Why It’s Time To Stop Treating OTT And TV As Different Channels

by Allen Klosowski

My parents have seen a lot of technology come and go during their lifetimes. When they were young, television was in its infancy, limited to black-and-white images on a small, dimly lit screen. Today, they have not one, but two high-definition televisions side by side in their living room: One is a traditional cable television set and the other is a Roku TV.

My parents don’t care that one TV receives programming through a cable box while the other streams video through the Roku app and other smart-TV apps. They like to be in the same room together, and this setup avoids the need for compromise; my dad watches sports silently with closed captioning and my mom keeps up on her favorite shows at the same time.

If you switched on the same show on both TVs, you wouldn’t be able to discern which was which because the image quality and viewing experience are identical.

While this story is unique to my family, it’s representative of the larger reality that the lines between television and over-the-top (OTT) video are becoming blurred. Consumers don’t dwell on how some televisions have internet capabilities and others do not. The only relevant factor is whether they can access their desired content at a satisfactory level of quality. Once that need is met, OTT, traditional TV and everything in between become insignificant distinctions in the minds of most consumers. All in all, it’s just “TV.”

OTT origins

Was OTT video streaming spurred by the first smart TVs in the late ’90s and early 2000s? Or maybe Netflix’s rollout of streaming video in 2007? Whatever beginning point you choose, one pattern holds true: Early users of OTT sought a different experience than traditional television. Audiences wanted greater control over the specific content they consumed, and they wanted to watch it on their own time.

A decade later, however, the definition of OTT video has significantly evolved and broadened to include features and capabilities that weren’t in the picture early on. Consumers who leverage over-the-top video have undergone a parallel transformation, and the user base today looks very different than it did years ago. These factors are evidence of ongoing progress that should continue to shape the way video is packaged, supplied and monetized for years to come.

In the early days, over-the-top video and video-on-demand (VOD) were often one and the same, so it was acceptable to use terms like OTT and VOD synonymously. On the other hand, OTT and linear TV described entirely different experiences. OTT represented a limited selection of video streamed to televisions or computers over the internet, unbound by dayparts or bundles.

Television viewing was subject to network scheduling, but a wide variety of content was available, including live events such as sports and newscasts. Moreover, the experience available in OTT fell short of the premium standard that had been set by traditional television – navigation was clunky, user interfaces were not well-suited to the available devices and buffering was a constant annoyance.

Due to these discrepancies, early OTT was mostly seen as a supplement to regularly scheduled programming. While it was clearly a disruptive innovation that quickly established staying power, it wasn’t regarded as an acceptable alternative to TV.

Today’s OTT

Over the last several years, however, OTT has advanced to the point that it rivals traditional television. Live, broadcast-quality video can be streamed over the internet and viewed in an uncluttered, lean-back environment where viewers are in complete control of what they watch and when.

Many media owners have also upskilled in video streaming, bringing a greater variety of content into the space. Leading broadcasters have developed TV Everywhere applications to make their original content available in OTT environments, and pioneers like DirectTV Now, fuboTV, Hulu and SlingTV have even brought live and linear programming into the mix. Viewers can now enjoy a comparable experience regardless of whether they’re accessing content over-the-top or through traditional channels.

The natural upgrade cycle for video viewing technology has also driven “passive adoption” of OTT. Many consumers buying smart TVs are not necessarily doing so on purpose, but brand-new televisions are often equipped with internet capabilities by default. In these cases, OTT adoption isn’t a conscious choice, but rather a natural evolution and simply a sign of the times.

Cord cutters, cord shavers and cord nevers have all made their content consumption decisions for very different reasons than the early adopters of OTT, and the audience has broadened as a result. Now, the delivery method of choice is less about what the technology represents – innovation, modernity, being ahead of the curve – and more about the experience it can deliver. From a consumer perspective, over-the-top is not a new category but rather the next evolution of how TV can be enjoyed.

read more here: adexchanger.com

US streamers paying $2.1BN per month on SVOD

According to Deloitte’s 12th edition of the Digital Media Trends Survey, 55% of US households now subscribe to at least one video streaming service, a 450% increase since 2009.

