Study: Rising global demand for premium OTT

A report from business-to-consumer subscription management solutions specialist Vindicia has found that premium OTT subscription revenue is quickly rising across four regions: Western Europe, USA, Latin America and Asia Pacific, and that consumer demand for premium OTT services will be driven by local, live and linear content, as well as by easier payment solutions.

The report, The Prospects for Premium OTT, carried out by international research and strategy consulting firm MTM, revealed that premium OTT in Western Europe will grow strongly in the next three years, as connected consumers embrace not only services from global OTT players, but also new subscription services from local and regional broadcasters, and direct-to-consumer services from content brands. The UK will remain the largest market for premium OTT in Western Europe, with revenues forecast to rise from $1.18 billion (€1.32bn) in 2017 to $1.63 billion by 2020.

Meanwhile, in the US, premium OTT subscription revenue will surge past $21.2 billion by 2020, up from $16.4 billion in 2017. While Netflix, Amazon and Hulu will dominate revenues, new competition will come from direct-to-consumer offerings from the likes of Disney, specialist services such as Crunchyroll and WWE, and live sports delivered via OTT, according to the report.

Revenues from premium OTT services will also grow rapidly in Asia Pacific, albeit from a low base in some cases. Thailand, for instance, will see revenues rise from $66 million in 2017 to $108 million in 2020, while Indonesia will expand from $26 million to $ 72 million in the same period, the report found. The market for premium OTT services in Asia Pacific will be driven by pan-regional players, such as HOOQ, Viu and iflix, that focus on local content and are priced for local audiences.

The premium OTT market in Australian is one of the largest in Asia-Pac and will continue to see considerable growth, with revenues reaching $420 million by 2020, up from $280 million in 2017, the study found. Netflix will be the dominant subscription service in Australia for the foreseeable future.

In Latin America, improved broadband connectivity is driving growth in premium OTT subscriptions, where local content offerings are bundled with Internet access. However, greater connectivity is also encouraging content piracy. Mexico will become the largest market in Latin America for premium OTT services by 2020, with revenues forecast to reach $678 million, up from $410 million in 2017, according to the report.

“As revenues for premium OTT services increase in all regions around the world, consumer demand will be driven by local, live and linear content,” said Kris Nagel, Head of Vindicia. “Consumers will become subscribers for the right price, the right content and the right experience. As part of that experience, consumers will also demand frictionless payment solutions. Premium OTT services that can seamlessly integrate and manage payment platforms—and make payments almost invisible to the user—will see the greatest subscription growth going forward.”

download the full report here.

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The Struggle with ‘One Size Fits All’ Viewability Standards

Measurement and analytics company Integral Ad Science (IAS) last week launched a new blocking capability that it says enables advertisers to protect their ads from risky content and ad fraud regardless of the ad server they are using. In this Q&A, EMEA MD, Nick Morley discusses how advertisers can best protect their video advertising, whether current viewability standards go far enough, and what the industry must focus on in order to increase digital video investment.

IAS has released a new video blocking feature. What does video blocking mean in this context and how can it protect advertisers’ investment?

Video inventory is extremely valuable as it provides an opportunity for advertisers to capitalise on not only sight, but sound and motion to capture consumer attention – and therefore tends to come at a premium. At IAS, video blocking prevents video ads from appearing next to inappropriate content, or being served in environments known to be fraudulent.

Our new solution builds upon IAS’ current blocking technology across desktop and mobile web. Our enhanced video wrapper tag allows advertisers to further protect their ads from fraud and brand risk in real-time, regardless of the ad server they are using. This gives advertisers increased insight into how best to carry out their video campaigns, protect their investment across all devices, and optimise to objectives.

There’s a lot of talk at the moment of changing viewability standards, do you think current standards, such as the MRC, need updating?

Our UK Media Quality Report data from H2 2017 suggests that just over half (53.3 percent) of display ads meet the MRC standard, jumping to two-thirds (66.2 percent) for desktop video impressions. While the MRC standard provides the industry with a good baseline, we now need to strive to understand the best metrics possible to drive efficiencies for each campaign.

