OTT Market Analysis
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Transcript of OTT Market Analysis
OTT Market AnalysisEMERGING PATTERNS AND OPPORTUNITIESROHAN PANJIAR
Digital Video has Reached Maturity
Pay TV201.8 million US adult viewers
Digital Video175.4 million US adult viewers
Broadband-only Homes Growing and Adopting OTT Services
Growth of broadband only homes◦ 9% of U.S. population in 2013◦ 15% of U.S. population in 2017◦ Approximately 17 million broadband-only homes
63% of U.S. broadband households subscribe to at least one OTT service
31% of U.S. broadband homes have multiple OTT service subscriptions
‘Practical’ Factors Driving Growth of OTT Market
Growth in smartphone users and mobile internet usage
Increase in broadband penetration
Growth of broadband only homes
Increase in digital ad spend
Consumer perception that content libraries are expanding and affordability versus Pay TV subscription
OTT is now being considered as a more ‘practical’ choice. This practicality can fuel the need for supplementary AVOD services that offer content that SVOD services don’t
OTT Market Landscape Germinating Multiple Business Models
OTT market is growing 20% annually
Pay TV revenues only growing 2% annually
AVOD◦ Free to air, advertiser supported◦ Premium video content◦ Digital content created by digital creatorsTVOD◦ Digital rentals and purchases◦ Apple iTunes’ store SVOD◦ Monthly fee for access to content library◦ Netflix, Amazon Prime VideoDVMPD◦ Subscription services that replicate traditional cable
bundle in a digital context◦ Sling TV, Playstation Vue, DirecTV Now
Growth being Captured by AVOD and SVOD
AVOD and SVOD have disrupted the industry
◦ New content models (short form + long form original content)
◦ New windowing models◦ Innovative pricing models ◦ Have captured 80% of global OTT
revenues
DMVPD and TVOD have had a muted impact
SVOD Services Growth Projection
Netflix: 120 million users
Amazon Prime: 76.2 million users
Hulu: 30 million users
Crowded space with well-entrenched competitors
Have cash flow to invest heavily in original programming that gives them a competitive advantage
Original Content Driving OTT Growth
Primary growth driver for Netflix, Amazon & Hulu
Has allowed HBO and Showtime to also make a mark in the OTT market
Critical to demonstrate value to the consumer to continue paying monthly subscription fee
Netflix subscriber trends (churn and additions) correlate with shows getting phased out/launched
AVOD Riding on Growth of Online Video Advertising
Boston Consulting Group projects that global online advertising expenditures are expected to increase 34.5% from $15.3 billion in 2015 to $34.5 billion in 2018
Lack of premium video inventory for advertisers◦ YouTube still dominated by creator content◦ Hulu has pivoted away from AVOD
Digital video ad spend share of total digital ad spend is growing
◦ 14.3% of total digital spend in 2016◦ 15.1% in 2017
Ad revenues for AVOD market growing impressively◦ $1.1 billion in 2010◦ $5.65 billion in 2015
Advertising Buying Trends: Programmatic Growing but Direct Sales Dominant
Programmatic growing but still a very small share◦ Automated Transaction Models grew (+64% YOY) ◦ Low percentage of overall premium video ad sales in the U.S. (11.4%)
Factors behind this: -◦ Strong direct sales across the premium video economy◦ Restrictions on targeting and tracking in certain environments like OTT◦ Risk factors related to managing user experience from Automated Transaction Models
Long form content dominant driver of ad views◦ 41% share of ad views (FreeWheel report Q3 2016)
Advertising Consumer Receptiveness: Differs from Display Digital Advertising
Online video viewers less receptive than live TV viewers◦ 19% of online video viewers responded favourably to ads compared to 27% for live TV viewers◦ Probably biased by the fact that online video was on-demand while TV is more linear, lean-back
More open to interest-based ads as opposed to re-targeting◦ 41%of people responded favorably to ads tailored to their interests◦ Only 25% liked ads that tracked their browsing history like a retargeted promo
Stats based on study by Millward Brown
Facebook’s Shift from Live Video to Long-form Video Content