The survey also found, on average, that Americans watch 38 hours per week of video content (39% of which is streamed), nearly the equivalent of a full-time job. With over 200 SVOD options in the US, the average streaming video subscriber is paying for three services.

High-quality original content appears to be driving an increase in streaming with nearly half (48%) of all US consumers streaming television content every day or weekly, up 11% year-over-year.

Conversely, the report found that pay-TV subscriptions declined for the first time in recent years, with 63% of households still subscribing to a traditional pay-TV service, down from 75%. Pay-TV’s decline was seen to be especially pronounced among Generation Z (ages 14-20), Millennials (ages 21-34) and Generation X (ages 35-51).

“Consumers now enjoy unparalleled freedom in selecting media and entertainment options and their expectations are at an all-time high,” said Kevin Westcott, vice chairman and US media and entertainment leader at Deloitte. “The rapid growth of streaming services and high-quality original content has created a significant opportunity to monetize the on-demand environment in 2018.”

How an Hit TV Program Contributes to Amazon’s Profitability

Last week Reuters reported data from internal Amazon documents that for the first time provided insights into viewership of the company’s original TV programs and their contribution to creating new Prime subscriptions. Below I’ve done some additonal math using separately reported information to calculate how profitable at least one of Amazon’s original programs could be.

Last October, Fortune reported research from Consumer Intelligence Research Partners indicating that Amazon Prime subscribers spend an average of $1,300 per year compared to an average of $700 per year that non-Prime subscribers spend. (Note, back in Fall, 2016, Morgan Stanley said that according to its survey, Prime subscribers spend nearly $2,500 per year, vs. $544 for non-subscribers). For the purpose of my calculations, I just used the CIRP estimate of $600 incremental spending per year by subscribers.

The Reuters article notes that the Amazon program “The Man in the High Castle” delivered 1.15 million new Prime subscribers worldwide. So, multiplying this by the incremental annual spend of $600 yields $690 million in incremental revenue from these new subscribers. Amazon’s North American e-commerce operating margin in 2017 was approximately 2.7%, so the operating profit on the incremental revenue would have been around $18.6 million (this is rough, because some of the incremental subscriber spend came from international where it is undoubtedly lower and also where Amazon actually still loses money on an operating basis).

In addition to the annual incremental spending benefit, those 1.15 million new subscribers also spent $99 to belong to Prime, which would be another $114 million in annual revenue. The operating profitability of the membership fee is hard to calculate given all the different benefits and their costs, but assume it’s 50%, so the profit would be around $57 million. In total that would mean “The Man in the High Castle” delivered year one profits of $75.6 million vs. its cost of $72 million, or $3.6 million net profit, a 5% margin. But keep in mind this is only year one; as long as Amazon retains these 1.15 million subscribers, the profitability multiplies. In addition, there are further revenue streams derived from Prime members such as add-on subscriptions to video services through Amazon Channels.

Admittedly, the above math is a little rough, and it should also be noted that Reuters’s own reporting hasn’t been independently verified. Still, Amazon CEO Jeff Bezos has been extremely candid about the benefits of video to Prime. In an interview with Recode in mid-2016 (see 37:32 cue point), Bezos said that “When we win a Golden Globe, it helps us sell more shoes,” adding that both Prime’s free trial conversion and annual renewal rates increase when subscribers watch video. He actually cited “The Man in the High Castle” as an example of programming that works really well, no surprise.

read more here: www.videonuze.com

YouTube TV rockets to top of vMVPD list in 2017

YouTube has been spending big to promote its vMVPD service. According to the latest data from TiVo, the service was used by 9% of consumers in Q4 2017. That would make it more than twice as big as its biggest rival.

YouTube TV ad blitz working

YouTube TV has been on an ad blitz for the last several months. The service was a very visible sponsor of Baseball’s World Series, spent big on other TV ad campaigns, and is doing more of the same this year. It is also advertising extensively to regular YouTube users. According to TiVo’s new Q4 2017 Video Trends Report data, the marketing spending is paying off.

