apple will also join the content game in the coming years. Netflix is expected to have nearly 100 million subscribers by 2019, for example, and is expanding outside the U.S. in 2015.
What is over-the-top (OTT) television?
OTT is audio, video and other media delivery over the internet without the involvement of a traditional cable or satellite provider. The internet provider doesn’t control or manage any aspect of the content, other than offering a delivery service. The most common example is content distributed by companies like Hulu and Netflix to an end-user device—leveraging an ISP for data transfer.
With such possibilities, streaming providers have huge opportunities to increase revenue. But so do content creators—and they’re responding. The number of scripted shows ballooned to 371 last year. Researchers believe that figure will pass 400 this year, which would nearly double the 211 shows made in 2009.
Delivery mechanisms are changing. Content providers are changing. Consumption models are changing. Just like everything else, monetization is being disrupted—and innovative companies are using the disruption to explore new monetization strategies. Some approaches include:
- Keep an eye on platforms. It seems as though almost everyone has jumped on the streaming bandwagon, including Apple TV, Roku, Amazon, Netflix, Vevo, HBO Go, Hulu Plus, Sling TV and Pandora. That “almost” is important. Other brands, including Microsoft and Apple, have ample opportunity to disrupt the marketplace.
- Use all platforms. 50 million people in the U.S. watch video on their smartphones. Don’t be afraid to build content and campaigns specifically for mobile, or at the very least, optimize video delivery for all screen sizes, operating systems and device types.
- Insert targeted ads. Deliver pre-, mid- and post-roll messages on the fly, targeting users by location and interests to convert viewers into valuable customers.
- Use analytics for immediate improvement. Analyzing ad performance continuously on every platform gives you opportunities to adjust messaging, frequency and channels to maximize profitability.
- Streamline operations. Driving down cost and complexity is key to success. Consider partnering with specialists who are skilled at monetizing content.
The real question is not whether streaming video will continue to matter. It’s how the current video landscape will change. Are 400 shows a year sustainable? Can many streaming providers co-exist, or will they consolidate? Could another disruption overturn the existing situation and put players like Netflix and Hulu on the defensive?
These are complex questions. Video publishers who fully understand the potential of internet-delivered content can tap new revenue streams in their existing content libraries. But change is inevitable and new opportunities will be emerging. Check back on our blog soon. We’ll explore an upcoming disruption that could have a transformative effect on streaming providers and content producers. It’s called Apple TV.