August 2, 2016

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The Future of Content Consumption: Navigating the OTT Landscape

The emergence of over-the-top (OTT) over the last few years has been substantial and well-documented across leading industry publications. Globally, there has been a major shift in consumption modes, with users preferring to stream dynamic content through OTT services instead of traditional cable or satellite TV subscriptions. The media and entertainment industry are now experiencing an epochal shift, primarily to keep abreast of fierce competition and respond to evolving customer expectations.

The Changing Landscape: SVOD vs Traditional TV

OTT platforms with their open content delivery mechanism, that can disintermediate cable, satellite, and telco services, have been increasingly replacing traditional TV services. With viewers assuming decisive control of content consumption, OTT provides operational flexibility and a wide range of options. The proof lies in the evolving viewership habits. Within the span of a decade, the Netflix market has scaled up exponentially, from 4.2 million in 2005 to 60 million in 2015.

Traditional television productions are still one of the most preferred mediums of visual content delivery and consumption even when faced with OTT’s emergence. In 2015, HBO’s most viewed show, Game of Thrones, registered 28.2 million expressions, nearly double of that of Netflix’s most viewed telecast, Narcos, which registered 14.3 million. Despite that, the network giant’s US consumer base was surpassed by the SVOD (Subscription Video on Demand) provider. This resulted in HBO Now being launched - an OTT subscription video service offering full access to the HBO library and original programming.

Binge Watching: The OTT Edge

In evolving and developed markets, a huge part of non-scheduled TV entertainment is transitioning from a disc, DVR, and downloads to premium SVOD streaming. This is because OTT holds three distinct advantages over the traditional medium –

Convenience: Programs can be viewed from anywhere on the globe, at any time of the day, and on any device that connects to the Internet. In fact, it is increasingly being acknowledged that access instances from mobile devices are likely to overtake those from desktop solutions.

Control: The traditional TV market was a schedule-driven system where consumers had no control over the viewing pattern. With the emergence of OTT, distributors can no longer dictate the time of broadcast or the order in which the program can be viewed.

Such is the impact of OTT content that customers are expecting the same experience from their traditional TV services, which means a more user-friendly interface, faster search, and content recommendation with cross-channel support. This has led to parallel developments in the media streaming hardware space, where devices like Chromecast have enabled viewers to transfer their flexible viewing habits from the Internet to the television.

Content: Programs are not only streamed and broadcast, they are also archived. The consumer can choose from numerous comprehensive and well-curated content libraries, in addition to opting for original programming.

The immediacy and availability of OTT content have given rise to a group of dedicated consumers who can now binge watch their favorite shows, a large percentage of them being millennials. Three-quarters of US adults, in the age group of 26-32, subscribe to at least three video streaming services on an average, and the same ratio of the millennial demographic stream TV shows or movies on a monthly basis. Interestingly, even baby boomers are given to binge watching. One-third of those surveyed to do so indulge in it once a week and watch up to four episodes in a viewing session. The line between content creation and OTT consumption grows thinner as the entire video delivery ecosystem strives to ensure an optimal binge-watching experience. Consumers are showing low tolerance levels for unavailable episodes and are less likely to resume viewing a show after they discontinue watching it.

Consumer Expectations

The rise of connected devices like smart TVs, network enabled Blu-ray players, gaming consoles, and media streaming devices have led to the gradual merger of television and digital video formats. The wide emergence of these connected devices has also resulted in an improved viewing experience for consumers. Media innovators like Roku, Amazon Fire, and Chromecast offer excellent features at relatively competitive prices. The emergence of OTT has brought about an improvement in video stream quality deemed unprecedented in previous broadcasting models. Traditional television network providers had much longer production cycles, and are still upgrading to basic HD technology, while SVOD providers are offering True HD, Ultra High Definition (UHD), and 4K upscaled content. By 2015, UHD accounted for 7.5% of internet video traffic.

Apart from offering its viewers a wide selection of classic movies and new releases, SVOD providers are also developing unique content, once the exclusive reserve of satellite television. Netflix plans to invest $6 billion in exclusive content and will broadcast 600 hours of original programming in 2016. Amazon Prime Video has invested sizeable resources in an exhaustive list of preferred shows, many of which have been renewed for multiple seasons.

Netflix and Amazon are part of a larger OTT emergent ecosystem that has been proven to be successful. Despite that, less than stellar reception for companies like Xbox Entertainment Studios and Redbox Instant have placed caveats to this trend.

For VOD service providers, navigating the dynamic digital video landscape, and surviving it, requires a vision for the future and dealing with rapidly changing customer expectations.