TiVo added YouTube TV to the quarterly survey for the first time in Q4 2017. An amazing 9% say they use the service. The next nearest service, DirectTV Now, has less than half of YouTube TV’s total, and Sling TV has less than a third. We should perhaps treat the YouTube TV number cautiously. It is possible some survey respondents confused YouTube TV with YouTube on TV. That said, even if YouTube TV has just half the number of users as TiVo indicates, it is still the new category leader.

The TiVo numbers suggest the size of the vMVPD market could be much larger than the 4.5 million estimated. Dish Network reports that Sling TV has 2.2 million subscribers. YouTube TV could already have more than 4 million subscribers, and it could also mean the total number of vMVPD subscribers is almost double the previous estimates.

SVOD continues its inexorable advance

TiVo’s data says that SVOD continues to grow in all dimensions. 68% say they use an SVOD service, up more than 4% over the previous year. Netflix continues to dominate, with 55% saying they use the service. 26% use Amazon Prime Video, 17% use Hulu, and 6% use HBO NOW.

Spending on SVOD services increased strongly. The number of people spending more than $15 a month increased from 27% in Q4 2016 to 35% one year later. However, it could be vMVPDs that are driving this number, rather than people subscribing to multiple SVOD services. Only one vMVPD, Sling TV, has a tier below $21 a month. The rest charge $35 or more per month. The increase in the number of people spending over $21 a month was 9%, with 7% paying over $30.

Time spent with the services also increased. 93% of people that subscribe to SVOD services say they use the service every day, 3% higher than two years ago. As well, the number of people that say they use their service for less than 1 hour a month decreased 10%, to 12%. Meanwhile, those using their service for 2 hours a day or more increased dramatically. A third say they watch their SVOD services for more than 3 hours a day, and almost a half watch from 1 to 3 hours per day.

TVOD continues its slow drift downwards

Transactional VOD continues to struggle in the digital era. The number of people saying they had rented or purchased a movie or show online declined slightly over the last year, to 37%. Amazon maintained and slightly extended its lead, with 18% saying they used Amazon’s video store in Q4 2017. Redbox kiosk users fell slightly to 13%. Apple also lost a little ground to Amazon, with only 8% of saying they used iTunes in Q4. Google Play looks as though it may overhaul iTunes this year. It gained slightly more users and is only a little behind iTunes.

read more here: www.nscreenmedia.com

Netflix’s real advantage is that it’s a tech company first

Netflix hasn’t been coy about its plans to take over Hollywood. The company has already said it could spend up to $8 billion on content this year alone. But, for all the awards House of Cards and Icarus rack up, one of the reasons Netflix has tasted success so rapidly is its streaming technology. That’s an area it has been perfecting in-house since 2010, when it became more than a simple mail-order DVD rental shop.

For Netflix, the tech is just as important as the storytelling. Regardless of how many shows or movies Netflix produces, it needs to ensure that its 118 million subscribers can watch them without issue — no matter where they are in the world, which smartphone they own or how fast their internet is. Netflix even recently re-encoded its entire catalog (said to be around 6,000 titles) to produce the best possible picture using the smallest amount of bandwidth, which was made possible by an AI technology it developed called Dynamic Optimizer.

During a tour of its Hollywood and Los Gatos headquarters, Netflix said that a typical episode of a show like Jessica Jones, which is roughly an hour long and is captured in 6K resolution, weighs in at 293GB of raw, unedited footage. That amounts to about 750 Mbps of data, which would basically kill your internet plan if you streamed it before it was compressed. The company says it used to be able to deliver content with “an enjoyable quality” at 750 Kbps, but last year it started using a new encoding framework that shrunk that to a mere 270 Kbps. In the real world, that means that if you have a 4GB data plan, you can watch 26 hours of Netflix per month, up from just 10 hours before. These improvements are especially important for developing regions where Netflix is trying to grow its business — particularly in Africa, Southeast Asia and South America.