Increasingly, we are seeing major holding groups and brands setting their own custom metrics. For example, GroupM now only considers a video ad as viewable when 100 percent of the video is in view for 50 percent of its duration. We support many of these custom standards as we have seen agencies and advertisers alike struggle with a one-size-fits-all approach to viewability.

Whether standards are based on MRC guidelines or custom metrics, the industry should shift focus to understanding whether the ad has been effective. Step one is ensuring the media quality factors of viewability, brand risk, and ad fraud are addressed, before advertisers can move to step two, to determine metrics such as ad exposure duration across a campaign, as well as any correlation with increased brand awareness and sales.

The IAB released an interesting report recently showing that advertisers don’t actually use the KPIs they claim to value most. Why do you think this is, and what would encourage advertisers to break out of these habits?

The report highlights that there are demands within our industry that are not being met or addressed. It is not uncommon to see a gap between what KPIs the industry would like to utilise and those actually being implemented. For example, in the report, interaction with an ad is ranked as important by 82 percent vs 19 percent in practice, while 59 percent cite brand safe, non-fraudulent impressions as important vs only 19 percent who measure against these media quality factors in reality. Even viewability is ranked as important by 85 percent but presently considered by only 30 percent of advertisers as a KPI.

There can at times be technical limitations as to why these KPIs are not measured but mostly, this is down to how quickly digital has grown, and as the industry scales its technology across devices it’s challenging to keep up with consumer behaviours. It is why at IAS we have worked tirelessly to provide greater insight into how, when, and where people are engaging with ads, including video, so both the buy and sell side are well positioned to optimise against KPI targets.

Why have various studies found that video ad fraud levels are still disproportionately high?

Video is an engaging and fast-growing format, with global digital video ad spend predicted to reach $32 billion in 2018 – so it’s no surprise the format is attractive to fraudsters who simply follow the money trail.

Our Media Quality Report data from H2 2017 found that – when no ad fraud prevention strategy or technology is used – global desktop video attracts a fraud rate of 7.2 percent, while global mobile web video attracts a fraud rate of 5.4 percent. Interestingly, when ad fraud prevention technology is in place, these decrease significantly to 1.4 percent and 0.4 percent respectively. Clearly, with the right technology in place to block fraud, advertisers can minimise the risk and wastage to their video spend.

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W Europe OTT revenues $23bn+ in 2023

Western European OTT TV episode and movie revenues will reach $23.02 billion (€19.93bn) in 2023; more than double the $9.84 billion recorded in 2017, according to the Western Europe OTT TV & Video Forecasts report from Digital TV Research. Revenues for 18 countries covered by the report are expected to climb by $2.63 billion in 2018 alone.

“The UK is the largest OTT revenue earner in the region by some distance,” advised Simon Murray, Principal Analyst at Digital TV Research. “Its $2.98 billion generated 30 per cent of the 2017 total. The UK’s $6.80 billion in 2023 will represent a similar proportion.”

SVoD became the region’s largest OTT revenue source in 2016 by overtaking AVoD. SVoD’s share of the total will reach 54 per cent by 2023, up from 45 per cent in 2017.

SVoD revenues will almost triple by reaching $12.47 billion in 2023 – up from $4.44 billion in 2017. The UK will remain the SVoD revenue leader by some distance – generating as much as second-placed Germany and third-placed France combined by 2023.

The Western Europe OTT TV & Video Forecasts report estimates 98.85 million SVoD subscribers by 2023, up from 50.34 million at end-2017. Nearly 15 million subscribers will be added in 2018 alone, with 11 million more expected in 2019.

By 2023, 69.3 per cent of Western European TV households will subscribe to an SVoD platform; up from 38.4 per cent at end-2017. [Gross subscriptions. If a household takes two subscriptions then it is counted as two subscribers]. Norway will have the highest proportion at 104.8 per cent by 2023. Germany, Italy, France and Spain will all fall below the regional average by 2023.

Netflix will remain the largest SVoD platform by some distance, with 49.75 million paying subscribers in 2023 – or half of the region’s total. This is the same as the 2017 proportion. The 2023 total includes 22 million Amazon Prime Video subscribers.

