3Vision Insight - OTT SVOD vs Pay TV
21 Oct 2013
Over-the-Top (OTT) video continues to increase its influence on the media landscape. OTT services number in the hundreds, but we are more interested in how Subscription VOD (SVOD) services are developing, and the specific challenges they present pay TV operators.
SVOD OTT operators and business models
In our recent survey of global OTT service providers offering SVOD the majority (48%) were independent of any broadcaster, Pay TV operator or content owner business.
30% of services had some level of pay TV operator interest, 27% broadcaster and 13% content owner.
In terms of business models, 28% rely solely on SVOD, but in total 60% also offer TVOD, with some of them also offering free VOD.
SVOD OTT operator’s device integration
Connected devices remain a major focus for service providers, but the diverse market for devices, and the continual emergence of new hardware or new operating systems make prioritisation a challenge.
From our surveys it appears that SVOD services are going further than catch-up; aside from connected TV integration (which has been helped by consumer electronics manufacturers demand for catch-up services) integration is markedly higher with SVOD OTT.
There are regional variations, with games consoles significantly higher in North America (close to 70%), and pay TV operator integration at 35% in Western Europe largely driven by France and the Nordics.
SVOD OTT operators and original production
Another area of interest is the significant moves into original production. Although it is yet to be seen how this may develop outside of the influence of the North American production businesses, there it is becoming a new battleground for Netflix, Hulu and Amazon.
Although their strategies all vary, we will begin to see whether these moves make financial sense for the operators, and whether more alliances will be formed with traditional media.
Premium channels opening the walled garden
More free-to-air broadcasters are moving into new models, adding transactional and subscription services to their catch-up services.
Significantly though we also see pay TV platform premium channel businesses gradually moving from TV Everywhere - requiring a pay TV subscription - to pure OTT available to anyone.
It is the loosening of these restrictions associated to premium TV channels that illustrates how seriously pay TV platforms are taking the threat from OTT services (and in some markets perhaps the opportunity it presents).
How are pay TV operators responding?
There are numerous responses open to operators, and strategies vary.
TV Everywhere is becoming a relatively standard feature of the Pay TV Landscape (>60%), although scope varies.
Some are joining in with their own OTT offers but it remains the minority (23%), with those initiatives themselves divided between ones that have ambitions to create new revenue streams, and others simply defending their businesses.
More aggressive content acquisition strategies have to be adopted - much to the appreciation of content owners. Change is being forced upon the movie windows (in particular with a more clearly defined 2nd pay window), and prices are rising in a market where growth has been static for some time.
There are more signs however of operators welcoming third party OTT services. Either by using them as a tool to get across the benefits of superfast broadband or by adding value to their TV proposition.
For the full insight, please get in contact with us.