Of course, Netflix isn’t the only one trying to develop the best streaming tech possible. BAMTech, the startup created by Major League Baseball’s Advanced Media and now owned by Disney, takes credit for being the first to stream in 60fps and in 4K. And its technology has such a solid reputation that it powers many of the most popular streaming services, including HBO Go, WWE Network and MLB.tv. Disney will join that list when it launches its own offering in 2019, which is setting up to be a major challenger to Netflix, with cheaper monthly fees, a library full of popular titles and BAMTech’s engine under the hood.

The quality of streams counts for only so much, however, and Netflix is well aware of this. As such, the company says its other main focus is to provide the filmmakers it works with the necessary tools “to create content at a high level, then distribute that around the world.” Netflix says that most of its original shows and movies are being shot in 6K — though it’s only delivering that picture in 4K right now. Still, not only does this allow it to be ahead of the curve (others, like HBO, stream only in 1080p), but it gives Netflix the ability to future-proof its content.

Netflix has also been a big proponent of high dynamic range, which delivers richer colors and deeper blacks. The company now has more than 300 hours of HDR programming, but it says the challenge is to not make content only look good on high-end TVs. Everything Netflix makes and streams needs to be just as perfect whether you’re watching on an iPhone X, a Galaxy S9 or an older, entry-level smartphone.

read more here: www.engadget.com

Study: 34% of Gen Zers are Leaving Social Media

Thirty-four percent of Gen Zers, or people born between the mid-1990s and early 2000s, say they’re permanently leaving social media, and 64% say they’re taking a break from the platforms, according to new research from Hill Holliday’s in-house research group Origin cited in Campaign.

The research also shows Gen Z’s paradoxical view of social media: 41% say the platforms make them feel anxious, sad or depressed, but 77% say the platforms offer more benefits than drawbacks. Twenty-two percent say social media makes them feel like they’re missing out, but 71% say the platforms have a positive effect on their relationships. Social media negatively impacts self-esteem, 29% of Gen Zers said, but 61% say it boosts their ego. Seventy-two percent said people their age spend too much time on social media, while 66% say the platforms help them make connections with people.

Some of the main reasons Gen Z members gave for considering leaving social media include the propensity for wasting too much time on the platforms (41%); too much negative content (35%); the fact that they do not use it very often (31%); a lack of interest in the content (26%); privacy concerns (22%); too much pressure to get attention (18%); too much commercialization (18%) and that social media makes them feel badly about themselves (17%).

Gen Zers are widely considered to be more social media-savvy than any other generation, but as the new Origin research highlights, their feelings about social media can seem somewhat contradictory, which suggests that the sluggish interest levels from younger consumers that Facebook has already been experiencing could start spreading to other platforms. To best reach Gen Z, which has a purchasing power of $44 billion, marketers need to refocus their strategies on using social media for good to help Gen Z foster their own identities. Marketers should also invest in using social media to tell compelling brand stories and spread highly personalized, relevant messages.

Mental health and well-being are important to Gen Zers, which is why many report taking breaks or swearing off social media altogether. Members of Gen Z also tend to be distrusting of institutions and expect a lot from brands, rewarding those with strong values and that support the causes they care about. Gen Z has a strong sense of purpose, and 69% think that brands should help them achieve their goals and 30% said they have felt excluded by brands because of their identity, per PSFK research. Brands that position their social media content as educational or collaborative and unobtrusive stand the best chance of engaging Gen Z on social media.

read more here: marketingdive.com

Free trials work! 60% convert to paying customers

It can be a struggle to find and retain subscribers for smaller SVOD services. New data from Vimeo shows that a free trial is a critical tool in converting subscribers and apps help cement the relationship.

Vimeo has been helping content rights holders launch online video services for more than a decade. It has plumbed data from 3.6 million worldwide online subscribers to bring some insights into how to build a successful video service. Two of the five data points in the just-released The 2018 OTT Revolution report struck me as particularly useful to any online video service provider looking to boost subscribers and increase customer lifetime value.

Free trials work

Online video service providers (OVSPs) could be forgiven for hesitating to provide a free trial. There are risks that many people will signup, binge the content they want, and then bolt without paying a dime. New data from Vimeo shows it is worth taking the risk. Vimeo data shows that any online video service provider (OVSP) would foolish not to allow free trials of the service. The company found that 60% of people that sign up for a free trial from any platform end up becoming a paying customer.