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US OTT service cancellation steady at 18%

Parks Associates research finds the rate of cancellations for OTT video services among US broadband households has held steady over the past three years at approximately 18 per cent.

The average subscription length for OTT video services is 30 months overall, although the three top services in the market—Netflix, Amazon, and Hulu—have the most stability, while churn rates for other services tend to be more volatile.

“With OTT service penetration starting to plateau at around 65 per cent adoption among US broadband households, the OTT video market is reaching a level of saturation for the services currently available to consumers,” Sappington said. “In an increasingly crowded and competitive marketplace where subscriber acquisition costs are high, this plateau highlights the need for services to focus on retention rather than solely acquisition. Successful services can encourage retention in several ways, such as community building, continuously offering new and fresh content, and improving their user experience.”

Additional highlights from the research:

– More than 85 per cent of US millennials subscribe to at least one OTT video service.
– By 2022, more than 265 million households worldwide will have more than 400 million OTT video service subscriptions.

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Pay-TV execs expect increased competition

The global findings of the 2018 Pay-TV Innovation Forum, produced by content protection and multiscreen television solutions provider NAGRA in partnership with international research and strategy consultancy MTM, highlight that 84 per cent of pay-TV executives expect competition for paid-for video services to increase dramatically over the next five years.

The programme seeks to identify how innovation is driving opportunities for content owners and service providers around the world as they face a disrupted market. The findings are based on extensive regional research conducted in Europe, North America, with a special focus on the United States, Asia-Pacific and Latin America.

While participants are optimistic they can continue to appeal to paying consumers, an increasing number – 90 per cent of executives – believe that pay-TV providers will have to innovate strongly to remain competitive and relevant, up from 85 per cent in 2017.

The research highlights how the pay-TV industry is converging towards a platform-agnostic model, and as a result is transitioning into a paid-for-video market, spanning a variety of offerings including standalone OTT and direct-to-consumer services. This shift is another reason why 77 per cent of pay-TV executives consider innovation to be one of the top three strategic priorities for the industry.

Content piracy remains a concern, with executives agreeing that the industry is experiencing a significant threat to the long-term sustainability of pay-TV and OTT businesses. Forty-seven per cent of 2018 respondents believe that piracy will lead to greater pressures on the industry over the next five years, in line with 2017 findings.

While challenges remain, this year’s research brings into focus the six key innovation areas in the industry:

– Continued investment in next-generation pay-TV services: Most pay-TV providers (65 per cent) have improved their portfolios in the last 12 months, primarily focusing on the core pay-TV proposition as they deploy next-generation set-top boxes that support advanced functionalities such as third-party apps, personalised content recommendations, and 4K.

– More diverse multiscreen pay-TV propositions: 77 per cent of executives surveyed believe that pay-TV bundles will evolve substantially over the next five years, catering to the needs of different customer groups, and 89 per cent agree that delivering a seamless and personal consumer experience will be key.

– The next wave of aggregation – super aggregators: This model, where companies offer a range of content and services via a single subscription, is seen as a way of simplifying a fragmented marketplace for consumers, while also offering additional growth opportunities for well-established operators.

– Converging pay-TV / OTT offerings: Most traditional pay-TV providers are now looking to offer converged pay-TV/OTT services. As a result, the pay-TV market is transitioning into a paid-for-video market.
– Moving beyond the set-top box: Many industry executives believe that network infrastructure and billing relationships – rather than proprietary set-top boxes – are now the gateway to the customer.

– Growing focus on diversification, particularly connectivity: Fixed and mobile broadband services are expected to grow in importance in future as providers pursue bundling strategies to deliver better value and improve stickiness.

“Change is the one constant in the global pay-TV industry, driven by numerous pressures from competitors, pirates and subscribers, making it challenging for service providers and content owners to maintain revenue growth,” said Simon Trudelle, Senior Director, Product Marketing, NAGRA. “It has never been more important to understand new consumer expectations, anticipate future needs and innovate, and this report reflects the way pay-TV service providers around the world are taking the necessary steps to strengthen and grow their product and service portfolios.”

