You’ll Be Hearing More About OTT…Much More

If you follow the news about the evolution of home entertainment technology and consumer behavior, like we do, you can’t miss the numerous prognostications about the the future of streaming media, the rise of OTT, the increasing rate of “cord-cutting” and the personalization and app-ificiation (if there is such a word) of content delivery. Just in the past few days, we’ve seen (and retweeted at @Giantinfo) articles such as Here’s TV Networks’ Latest Scheme to Limit ‘Cord-Cutting’OTT in Fortune, OTT Video Finds Sweet Spot: Niche Content via Media Post, OTT At a Tipping Point, Poised for Rapid Growth on StreamingMedia.com, Cord Cutting, Late Summer, 2016 on TV[R]EV and Accelerating pay-TV subscriber losses point to OTT’s continued adoption on Ooyala’s Videomind blog. The general consensus is that linear television as our parents knew it and as we ourselves may have known it growing up, will soon go the way of buggy whips, spats and hoop skirts. But WHY is this change coming, and WHY is it coming at such a pace? Don’t the cable companies provide value with the breadth of content (500 channels!)? Aren’t we currently in a new Golden Age of Television which is delivering better episodic entertainment than has been seen in the previous 3 decades, perhaps more? The answer is yes to both questions, but nevertheless, the reasons behind this shift are worth understanding, particularly as they relate to where we, the audience and the industry, are headed…next week, …next year…the next decade and beyond.

  • Technology: Of course, this is one of the key answers to why this is happening now. Where streaming video used to be technically challenging on the provider end and difficult to access over pre-broadband internet on the consumer end, technical advances by a host of companies have enabled access. Broadband continues to be available to a larger and larger portion of the US and the world and encoding/transcoding protocols have advanced to the point that it’s now viable to deliver, individually, movies and television shows and even live events on the fly. What used to take hours to access can now be delivered in real time. Of course, the drive to improve the technology was itself driven by consumer demand, thus creating a kind of chicken/egg question. Nevertheless, the improvement of streaming media technology has, in turn…
  • Cost: Owning and operating a television station was expensive, what with the license, the infrastructure and the operations expenses. Now the cost to develop and launch a streaming media service or OTT presence has greatly, GREATLY reduced the financial barrier to entry. Market innovators such as Ooyala, Brightcove, Limelight and others introduced low(er) cost services. Continued innovation continued to reduce development and launch costs and improve the business case for smaller business entities. The next generation of solutions, from companies, such as Viewlift, Piksel and (soon) Giant Interactive, will widen that market segment even further, which allows…
  • Personalization: Where once you had a very small choice of channels broadcasting a very narrow array of content, today’s audience has become very used to seeking out their own interests and defining their own experience. In Los Angeles in the 70s, for example, the choices were of the big networks (CBS, NBC, and ABC) and a few local stations: KTLA, KCOP, KTTV and a wasteland of UHF channels, including PBS. Even beyond the 500 cable channels promised in the 90’s, viewers can seek out and binge on content of their own choice. They are,

“…the programming masters of our own universes. Including the cable box — with its video on demand and digital video recorder — and Apple TV, Chromecast, PlayStation, Roku, Wii and Xbox, that universe is constantly expanding. Time-shifting allows not just greater flexibility, but increased consumption. According to Nielsen, Americans watched almost 15 hours of time-shifted television a month in 2013, two more hours a month than the year before.”

Viewers can construct an individualized entertainment experience on their own schedule, their own duration and with a show they want (rather than simply what’s available). Viewers can own the experience rather than accepting the programming overlords’ schedule. This may sound like a minor issue, but it’s been transformative.

  • The Netflix Effect: As one of the first subscribers to Netflix’s DVD-by-mail service back in 2000, I was an early supporter of this little upstart company which would eventually topple Blockbuster and upend the home entertainment business. The success of Netflix in the streaming media space, has been envied by many content owners, leading many to inviestigate, develop and launch their own streaming media services, and as costs to market have declined, the number of entrants has increased. Some of the first to market — AcornTV, WWE Channel, Shudder, UrbanChannel — have been joined or will be joined by others like Kevin Hart’s Laugh Out Loud and Film Detective. These are just a few of the initiatives which content owners have launched in an attempt to keep those viewers and, correspondingly, subscriber dollars closer to home. And with the success of THESE services, even more specialized companies and entitites are seeking to enter the market: A streaming media presense is nearly universal for US-based mega churches many of which are also launching Apple TV and Roku channels. Fitness companies ranging from Barre 3 to Crunch have their own streaming SVOD offerings.

The “Why” the revolution is happening is clear: Technology + cost to market efficiencies + personalization + demand = Entertainment revolution. But why is the change happening so fast? Our theory: The ubiquity of the personal device. Alan Wolk provides an interesting personal observation and insight in his recent TV[R]EV article, Cord Cutting, Late Summer, 2016:

Every summer, the TVs in the great rooms have gotten a decent amount of use, something for the kids to watch in the morning over breakfast or in the hours between the beach and dinner. But not this summer. In both houses, the TV was not turned on. It wasn’t that the kids (and there are 5 in total, ranging in age from 10 to 17) are spending all their time reading. It’s that whatever “television” they want to watch is available via their smartphones, laptops and tablets. There’s no more need for the actual television set.

Television is no longer a communal experience. It’s become a personal one, a behavioral shift which has been enabled by the easy availability of individual screens such as tablets and smartphones. No longer does the family gather around the electronic hearth, they’re doing their own thing, pursuing their own interests…and creating futher demand for niche channels and services.

“…most people don’t want to watch TV on someone else’s schedule most of the time. That for young people, the whole notion of a predetermined schedule is anathema and that services like Netflix and Amazon are not going away.

It’s a tectonic shift in the way viewers consume entertainment…video entertainment. To keep pace, content owners will need to embrace this new personalized ecosystem, either by allying themselves with the larger services through licensing deals, or by striking out on their own to provide an individual experience which is brand-specific and enjoys a direct connection to the consumer.