The company saw the highest conversion rates through iOS devices, 69.6%, and Roku devices, 69.4%. 68.4% of those signing up through a web interface converted to paying customers. Android TV and Android conversions were slightly lower, 64.7% and 62.7%, but only slightly.

The challenge is to get people to sign up for a free trial. Vimeo says an OVSP can increase its chances of that happening by one-third if it can get them to use the service app rather than the web interface. Since downloading an app implies a bigger commitment than browsing the website, it makes sense that free signups would be higher. The trick, however, is to get people to download the app in the first place.

Apps a critical part of the ecosystem

Vimeo says that it examined subscriptions to hundreds of online video services it powers. It found that more than 73,000 people subscribed through a web browser in 2017. Of those, over three-quarters also watched through an app. 32% watched through an app on their iPhone, 20% on an Android device, 2.4% through a Roku, and 3.3% through an iPad. This data strongly supports the idea that when consumers signup for a service they expect to have access to it through all the screens they use.

read more here: www.nscreenmedia.com

UK TV advertising slips back year-on-year

Even though it did not quite hit the highs set two years ago, nor indeed 12 months earlier, the UK’s advertising market generated £5.11 billion in revenue in 2017, according to survey data from Thinkbox.

The association of UK commercial broadcasters said the figures represent all money invested by advertisers in commercial TV across all formats and on any screen: linear spot and sponsorship, product placement, broadcaster VOD, addressable and interactive.

The data showed that the annual decrease compared with 2016 came after seven consecutive years of growth in the UK, caused mainly by ongoing economic and political uncertainty, with a weakened pound and inflationary pressure leading some advertisers to reduce TV investment, notably FMCG advertisers. Yet according to data from Nielsen, FMCG spend on TV advertising in Q4 2017 grew by 8% compared with the same period in 2016. And figures from the UK broadcasters suggest that Q4 2017 saw an approximate 2% overall increase in TV spend year-on-year. The Advertising Association/WARC predicts that TV advertising in the UK will return to annual growth again in 2018, forecasting a 1.5% increase in total investment.

Thinkbox also found that, according to Nielsen data the top five TV spending categories in 2017 were: online businesses: £682 million (0.3% down year-on-year); food, which generated £559 million (-11.4%); cosmetics and personal care with £431 million (-2.4%); entertainment and leisure generating £385 million (+1.6%); and finance, capturing £324 million (-3.1%).

Commenting on the results, Lindsey Clay, chief executive of Thinkbox, said: “Post-recession, TV advertising in the UK had seven consecutive years of growth. But TV hyper-reacts to the economy, good or bad, and recent uncertainty saw growth stall in 2017. That growth is now returning. The pendulum is swinging back to TV. We have more proof than ever that TV advertising drives business growth and outperforms all other forms of advertising. TV is a proven, trusted, high quality environment for brands. And TV’s strengths and unique assets have been thrown into even sharper relief recently following the much-publicised scandals and loss of trust in some areas of online advertising. Advertisers are re-assessing where they advertise and TV is well placed to capitalise.”

Three Strategies to fight Netflix

In just a few years’ time, the way we consume entertainment has changed drastically. Netflix and other video streaming services have taken the industry by storm, encouraging consumers to cut the cord and enjoy their content on demand. In fact, last year Netflix users collectively watched 1 billion hours of content each week, and more than 22 million U.S. adults were expected to drop cable services, up 33% from the previous year — a major blow to cable companies.

With streaming on the rise, how can cable outlets keep their current customer base coming back?

Stay Transparent

Open communication is key to maintaining a healthy customer relationship. When it comes to set-up fees, service upgrades or any extra charges, cable providers should be up front about a customer’s tab.

Unexplained price increases are a common cable customer gripe, and with monthly charges up an average of 53% in just a decade, according to S&P Global Intelligence figures cited by the Associated Press, customers are turning to alternate options. Nobody likes seeing an unexpected uptick in their monthly bill — be prepared to explain why things may be changing, and it’ll go a long way toward maintaining customers’ trust.

