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Convergence Through the M&E Industry

Convergence Through the M&E Industry
October 21, 2020

COVID-19 is disrupting industries worldwide. The media and entertainment (M&E) industry is no exception. The hardest-hit sectors in M&E are those that monetize social/physical interaction—such as live music concerts, cinema, B2B events, and out-of-home (OOH) advertising. Demand from advertisers has also declined, impacting sectors that depend more on advertising revenue streams.

On the bright side, however, government-imposed measures such as work-from-home, social distancing, quarantining, and travel restrictions have positively impacted media consumption. Nielsen studies show that home-bound consumers have led to a 60% spike in video content consumption globally. The demand for over-the-top (OTT) media service streaming on mobile devices has significantly increased, along with internet access and fast data connectivity. Consumers engage with OTT media for both entertainment and education.

The demand for over-the-top (OTT) media service streaming on mobile devices has significantly increased, along with internet access and fast data connectivity.

According to Statista, OTT media revenue is expected to reach $158.84 billion by 2024, up by more than double the 67.8 billion generated in 2018. This growing inclination toward cheap, internet-powered OTT means traditional platforms such as cable TV and set-top-boxes are nearing their end-of-life.

A Transformative Approach

Due to rising media consumption, OTT has already become a crowded space. To stand out, OTT giants such as Netflix, HULU, Amazon Prime, and Disney are finding new ways to engage with their audience. They now produce their own, exclusive video content delivered to consumers on-demand. The focus is on attracting consumers through faster content delivery (powered by 5G networks) and cheaper subscriptions. ‘Think digital’ is a popular belief deeply rooted in their business models.

Even before the pandemic, companies that sensed a gradual shift in the digital media landscape took steps to adopt their own OTT capabilities. For instance, in North America, AT&T acquired Time Warner Inc. back in 2018 to leverage Warner Bros., HBO, and Turner’s content and creative capabilities. The company aims to facilitate direct-to-consumer distribution and offer consumers a unique, high-quality, mobile-first entertainment experience. Disney took a similar approach in India by acquiring Hotstar, a product of Star India. There are multiple partnerships/mergers such as these happening across the globe that unlock opportunities for consumers, content creators, distributors and advertisers.

Smart, Personalized Content Experience

Media companies today have to digitally innovate to match consumer expectations. They now deliver highly personalized, seamless, and cross-device content experiences to their consumers. This helps them grow and retain their audience and earn digital media revenues.

To personalize content, OTT service providers build a detailed record of each of their users’ consumption behavior and preferences. They deploy machine learning algorithms and use IoT device data to learn and identify deep patterns, turning them into actionable information. Based on this information and additional computing power, OTT providers deliver accurate, personalized content recommendations that instantly engage their consumers. This also applies to delivering personalized ads directly to consumers.

Getting the Most Out of Monetization Models

Content monetization, via ads or premium subscriptions, plays a vital role in generating revenue. Here are the popular monetization models used by OTT providers:

  • AVOD (Advertising Video on Demand): In this model, the streaming video is delivered as a free service for end consumers. Advertisements are the key revenue source for OTT providers operating under the AVOD model. A great example of this is YouTube, which deploys AVOD to monetize its traffic.
  • TVOD (Transactional Video on Demand): Using this model, OTT providers charge users for watching each video, every time. TVOD is also popular by names such as PPV (Pay Per View) or PPD (Pay Per Download).
  • SVOD (Subscription Video on Demand): SVOD model is popular among consumers. It offers users access to the entire video content library by simply signing up for a monthly/quarterly/annual subscription. Studies suggest that 3 in 4 US households have an SVOD service. Netflix leads in this segment, with Amazon Prime and HULU, among other top OTT services. Data also shows that 79% of the total time spent viewing OTT content in the US is spent on these three subscription services, along with YouTube.
  • Hybrid: This model combines the best of TVOD and SVOD. For instance, when a user signs up, she is offered a video content library. To access exclusive content, she can choose to opt-in for a paid pack, which is either a subscription model or a pay-per-view model. Example: Hotstar.

The Way Ahead

As the entertainment industry is becoming more consumer driven with on-demand content becoming the new normal, media companies must shift their focus. Their key focus areas will be innovation and transformation. To thrive in a digital landscape, both media companies and OTT providers must choose the right technology partners, who can bring the precise technical as well as business expertise to help them transform their business model to deliver maximum personalization and increase revenue via different means.

References:

https://www.nielsen.com/us/en/insights/article/2020/covid-19-tracking-the-impact-on-media-consumption/

https://www.nielsen.com/us/en/insights/article/2020/staying-put-consumers-forced-indoors-during-crisis-spend-more-time-on-media/

https://www.jpmorgan.com/global/research/media-consumption

https://about.att.com/story/att_completes_acquisition_of_time_warner_inc.html

https://theblog.adobe.com/personalization-key-monetizing-content/

https://www.infosys.com/industries/communication-services/industry-offerings/content-monetization.html

https://www.investopedia.com/insights/how-netflix-makes-money/

https://www.cisco.com/c/en/us/solutions/internet-of-things/understanding-customer-behavior.html#:~:text=IoT%20can%20capture%20passive%2C%20unconscious,he%20or%20she%20wants%20it.&text=Of%20course%2C%20using%20AI%20and,a%20delicate%20line%20to%20walk.

https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/overwhelming-ott-telcos-growth-strategy-in-a-digital-world

https://www.statista.com/statistics/260179/over-the-top-revenue-worldwide/

https://bstrategyhub.com/netflix-business-model-how-does-netflix-make-money/

https://newsroom.intel.com/wp-content/uploads/sites/default/files/documents/inline-migration/11/2018/10/ovum%E2%80%93intel%E2%80%935g%E2%80%93ebook.pdf

https://www.marketingcharts.com/digital/video-109973 (US market)