As we’re entering a new decade, it’s time to reflect on one of the most exciting years ever in the video industry and look for the key trends for the coming year. In 2019, at Accedo, we celebrated our 15th year in business, and while it’s difficult to see market trends as they’re happening, I’m sure we can all agree that the past 15 years have seen monumental change in the video industry.
Taking a step back, the video industry seems to be in good shape, with global growth in revenues in the overall industry, with the OTT industry in particular growing significantly faster. We’re seeing new OTT services being launched everywhere in the world with a variety of offerings and business model, and experimentation and innovation are abundant.
Looking a bit closer, we see a number of industry challenges. First of all, a lot of the industry growth comes from emerging markets, whereas in many of the mature markets, the revenue growth from OTT services doesn’t yet outweigh the decline in traditional TV revenues. Secondly, the new OTT growth tends to be fragmented across many services, making the transition to OTT challenging for the market leaders. Thirdly, the value chain disruption is accelerating, with content providers increasingly desiring a direct consumer relationship, causing significant business concerns for broadcasters and distributors in the market.
With these observations in mind, what is our view of the key trends for 2020?
1. The decline of the “me too” SVOD services
One of the major trends of 2019 is the announcement from several large US content providers of global OTT strategies. Coupled with Disney’s acquisition of most of the assets of Fox, this will over the coming year gradually limit access to a supply of licensed content from these content providers. This will mean major challenges for the standard local or regional SVOD provider relying in a large part on new or library content from the major US studios. We will see an increasing experimentation of other types of content, original and licensed, and new business models such as AVOD and TVOD to save these operations from an inevitable decline in market potential.
2. The operator as the master aggregator
The amount of OTT services is staggering, and more video services are being launched at a dizzying speed. Accedo is involved in many of these initiatives and we’re not seeing any decline in experimentation and willingness to reach consumers. In fact, with the declining costs of entry, continued decline in bandwidth and distribution costs and consumer maturity, we expect this market to continue to be very dynamic.
Now, this also means that it’s confusing for the consumer, even more so when we’re heading into the mass market, reaching people who haven’t had OTT services before or at least not a selection of them. It takes time to be an educated consumer, and the OTT market can be very confusing for most consumers. The operators, telcos or pay TV, have vast subscriber bases, consumer trust and will have a key role in this ecosystem. By providing easy access to a selection of video services and by providing a superior cross-service user experience, we’ll see operators gradually regaining some of their previous role in this industry.
3. The Netflix engine will start to sputter
Netflix deserves a lot of credit for its strategy over the past five years. To pivot away from being dependent on third party content and instead building up a significant portfolio of original content was a very courageous move at the time even if it now seems obvious. Its ambitions are astonishing, and it aims to repeat the original content strategy globally, with an increasing local portfolio of content to complement the English language global content.
However, we believe that Netflix has tapped out most of the “easy growth” in North America and Western Europe, and future growth will be much more hard won, with local competitors in growth markets being more than ready for the competitive challenge. Furthermore, Netflix has successfully managed to create a brand as the only “must have” SVOD service, which I think will be challenged in 2020. This will lead to increased churn in mature markets which coupled with a necessary increase in marketing for new content and promotions to new subscribers, will put pressures on budgets and indirectly set harder prioritisations on the International growth.
To summarise, the market evolution in OTT has never looked more interesting, and the changing dynamics both on a local and a global level will certainly create very interesting market conditions to launch and operate an attractive video service. Accedo’s latest products and solutions help all of our customers to better compete in this market. We’re looking forward to continuing to support our customers in 2020 and beyond!
If you would like to find out more about these predictions, meet our team at CES.