By Michael Lantz, CEO Accedo
Over the past 2 years, the OTT revenues have now become significant and “OTT only” content production is exploding.
OTT offers unparalleled customer experiences and opportunities to lower distribution costs, reaching new subscribers and providing new ways of engaging with audiences. Unfortunately, with new internet models come disloyal consumers, lower monthly spending and emergence of new competitors. Initially, it will clearly be much harder to create the sizeable profits of the traditional TV industry, which was much more monopolistic, especially on the distribution side.
I’m excited by the wider industry trends, and 2019 offers a glimpse into what I would call the “second wave of OTT services”, where the first wave consisted of the independent OTT providers (Hulu and Netflix) challenged by traditional networks and broadcasters (HBO, ITV, BBC) extending existing business models (subscriptions or advertising) into a new channel. The second wave will instead finally see a significant investment from content owners. The flagship service launch is Disney+, but we will see significant initiatives from the likes of AT&T owned WarnerMedia and Comcast-owned NBC Universal, as well as continued efforts from platform such as Apple and YouTube to establish a premium OTT service. These initiatives are hugely significant for the entire industry for various reasons:
First, they will likely be global or at least multi-regional. In particular, Disney’s brand and content will be well suited for a global audience. Second, there will be indirect effects with the content owners pulling or restricting other licensing in anticipation of the new service launches. Thirdly, we will see further explorations of “OTT-only” content being available only on these platforms. The desire to emulate Netflix’s success is obvious.
Finally, we will see the first true tests whether the “operator/media” consolidation will really make any difference. Will, for example, the AT&T/Warner merger deliver the possibility of creating a global OTT service out of Warner’s relatively weak consumer branding (yes, not even HBO is particularly strong if you look on a global basis)?
What we’ll see without a doubt is that consumers will be targeted with an immense amount of marketing for new services. We’ll see confusion and consumer experimenting with new services. We’ll see experimentation with business models and we’ll see a huge amount of content being made available to audiences for the first time. The investments will be larger than at any time before and time will be of the essence. If we just take Disney as an example, it will be extremely vital for them to show a significant progress as a challenger to Netflix.
I personally think that this second wave of OTT services will push OTT growth significantly. We will continue to see multi-service consumers and in high-revenue markets, I believe that we’ll start to see the average monthly video service bill start edging up again. While cord-cutting and cord-shaving will continue unabated, we’ll see OTT consumers with $50-60 monthly total spend. Overall, this is great for the industry and with more usage we’ll also see an increased fragmentation and willingness to try new services, maybe in partnership with some of the larger services or maybe as stand-alone services, locally, regionally or with a specific niche in mind.
The OTT industry has never looked more interesting than it is right now, as we begin 2019.