Change in algorithm to give preference to long-form videos with higher completion rate
Testing mid-roll ads
Testing new video-only tab
Rumored to be in talks with studios and producers about licensing exclusive shows to Facebook
Connected TV apps for Apple TV and Chromecast
Facebook is more interested in the YouTube model of collecting tons of quick video clips than investing in long-form shows or films like Netflix
Looking to build a wide range of content by paying content creators and sharing revenue
Ultimate aim to attract ‘episodic content’ similar to YouTube where creators regularly post videos
DirecTV Now more of a DMVPD To stem subscriber losses for DirecTV pay TV service
Added 200,000 subscribers in first month of operations
Buoyed by introductory price offer of $35 per month
Unlikely to cannibalize growth of SVOD or AVOD services given the differing value propositions◦ DirecTV Now: cheaper alternative to Pay TV◦ SVOD: Access to exclusive content for low prices◦ AVOD: Access to wide content library for no cost, supplementary to SVOD
Amazon, Netflix
Original contentAccess to TV content/wide content library
Paid
Free
DirecTV Now
Skinny Bundles
YouTube Pluto TV
Hulu
Connected TV Devices Growth Projections
Chromecast is dominant: 30.6 million users
Amazon Fire TV is the fastest growing device
Apple TV: 20.5 million users◦ Low predicted growth due to
◦ High device cost◦ Lack of original programming
Connected TV Usage Growth Driven by Younger Homes
Millennials form a dominant part of broadband only homes
This trend of heavy usage of streaming devices will likely increase
Roku and Fire TV Ideal Platforms to Focus On
Despite its lead in terms of number of users, Chromecast usage pales in comparison to Roku
Roku along with the Amazon Fire TV seem to be the connected TV devices to focus on in 2017 given their usage and growth respectively
Streaming Activity Pattern on Connected TV Mirrors Linear TV Watching
Peaks during primetime
Indicative that connected TV user is strikingly similar to linear Pay TV user in terms of consumption patterns
OTT Consumption Increasingly Driven by Connected TV Devices
“We are clearly seeing OTT video moving to the television… OTT users watch OTT services on their TV screens between 17-20 days per month, much more than platforms such as a PC, smartphone, or tablet.”
◦ Snappington of Parks Associates
Widening Gap in TV Consumption Amongst Age Groups
Deloitte forecasts that 18-24 year olds in the US will be watching less than 2 hours of traditional TV by 2020
Continuing decrease in TV consumption amongst 18-24 year olds:
◦ Watched 58% as much live and time-shifted TV as those over 65 years of age in 2008
◦ Down to 36% in 2015
Future Growth in Multiple SVOD Subscriptions
Digital TV Research has forecasted that the average U.S. SVOD user will pay for 1.33 subscriptions
◦ Implies multiple SVOD subscription
12 % of broadband-only households subscribe to Netflix and Amazon Prime
SVOD Broadband-only Homes Consume More Devices, Platforms
More affluent customers◦ Nearly half of homes with SVOD access have a yearly household income of more than $75,000
Heavier users of technology◦ U.S. households with SVOD subscriptions spend nearly 50 minutes more per day using TV-connected
technology than does the typical U.S. household◦ Average 10 more minutes daily watching time-shifted TV and double that in terms of time spent using a
multimedia device (such as Apple TV and Roku) than a typical TV home
Clearly they have an appetite to consumer more content, devices and platforms
Key Takeout Two key growth drivers
◦ Original content◦ Free access to content library that supplements SVOD services
Connected TV devices growing particularly in millennial homes, mirror behavior of traditional TV viewer
Relative dearth of premium video inventory for advertisers
YouTube and Facebook video platforms increasingly embracing long-form video content to capture these ad dollars
◦ Facebook live broadcasts◦ YouTube skinny bundle
Emerging picture of broadband-only homes depicts multiple subscriptions, devices, platforms
Opportunity for a service that is free and provides access to TV content and a wide content library