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Social “the new TV” for young UK audiences

Creative tech player VidMob surveyed 1,000 16-24 year olds and 1,000 25-34 year olds in the UK in May about their media consumption and digital advertising preference.

The study reveals where and why Gen Z and Millennials consume video content, engage with video ads and form perceptions about brands.

The findings from VidMob’s State of Social Video study could have implications on how marketers use video ads to connect with younger audiences in the UK:

1. Social is the new TV: a large percentage of younger audiences’ time spent is watching video.

– 40 per cent Gen Z’s digital time is spent watching video over reading articles or looking at photos while 33 per cent Millennials watch videos over articles or photos.
– In every hour of digital time: Gen Z spend 24 minutes watching video while Millennials spend 20 minutes watching video.
– 57 per cent of video time per day is spent on social apps (31 per cent YouTube, 26 per cent other social platforms) — that’s 3.8x time spent watching linear TV and 2.5x watching streaming services.

2. All social boats are rising:

– 52 per cent of Gen Z and Millennials spent more time on social media this year versus last year.
– Growth in usage of social apps is 27 per cent higher than mobile browsers.
– Compared to last year, Gen Z has embraced YouTube, Snapchat, and Instagram whilst Millennials show the most love for Instagram and YouTube.

3. Social has become the portal to the web:

– Less than 4 per cent of Gen Z and Millennials open a browser first.
– Top 3 first apps opened by Gen Z are Snapchat, Facebook, and YouTube.
– Top 3 first apps opened by Millennials are Facebook, Instagram and Snapchat

4. It’s a Stories World:

– Over 63 per cent of Instagram and Snapchat users watch Stories on both platforms daily.
– Percentage of Millennials who consume Stories on each platform: Instagram 68 per cent; Snapchat 49 per cent; Facebook 44 per cent.
– 31 per cent of Gen Z watches Facebook Stories.

5. The meaning of personalisation has changed for younger audiences:

– Across the board, similar style and taste is most important for whether either generation likes an ad.
– 34 per cent of Gen Z feels more positive towards ads that are visually beautiful versus 33 per cent of Millennials.
– Gen Z dislikes overly repetitive ads (46 per cent say it annoys them; 29 per cent say they tune out).
– Millennials either tune out or dislike brands who run the same ads over and over.

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Online video adspend to rise a whopping 27.5% this year

Advertiser expenditure on online video continues to grow rapidly thanks to a boom in mobile consumption and most of that spending is going on social platforms – despite concerns over brand safety and ad fraud – according to a WARC report.

The latest monthly Global Ad Trends report focuses on online video and says that expenditure on the medium – inclusive of pre/mid/post roll, social and broadcaster VoD – is expected to rise 27.5 per cent to reach $29.8 billion this year.

And with linear TV advertising increasing at just 1.1 per cent this year, online video is taking an ever greater share of the total video advertising market – 17.5 per cent in 2018.

The shares vary widely between markets, however. In the UK, online video is expected to account for 38.2 per cent of all video adspend this year; in China the figure is 24.7 per cent while in the US, the largest video market by far, the figure is 19.3 per cent.

With over 60 per cent of daily online video viewing now on mobile devices, most of this money is going to mobile-optimised social platforms such as YouTube and Facebook, the report says.

UK data from the AA/WARC Expenditure Report, for example, shows that of the £1.6 billion spent on online video advertising last year, 81.2 per cent (£1.3 billion) was paid to social platforms (up from a share of 55.4 per cent in 2014).

“The vast and continuing increase in video consumption via mobile devices has directed ad dollars to social platforms, despite the well-documented and persistent risks around negative adjacency and ad fraud,” said James McDonald, Data Editor, WARC.

Data for the second half of 2017 shows that at least one in ten online video ads pose a risk of negative adjacency to brands. And a recent study by Guardian US and Google found that as much as 78 per cent of video spend is susceptible to fraud if the publisher does not employ the ads.txt script within their website.