Tap New Revenue Streams

Who doesn’t like a healthy bottom line? By offering a valuable benefit like customized consumer electronics warranty products for TVs, gaming systems, laptops and more, cable companies can give current customers another reason to stay on board. Include this protection in a customer’s overall package, and you become much more than just a cable provider — you’re a one-stop shop for devices, service and coverage. Plus, you’ll be adding another line of revenue.

Don’t Be a Robot

While consistency in messaging is important when communicating with your customers, train your service reps to avoid being robotic in delivery. Sure, everyone has a script to read, but a simple gesture like asking the customer how their day is going can make a tremendous difference in the tone of a service call.

That interaction can have effects beyond one call as well. Angry customers aren’t hesitant to post bad reviews or recorded conversations online, potentially affecting your reputation. Take Comcast for example, where $300 million was pledged toward an updated customer service strategy. After multiple complaints, the cable giant promised customers incentives like $20 if a representative is late to an appointment, and a redesigned monthly bill to better answer customer questions.

read more here: www.multichannel.com

U.S. cable, satellite and telcoTV lost 3.5 million subs in 2017

Cable, satellite, telcoTV all lose subs

The traditional pay television industry in the United States had its worst year ever in 2017. The top seven public companies, which jointly account for 85% of pay TV subscribers, lost 3 million residential subscribers. If this 3.7% decline holds true for the operators serving the other 15% of subscribers, the industry will have lost 3.5 million subscribers.

Telco TV faired the worst in the year. AT&T U-verse lost 17% of its subscriber base. The huge loss is primarily attributable to the fact that AT&T is working hard to retire the service, pushing subscribers to switch to DirecTV and DirecTV Now. Verizon FiOS lost 1.6% of its pay TV customers.

Satellite operators lost 5.4% of its customers. Dish Network subscribers lost 10.3%, down an amazing 1.14 million. DirecTV lost 554,000 customers, or 2.7%, despite AT&T making a huge marketing push to bring U-verse customers to the services.

Cable held up the best in the face of this broad overall decline. Comcast, Charter, and Altice jointly lost 1.1% of their video customers. Comcast had the lowest overall decline, losing just 0.8% of subscribers. Charter was down 1.8% and Altice down 3.8%.

The X1 bubble has burst

Last year, Comcast enjoyed the first full year of growth in pay TV subscribers in 10 years. The company gained 103,000 subscribers. The company’s market-leading X1 service seemed to be doing a great job attracting disaffected subscribers from other pay TV services. Showcases such as the Rio Olympics, which Comcast integrated into a unique experience on X1, did a great job of marketing the service.

In 2017 far more customers left rival satellite and telcoTV providers than in 2016. Unfortunately for Comcast, most appear to have left traditional pay TV altogether rather than switching to its premium X1 experience. As my podcast partner Will Richmond remarked to me last week, it seems like Comcast has already won all the customers that would want its high-priced TV experience.

vMVPDs enable an exit from high price plans

The biggest beneficiary of the massive decline in traditional pay TV is the new online virtual MVPDs. The existence of services like Sling TV and DirecTV Now is a major reason many people now feel they can live without their cable or satellite company. Before these companies existed, it was impossible to get content from channels like ESPN and TNT without pay television. Now, a $20 a month subscription to Sling TV provides both.

Dish Network reported that Sling TV gained 710,000 subscribers in 2017 to reach 2.21 million. DirecTV Now reached the 1 million subscriber mark in December, impressive performance by the barely 1-year-old service. Overall, vMVPDs have about 4.6 million subscribers or about 5% of total MVPD subscribers.

Compared to traditional pay TV, the vMVPD business is terrible. nScreenMedia estimates that even after YouTube TV’s $5 price increase the service is barely breaking even. The same is likely true at other providers, like DirecTV Now. However, none of the major vMVPDs show any sign of backing away from their aggressive pricing. Linear television services are part of more important strategic initiatives that make low or non-existent profit margins tolerable for companies like AT&T and Google.

read more here: www.nscreenmedia.com