IBC2015: On-Demand TV Comes of Age

 

Media and broadcasting industry headed again this year to Amsterdam’s IBC. Here follows our report.

Future of tv - 1

Video on demand moves from nice-to-have to a real business

Video on demand (VOD) has been an area of experimentation and nice service for the viewers, mostly in form of catch-up services. Netflix and other new video content providers have, on their behalf, based all of their business on on-demand rather than traditional linear, schedule-based programming.

Video-on-demand is about to come of age. From advertising sales point-of-view, some channels  such as UK’s Channel Four estimate VOD advertising to make around 10 % of their total advertising income in 2016. That share is obviously on growth path.

As VOD becomes a “normal” way of viewing TV besides linear viewing, there are implications for content strategies, content development, marketing, advertising sales, measurement and analytics.

“This is great news for consumers and advertisers”, says Julia Jordan, Havas UK. Consumers will be able to access growing amount of content and advertisers get “deep brand immersion opportunities” and an “ideal stepping stone between linear TV advertising and advertiser web content”.

To take the benefit of targeted advertising there are pressures growing for measurement and analytics. Time Warner’s Joan Gillman: “You need to move to impression based measurement – sample based model does not work any more”.

On-demand requires changes also in marketing of TV shows. Instead of concentrating marketing activities at show launch, more continuous marketing approach is needed to activate viewing in long term.

Big players coming to direct-to-consumer

In the era of content delivery on the Internet the big media companies that own big content portfolios are looking at offering content directly to consumers, in addition to current distribution channels.

One of those is Discovery Networks. Jean-Briac Perrette, President of Discovery Networks International, told that the company’s non-US revenue surpassed their US revenue last year. Discovery has been in an acquisition spree buying e.g. Olympic rights, SBS media company and a share of UK production company All3Media.

Discovery has announced that they will start their direct-to-consumer offering in the Nordics due to the strong position they have through their SBS acquisition. Perrette didn’t disclose if they were going to offer some of the Olympic content directly to consumers as well.

“One-to-one is totally different animal”, Perrette said, comparing the business model with traditional TV business. Technology would not be the key issue as there are tech partners for that.

Sky, Dish address cord-nevers with their own Internet TV services

As frequently reported, the amount of cord-cutters (people quitting their pay TV in favour of Internet TV) and cord-nevers (millenials never starting to subscribe to pay TV) is on the rise. In the US, pay TV penetration has dropped from 89% to 80% of the household in few years.

Sky and Dish are among established pay TV companies that address the cord-cutting and cord-never phenomenon by introducing their own Internet based TV services (called also “OTT”, over-the-top services). Sky’s service is called NowTV and Dish’s Sling TV.

According to presentations from NowTV and Sling, these services aren’t yet significantly cannibalising their parent companies’ pay TV business but rather targeting different customer segments. Gidon Katz, NowTV, told that “90% of our subscribers hadn’t even considered subscribing to Sky”.

Internet TV, or OTT, is not just “sending cable TV channels on the Internet”. First, Internet services are mobile and not restricted to a fixed location. They are also often used with mobile devices. With cable and satellite services customer acquisition cost is high – in the US the average cost 850$ according to Sling TV’s Roger Lynch. The cost includes devices, credit checks, sales costs and the high cost leads to long fixed subscription periods. Internet TV sales works with a funnel model that start with free trials. Low sales cost removes the need for long fixed subscription. On the contrary, Sling TV’s Lynch told that the service needs to be very easy to cancel, that encourages customers to come back later.

Compared with cable, Internet TV has some differences in advertising as well. While in cable the advertising is primarily sold by channels and delivered as a part of the stream, Internet TV services can sell the advertising and take the benefit of their customer data.

Forget the “second screen”

“Second screen” refers to the idea that TV viewers would interact with TV content with their mobile or other devices while watching TV. Now that the idea has been presented for some years, the real success stories are really rare (we reported a couple of those in our IBC2014 report). It seems that the idea that TV would be the core medium that is complemented by other media does not work: more often it is the mobile device that is the core and TV complements mobile’s offering. As Jeff Nathenson, Whistle, put it: “If there is a second screen it is the one which is further away from teenager’s nose [than her phone]”

Content: storytelling, virtual reality and short formats

On the content side key trends were storytelling, platform independence and short formats. “ESPN became great not because of showing live sports but bringing storytelling to sports programming”, said Whistle’s Nathenson.

Stories become critically important for advertisers as well. Going to fridge is no longer the biggest competitor for ad breaks, mobile browsing is. Many speakers therefore emphasised the need for advertisers to develop stories and meet their target groups through content marketing rather than TV spots.

Content should travel to all appropriate platforms. If your content works on Snapchat, then you’ve made it. Which, of course, is easier said than done.

On the future-looking side, one should be prepared to utilise virtual reality, augmented reality and 360-degree images in storytelling (whereas 3D was not discussed at all). BBC’s Fran Unsworth presented a vision where as a part of news coverage the viewer could step in the middle of battle scenes with virtual reality technology. For those wanting to test virtual reality content available today, we recommend downloading “Lexus Virtual Drive” app from your app store.

The shortening attention span of youngsters and growth of online video viewing increase the need to produce short-format content. Thereby we’ll end the report with the informative music video from BBC featuring YouTube star Brett Domino. Enjoy!

Timo Argillander

Timo toimii sijoitusyhtiö IPR.VC:n managing partnerina ja Digital Media Finlandissa neuvonantajana. Timolla on pitkä kokemus strategiatyöstä ja muutoshankkeiden läpivienneistä yrittäjän, ammattijohtajan, konsultin ja sijoittajan rooleissa. Timon erikoisalaa ovat muuttuvien liiketoimintaympäristöjen ansaintamallit ja teknologiamuutosten tulkinta.

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