OTT MARKET TRENDS IN 2019

2019/05/13

In recent years we have seen a real change: traditional broadcasting services are gradually moving towards OTT (Over The Top - via unmanaged Internet networks). This upheaval raises many questions, particularly about users' expectations and the challenges facing professionals in the sector. How can audiovisual actors anticipate this digital revolution?

To understand 2019, which will focus mainly on OTT's quality of service, it is crucial to look at 2018. Here is a review of the latest OTT trends:   

2018: a year rich in innovation

 

The user experience

A real challenge for OTT in 2018 was the user experience or UX: the main goal was to satisfy users of digital streaming interfaces. The objective is always to create a unique and individualized user experience on the website or application, whether for navigation or content. Streaming platforms have embarked on a battle to demarcate and develop lasting relationships with their audience. They want to offer a totally exclusive product that provides a positive and pleasant experience for users:

  • Uninterrupted streaming to ensure quality of service.
  • Easy navigation with adapted recommendations.
  • Multi-track audio, and subtitles to improve the user experience.
  • An all-compatible solution to allow the user to watch their movies on different devices.

These companies are therefore increasingly adopting a "user-centric" strategy, consisting in better understanding the needs and expectations of their users in order to better meet them.

The original content

In 2018,  streaming platforms worked to expand their catalogue, especially with original productions and exclusivities in order to recruit and retain their subscribers.  Thus, streaming platforms free themselves from having to acquire the rights to broadcast series and films on the one hand, and on the other hand they facilitate consumer loyalty by offering them exclusive content.

Netflix has started the battle for original content. With an already well-stocked catalogue, the platform recorded 88% growth in original content in 2018. Netflix's recommendation algorithm has also been refined to highlight them and create a dependency on the brand's productions.  In this way, the platform highlights its own content.

The European Parliament passed a law in October 2018, according to which major streaming platforms must broadcast at least 30% of European content. In addition, the platforms "will also have to contribute to the development of European audiovisual productions, either by investing directly in content or by contributing to national funding",  according to a statement of the European Parliament.

This is one of the reasons why Netflix is conquering Europe and has launched its very first production studio in Madrid, Spain at the end of 2018. Spain seems to be the most obvious choice for Netflix, especially with the worldwide success of "La Casa de Papel".

On Friday, November 30, 2018, e-commerce giant Amazon has launched its first original French series: Deutsch-les-Landes.

Across Europe, Amazon has invested heavily (and continues to do so) in original content. There will therefore be a significant increase in the rate of content production and acquisition. In terms of editorial strategy, Amazon wanted to acquire French series or films from the beginning. However, volume is not the priority, instead, they want to have the best possible series for their customers, and this is the best way to differentiate themselves from the competition, according to Amazon.

However, a future competitor could disrupt the balance of the 2 streaming giants. Indeed, Disney presented the original content of its future streaming service, which include: a series named Monsters and Company, a reboot of High School Musical  and most importantly, the Red Witch, a series based on the character Loki, which is very appreciated.

Disney+ will also offer exclusive content under Disney's intellectual property. That is to say: films, series or documentaries about Marvel, Star Wars, Pixar or National Geographic.

The Cloud Revolution

Until 2018, OTT was a quite risky business, but thanks to the cloud revolution, new opportunities arise:

  • Less seed funding
  • Less maintenance
  • Simplified workflows

The cloud offers tremendous advantages over traditional servers or locally hosted solutions as it provides unprecedented flexibility:

The development of cloud solutions has significantly lowered the costs of technical implementation into the video market. Today, a base of 2,000 subscribers is sufficient to cover its technical costs. This allows broadcasters to significantly reduce their costs and increase in efficiency. Platforms can be launched and grow very quickly, without compromising service quality.

The growth of niche services

For the past 10 years, the OTT market has been largely dominated by the American giants, such as Netflix, Amazon Prime and soon Disney and Apple. Two thirds of SVOD's global services have a catalogue dedicated to the general public. However, for the past 3 years, it has been clear that there is a real opportunity in the niche video content market. Niche platforms are ultra-specialized VOD or SVOD platforms that have appeared in recent years and are directly aimed at a targeted audience:

  • auteur cinema
  • independent cinema
  • documentaries
  • niche sports
  • children's content
  • fashion, luxury, ...

Niche platforms bring together committed and active customers around content that excites them.  However, they must fight to be visible and regularly renew their content.

2019: a revolutionary year!

Since the beginning of 2019, and for the first time ever,  linear TV is not the most consumed media. Instead, online content has taken over.  According to Médiamétrie*, the TV viewing time decreased of almost 30 minutes among 15-49 years-olds between February 2018 and February 2019.

Guaranteeing service quality

Today, viewers have become experts in the search for unique, original and entertaining content. The challenge for OTT players and operators is how to enrich the user experience by ensuring quality of service. Four elements must be considered in order to guarantee it:   

Source: CSA - March 2019

In the case of live  broadcast, the time it takes to access content is the most sensitive element of the four.

