Once upon a time, millions of people would sit down in front of their television sets at the same time to watch a favorite broadcast program. Today, the Internet has changed that traditional scene. A new video era has arrived, one with more channels, more providers and more devices. The primary disruptive technology is video over the Internet, increasingly known as over-the-top (OTT) TV. Delivered via an Internet connection and viewed on a wide array of Internet-enabled devices—smartphones, tablets, laptops and more—OTT is not simply a niche offering but a market force.
Consumers, especially younger ones, are responding to the ability to get video content delivered when they want it, how they want it. In Accenture’s 2012 Video-Over-Internet Consumer Survey, 92 percent of online respondents said they watch video over the Internet, with an increasing number of people watching videos on Internet-enabled mobile devices, not just PCs or laptops.
Viewing figures and content volumes are growing at astounding rates. YouTube now streams 4 billion videos every day. OTT content aggregators such as Netflix and Hulu have established consumer bases with impressive revenues and are deriving value from multiple sources, collecting both subscription fees and advertising revenues.
But traditional broadcasters are not standing idly by watching these new, digital players impinge on their home turf. Acknowledging that the traditional TV business model is under threat and unlikely to be sustainable in the long run, incumbents have responded by launching their own versions of OTT-TV.
How will this competition play out? Winners are likely to be those who master a range of capabilities: attractive, differentiated content; compelling customer propositions; the ability to offer effective pricing models; and excellent execution in terms of delivery and supply chain.
Why over the top?
Traditional television viewing is still resilient and will always have its place in the broader video services ecology. But OTT provides a number of extremely compelling value propositions to consumers and also to a range of companies in the video ecosystem:
- Improved customer satisfaction and reduced churn. The ability to track consumer viewing and content preferences means that a provider can suggest related content, providing a kind of personalized service. Add to that the ability to provide seamless access to programming across multiple screens and devices, and you have a mechanism for driving greater brand commitment and loyalty.
- New advertising models. Because of the Internetbased delivery channel, providers and advertisers can more closely understand demographics and viewing habits at a detailed level. Traditional broadcasting cannot match that capability, which means OTT-based advertising could command premium prices.
- Adjacent revenue streams. A connected viewing experience can enable new providers to launch such complementary offerings as micropayments for content, even game playing and gaming. Imagine watching a major golf tournament, for example, and being able to place a wager in real time, just before a critical shot is made.
OTT providers—the likes of Netflix, Hulu and Google—have to this point built scale on the back of technological innovation as well as the ability to provide compelling consumer experiences. Now they must continue to provide a compelling, differentiated and sustainable alternative to the incumbent broadcaster and cable operators who are fast catching up.
Traditional broadcasters: Not-so-sleepy giants
Traditional broadcasters are taking a number of approaches to establishing themselves in the OTT marketplace. We term these alternatives Innovators, Followers, Extenders and Diversifiers.
Innovators. Early plays in the OTT space from the likes of Channel 4 and the BBC in the United Kingdom helped to unravel some of the OTT technical challenges. Initially limited to PCs, mobile services followed quite quickly— and connected TV/IPTV is next (for example, with the YouView consortium in the United Kingdom, combining the free-to-air broadcasters, two telcos and one transmission company).
Followers. Because of uncertainties at the heart of the OTT business model, many broadcasters (particularly free-to-air) have been reluctant to commit the resources and content needed to accelerate their OTT propositions. Web TV propositions in this case are seen as something to be created just to keep pace with the market—often without solid strategic support across the business. Followers may have difficulty keeping up.
Extenders. Broadcasters with strong pay models have spent considerable effort extending their TV propositions onto new OTT services. Different approaches are being adopted. Mediaset in Italy launched a new premium service (Mediaset Premium Play) while Sky in the United Kingdom bundles its OTT proposition with its TV service. Things are moving ahead fast on this front—to compete with the pure OTT players, both Canal Plus in France and Sky in the United Kingdom have launched standalone OTT propositions on multiple devices for customers without a traditional linear subscription.
Diversifiers. Some broadcasters—notably NBC Universal, Fox and Disney in the United States (through Hulu)—have created entirely new companies to target the OTT market. These moves have been driven by a desire to maintain separation between the core business and units driving newer approaches, freeing innovations from the shackles of incumbent business models and approaches. Telecom operators, including BT, France Telecom and Deutsche Telekom, also have experimented with OTT, developing services targeted at reducing existing customer churn and attracting new customer bases to a suite of digital products.
Gaining an advantage
As the television wars heat up, what kinds of strategies and approaches should both types of players—the traditional broadcasters and the digital upstarts—be driving to gain an edge? Here are some of our headline recommendations.
- Both content and context are important. The availability of an extensive catalog of attractive, differentiated content is the most important asset for any OTT service. However, it is also becoming increasingly vital to understand the context within which an individual consumer engages with that content. In other words, the whole consumer experience must be taken into account and tailored effectively to stand above competitors. This brings into focus the range of other assets and capabilities required to be an effective OTT player: expertise across screens and devices, an intimate knowledge of consumer behavior and the ability to deliver a high quality of service.
- Offering an affective, multiscreen, multidevice proposition is key. The successful newer players such as Netflix have demonstrated a great ability in offering a multiscreen experience. This is also now a major priority for many broadcasters—evidenced, for example, by the BBC’s “Four Screens, One BBC” strategy.
- Quality of service will become increasingly important. Consumers have rising expectations for the quality of the video service they receive over the Internet. However, OTT players by their very nature do not have direct control over the quality of online services because they do not manage the content delivery networks.
- Experiment with pricing and revenue models. A number of different pricing models and approaches are currently being offered in the market, with no clear winner at this time. In this environment, it makes sense to pursue maximum pricing flexibility for now, giving consumers a variety of options to choose from and increasing the potential market for customer segments that are not attracted by the pricing schemes currently being offered.
- Drive engagement through analytics. The proliferation of new media delivery platforms and new digital consumer behaviors creates a plethora of consumer data. Predictive analytics, effectively deployed, can help turn fragmented and unstructured data into actionable insights and help OTT companies present individual consumers with the right content choices at the right time, through the right service on the right screen.
Although the battles in the OTT marketplace will continue, companies must also begin to understand how to work collaboratively, even with their competitors. For example, the pure OTT aggregators will need to figure out how to work more cooperatively with network operators. Without access to a share of the revenues from video services, telcos will have little incentive to make the significant investments needed to ensure high-quality video services.
Video is a huge marketplace, and fierce competition tempered by pragmatic collaboration is likely to give the best players considerable opportunities to drive growth in this exciting space.
To read the full report, "Bringing TV to life: TV is all around you," go to: www.accenture.com/us-en/Pages/insight-bringing-tv-to-life-tv-all-around-you-summary.aspx.
About the authors
Francesco Venturini is the global broadcast lead for Media & Entertainment in Accenture Communications, Media & Technology.
Charlie Marshall is a senior manager with Media & Entertainment in Accenture Communications, Media & Technology. To Top