New TV is here, and traditional TV is scrambling to understand it. We all know content is king and it will continue to be king. What’s no longer king is the distribution medium that carries the content. This is why the rise of over the top or OTT is so necessary right now. It’s the next wave in media consumption and distribution and quite possibly the greatest threat ever to the cable model. There’s no longer a need for a cable operator to carry or distribute your channel. I’d like to detail what’s happening in the market at a top level and the basics of OTT to state the point that we’re at the advent of a completely new model of entertainment that, in my opinion, will rock the industry at it’s core.
8 things to consider when trying to understand the importance of OTT
- OTT or Over-the-top is primarily the term used to identify programs, apps or networks that are launched through platforms like iphone, ipad, android, AppleTV, Roku, Amazon Fire and even on-deck on Smart TV’s. Initially, successful placement on these platforms required intricate deals with companies like Apple and Samsung which over time had stymied it’s growth. However, while it’s still not necessarily turn-key to launch a network on these platforms; it is now much easier to do so.
- Content, as King, can build you a Kingdom of your own. If you’re a content producer, you may want to consider building an OTT to house your content long-term. There’s several monetization models, starting with subscription and ad supported. Within these models, there’s now an opportunity to increase your own ROI. Instead of drawing eyeballs to someone else’s platform and helping them grow THEIR overall ROI, now with OTT, you can build your own platform and monetize for yourself.
- There’s Video on Demand (VOD), Live Linear TV (IPTV) and Live Broadcast. All three are relevant but you don’t need all three to have an effective OTT strategy. Where older generations grew up watching TV with their parents on the family sofa, Millenials and the new Founders generations are what I like to call the pass-back generations because they grew up with a parent passing back an iPad to watch TV shows while on the go. The newer generations watch TV yes; but they watch it on any device, whenever they want to. No matter what anyone in traditional TV says; the truth is that these generations are not your cable viewer. Increasingly, they care less and less about your brand and more and more about binging on great content.
- The threat to TV is not only from small content producers; it’s from the big ones. Increasingly, content producers are realizing that they’re able to rely less and less on larger distributors to create great content. As audiences have eroded from large, expensive cable nets, so have the budgets to produce shows. This is a trend that will continue until a change has happened across the entire marketplace. With cable losing subscribers to thin bundles and cord-cutters and while they may claim a “healthy” growth in subscribers, they’re masking huge revenue losses. I recently read that ESPN in particular is losing over $10MM in subscriber revenue.
- Brands are getting smarter much quicker than traditional distributors. I work to create OTT distribution for some of our content producer clients and find that brands are actively in-market for OTT. It’s no longer only early adopters/innovators like Red Bull which has a robust content platform and an in-tune marketing machine. It’s brands like Dove and P&G that are out there connecting with content producers to build native, themed networks. As those joint ventures succeed, we’ll see more advertising dollars displace from traditional distribution to this new content model.
- Less than ten years ago cable networks were averaging a viewer age of 30+, now they’re averaging 40+. In my projections, within five years they’ll be averaging a viewer aged 50+ which effectively puts them outside the coveted 24-49 prime advertising range. Alternatively digital is bringing in the prime-time Millenial viewer who can be properly measured, easily scaled and effectively targeted. With digital, we learn about the viewer, not only from a Nielsen box and their TV viewing activity but from their combined behavior online and can monetize this activity effectively by ensuring an advertiser is reaching the right audience for their brand. This reduces spending while increasing ROI by combining first, second and third party data. As platforms continue to evolve, with dynamic ad insertion for VOD already in-market and for live feeds about to hit, the capabilities and attractiveness of digital will far outweigh linear in the not too distant future.
- Live Broadcast, if it’s not part of your strategy, should be. It’s not about Periscope, it’s about what Periscope/Meerkat started. It’s like when reality TV came around, everyone started producing mostly reality, over time, it just became one of the many categories of production. Live broadcast is unique in that it actually opens the door to interactivity like never before. It also opens the door to exciting opportunities like citizen journalism. As content producers evolve their interaction models, Live can help fill the seven day gap.
- Appointment Viewing is not dead BUT it will become diluted as a primary target. With VOD and Live Broadcast what we’ve been able to realize is that commodity outweighs excitement. People are more interested in viewing what they want when they want it than in waiting for something to watch it on time and date scheduled. With OTT, the models of distribution, content lengths and linear will evolve out of their current formulaic strategy. For example, it’ll become easier to fill the seven day gap by leveraging techniques like live broadcast to cut-in throughout the day with relevant content just one phone alert away.
The future is bright and a window of opportunity has been presented to revolutionize the hegemony of media. With fearless content producers and ambitious, smart and witty media companies we’ll have many more choices. While cable still resists un-bundling, OTT will allow us to select, pay for and support the content we actually want to watch. Lastly, the people will be the ones to reward excellence in media, producers will have a chance to get their great ideas out there in a whole new way to be and OTT will have provided us the opportunity to diversify and evolve media consumption habits.