An essential point of service quality is also found in the regionality of the servers. Indeed, the "content delivery network" allows content to be stored in advance on local servers to facilitate distribution to the user. However, today, this operation is not compatible with live content and is quite expensive.

Last but not least, an important work on file and data compression will have to be thought to optimize the network.



Mainstream content vs. niche content

Even if niche content was in the spotlight in 2018, mainstream content is coming back in force in 2019. The mainstream covers most of the demand and is therefore aimed at the largest number of potential consumers.

To illustrate this example, we can mention the success of "La Casa de Papel", a Spanish series that has become a global phenomenon.  

Netflix never communicates  regarding it viewing statistics, but according to a study by NPA Conseil with Harris Interactive, La Casa de Papel was seen no less than 17 million times between January and May 2018. Not only has it been seen by millions of  viewers, La Casa de Papel also represents 14% of Netflix's traffic. The study also states that 66% of the public are women and that 15-24 years olds represent 41% of the subscribers. Today, it is the most watched non-English series on the platform.

https://lh4.googleusercontent.com/0TbUszA_3_4E55RwPQdsfoxVPi6QzBH5gdymHiQWC_fq3wfSaTYArSGWd0eA1uFIiYlSz1wa0NwEmJi0Wu1HEGt9NGN3K5tY59PHiXsdXKzh_bgM6WwexqLok1wGmJMLq2gvyo0G

source : Huffpost



Content goes hand in hand with distribution

The online video race will not only focus on content,  but also on distribution. Those who benefit from the widest distribution will have infinitely more chances of winning the stream services war.

To illustrate this example: Apple plans to launch its own streaming service in the fall of 2019.  Even if Apple is late to the party, it can not only count on its 1.4 billion devices already on the market, but also on its huge financial resources, as well as the support of Hollywood studios.

AT&T relies on its vast network of subscribers  to promote its future WarnerMedia service, which merges the high-end HBO channel with the Turner channels.

In order to consolidate its business, and to establish itself in the long term, the question of the distribution of video streaming services becomes a real issue for OTT in 2019.



Data at the heart of the challenges

With the rise of OTT platforms, data is a gold mine, through which we seek to know the audience's activity in order to anticipate needs and adjust the catalogue and marketing strategy.

Data analysis is essential for platforms because it allows process automation, customization of the customer experience, optimization of content strategy, etc. However, this exploitation is only possible with a powerful metadata management tool, combined with advanced analysis tools.

Platforms optimize content distribution via CDNs. New technologies are emerging today, crossing multiple algorithms to refine customer knowledge and generate increasingly relevant recommendations.

User knowledge becomes a priority. Indeed, platforms try to transform the anonymous audience into logged users in order to aggregate more data to segment the user base and propose better recommendations.

Interactivity is a new marketing weapon!  Netflix tried it for the first time in 2018 with the series Black Mirror.  In the episode named Bandersnatch, the viewer was offered the opportunity of choosing from different scenario options. Far from being revolutionary, this type of format makes it possible to gather data   about the spectator's behaviour in relation to brands, or ,to dramatic structures.

The AVOD is about to explode!

AVOD (video advertising) is based on the model of conventional television. The consumer accesses the video free of charge after viewing one or more advertisements. AVOD is one of the main growth drivers in the OTT market.

https://assets.unreel.me/wp-content/uploads/2018/10/AVOD-Market-Growth-Projections-1.png

Source: Unreelme

Globally, the AVOD market is expected to double in size in the next 3 years. In 2018, the US, APAC and EMEA regions accounted for 97% of this market but are expected to lose 7 points to the LATAM region and India by 2021. With a market growth of +160% and +490% respectively, a real explosion is expected.

This significant expansion represents an opening for new streaming services that can be established and carve out their own niche in the market.

Video advertising evolved at the turn of 2019. Indeed, even if previously the tendency was to offer mass and poorly targeted advertising, nowadays ads are much more personalized. In 2019, broadcasters decided to be more transparent about it by offering a more "fair" system: the user is informed and agrees to be exposed to advertising in exchange for a free service.  Therefore, the AVOD becomes less quantitative and more qualitative!

Ultimately, in terms of content, we will continue to witness the struggle between old and new services regarding exclusive programs. The new entrants will compete with Netflix, the long-awaited Disney+, but also with Warner and Apple+. In addition, a considerable effort will have to be made to improve the streaming quality for users, which is not always satisfactory today, and the cloud will help to overcome this problem. As for new equipment such as connected TV sets, they can become a real growth driver for services distributed in OTT.

How will these giants and newcomers  make it out of the game?

To be continued...

*Médiamétrie, created in 1985, is a public limited company specialising in audience measurement and the study of the use of audiovisual and digital media in France.