“Facebook hopes to regain the initiative with its Watch platform, which is being positioned as a safe brand environment offering advanced audience segmentation”, McDonald noted.

As influencers account for more than half of video views on Facebook, advertisers are increasingly turning to them to build brand equity and deliver their messaging aside approved content.

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Q2 US pay-TV subs fall but OTT prospers

Strategy Analytics’ analysis of US pay-TV subscriber numbers shows Virtual Multichannel Video Programming Distributor (vMVPDs) with 868,000 net adds in Q2 bringing the total number of vMVPD subscribers to 6.73 million, up 119 per cent YoY.

Despite this, overall pay-TV subscribers (cable, satellite, IPTV, vMVPD) fell to 93.78 million, breaking a string of two consecutive quarters of growth, according to a Strategy Analytics’ Television & Media Strategies report, which examined the subscriber bases of 27 public traded and private pay-TV operators, accounting for 97 per cent of all pay-TV subscriptions.

“While the entire vMVPD segment is growing, AT&T’s DirecTV NOW deserves special notice,” said Michael Goodman, Director, Television & Media Strategies, given how rapidly it has grown in a fairly short period of time. If it continues on its current growth trajectory it will overtake Sling TV as the largest vMVPD in early 2019.”

In comparison, Qq 2018 was not particularly kind to legacy pay-TV providers (e.g., cable, satellite, IPTV) as they lost nearly as many subscribers (-973,000) as the prior two quarters combined (-1.16 millio). In Q2 2018, total legacy pay-TV subscriptions fell to 87.05 million, down 3.6 per cent YoY.

“Historically, pay-TV in the US has consisted of cable, satellite, and IPTV; however, the introduction of over-the-top pay-TV services, commonly referred to as vMVPDs, necessitates a change in our thinking,” said Goodman. “What we have commonly referred to as pay-TV (cable, satellite, and IPTV) should now be referred to as legacy pay-TV, while the definition of pay-TV should include vMVPDs.”

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The Arrival of OTT Live Video

Video-on-demand streaming systems have drastically changed how video content is monetized, delivered, and consumed. Over-the-top (OTT) distribution platforms have completely evolved customer expectations for content, driving greater demand for an ever-higher quality of experience—and this demand for quality is now impacting a long-held mainstay of broadcast TV: live events.

According to Forbes, 2017 saw tremendous consumer growth in streaming TV services, and 2018 is set to be even bigger. This year, eMarketer estimates that 181.5 million U.S. consumers will use connected TVs at least once every month—equating to more than 55% of the U.S. population—and by 2021, that number will expand to 194.4 million, which is almost 58% of the population.

Today, every major television outlet is in the midst of launching or advancing their direct-to-consumer VOD streaming services. Consumers now have more control and choice than ever, and the industry is becoming fiercely competitive in its quest for high-quality content to keep viewers. According to Parks Associates, there are over 200OTT services in the U.S. market, and that number is increasing rapidly.

Setting the Stage for Live OTT Streaming

Video-on-demand (VOD) systems have erased content delivery barriers and have paved the way for almost limitless service options. It is now possible to distribute a wide range of content for different devices, such as SD and HD in various resolutions. As broadcasters and program providers work to upgrade and improve their systems, the next frontier for OTT and direct-to-customer streaming will be in delivering high-quality live content.

With rapid innovation and the acceleration of new features and services coming to market, the advancement and acceptance of cloud-based live streaming will shift from leading-edge adoption to mass consumption in record time—and quality of experience will be the differentiating factor for consumers and providers alike.

While early adopters of live streaming accepted convenience over quality, capturing market share now requires meeting the quality expectation of the average cable TV consumer for live content. Ranging from interface performance and convenience, to pricing, to video and audio quality, the total quality of experience is foremost in mind with consumers. Customers are looking for a provider that can deliver both the convenience and quality they demand. Quality compromise is no longer an option.

Tools for Assuring a High QoE

Early streaming providers introduced live services quickly to establish market share and test customer acceptance. Owing to that development approach, even now some providers only have basic data that “something is going out.” Except for setting up a local Roku box, these providers don’t have any visibility of content quality until something major happens. It’s like waiting until your car breaks down before addressing issues; there are no tools in place to proactively monitor the content or quickly perform diagnostics and troubleshooting. Within an environment that’s become all about the quality of experience, this is not a good go-to-market strategy.

Live cloud streaming networks and workflows are very complex. Operators are bringing new services to market at rapid speed and are innovating with new features and updates even faster. This combination of complexity and rapid evolution on a still-maturing platform is a combination that naturally leads to streaming issues.Recently, for example, a large provider had a major issue during a live prime-time game, and it took more than an hour to find and fix the issue. Many customers dropped off and went somewhere else.

In the VOD and live streaming market, a provider’s brand is defined in terms of the quality of the content delivered. The key to success here is proper monitoring. Providers must leverage a system that detects, alerts and reports on critical customer-impacting issues.The goal is to give departments tasked with quality a single tool for monitoring assets and network performance, regardless of whether the distribution and delivery network is linear or multi-profile streaming.

One solution is to utilize software-based architecture, which allows for high levels of flexibility in where and how information can be accessed. It also makes it possible to customize what is reported and when it is delivered.

Customization can be invaluable for providers. In any buildout for monitoring, the key is finding a way to receive aggregate data and analytics that will also provide a comprehensive network overview. Identifying a common and consistent set of measurements to simplify diagnosis and reduce the time to remedy complex issues is critical to supplying users with a high level of quality content.

Simply put, engineering personnel must be supplied with a range of in-depth measurements and analysis to ease fault diagnosis on reported issues. This allows managers and technicians to quickly react before the end customer notices a problem, allowing businesses to avoid costly impacts of viewer dissatisfaction.

Low Barrier to Entry, High Cost of Failure
Millions of consumers have a VOD service like Netflix now, and the quality is very similar to what we would consider broadcast quality. Catalyzed by that exposure, the expectations of quality for live event streaming have changed.

In the early days of live streaming, customers who were away from a broadcast were just happy to be able to watch and track a game or live event remotely on their smartphone, laptop, or other device. The consumer accepted the fact that a cloud-based, internet-broadcast remote event would have issues. But now the expectation is for much greater reliability and a level of quality equivalent to broadcast television.

For providers to deliver on this promise, it’s critical to have proactive tools that can detect issues before the customer sees it. Today, quality is both a differentiator and a detriment. It’s no longer a commodity. It’s easy for customers to take advantage of free trials to test various providers to see which they like best. It’s also easy for customer to switch between providers looking for a better experience.

Of course, streaming providers can tell that they’re sending information out. The switches and network can verify that millions of packets went out, but they can’t see the content. Even if you know that data is moving, that doesn’t mean it looks good. Providers are realizing that they need to instrument for proactive stream quality and reliability. There’s an incredible level of competition—and it’s only going to increase.

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Will Interactive Video Right Facebook’s Ship?

With billions of dollars at stake, Facebook is betting its long-term success on content that consumers find more meaningful and engaging. In the short term, that has resulted in sagging consumption rates, slowing revenue growth, and soaring overhead costs.

Yet CEO Mark Zuckerberg insists that Facebook and its billions of users will ultimately be better off. “By focusing on meaningful connections, our community and business will be stronger over the long term,” he promised earlier this year.

Key to Zuckerberg’s grand plan is video that users find worthy of their time and attention.

Enter the seven-person team behind Vidpresso, an interactive video firm that Facebook just agreed to “aqui-hire” for an undisclosed sum.

Founded in 2012, Vidpresso helps publishers and brands soup up their videos with interactive graphics, comments, polls, and the like. As the company notes in a new blog post, the point was always “to make video more like HTML — easier to author, easier to change, and customized per person.”

Likely boding well for Facebook, Vidpresso’s client list is impressive. On the brand side, partners have included BMW, Burger King, and Nasdaq, while publishing partners include NBC News, TED, Fox Sports, Buzzfeed, The Washington Post, MTV, Turner Sports, and Reuters.

Along with the Vidpresso deal, Facebook recently began giving content creators tools to turn their videos into game shows.

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