Content – It’s An Algorithm 

Hollywood and the TV industry spend a lot of money figuring out what people wanted to watch.

It was a hit and miss. Strong shows or movies could offset the weaker ones. Executives could give a potential TV show (eg: Seinfeld or Cheers) or another so-so movie a sequel. In hopes that it’ll find an audience.

Fortunately, once the technology companies like Amazon Video, Hulu, Netflix and YouTube arrived, content became an algorithm. An algorithm based on analytics, designed to help these companies gain insights into their customers.

The perfect example?

Netflix.

Using the:

A) 30 millions “plays” a day from its subscribers (when they pause, rewind and fast forward)

B) 3 million searches its subscribers does 

C) data its subscribers generate (when they watch the shows, on what devices) and

D) the viewers metadata that describes the talent, action, tone and genre

Netflix was able to use all the data to create original content. Original content such as “House of Cards.” “Orange is the New Black.” “The Crown.”

That’s the power of big data.

Big data that allows you to create hits.

Not misses.

NB. Need more proof that big data and the algorithm can create content and drive subscriber growth? Netflix’s recent quarter. Where the company gained 5 million international users. 2 million US users.

Sources

Bulygo, Zach “How Netflix Uses Analytics To Select Movies, Create Content and Make Multimillion Dollar Decisions” https://blog.kissmetrics.com/how-netflix-uses-analytics/

Carr, David “Giving Viewers What They Want,” February 24th, 2013 http://www.nytimes.com/2013/02/25/business/media/for-house-of-cards-using-big-data-to-guarantee-its-popularity.html

Finimize “Netflix, too busy to Netflix n’ chill,” January 19th, 2017 email newsletter

TV….it’s an app

Television.

It used to be that the only option was buying a big tv screen, placing it in one’s living room or den, then everyone would gather around at a specific time to watch their favorite program.

Not anymore.

As Maria Rua Aguete, Research Director for Television Media at IHS wrote in her blog:

“US cable TV average revenue per user (ARPU) is $80…many will continue cutting the cord in favor of lower priced alternatives if they feel they’re overpaying for what they are getting.”

As a result, and with the advent of Roku, Chromecast, AppleTV, tablets and smartphones, television has become an app.

An app where everyone can watch when they want. And where they want.

According to #Digital90210, media consumption in apps grew 108% from Q2 of 2014 to Q2 2015. Applications that makes it easier for consumers to access the content and services that are important to them.

The perfect example? CBS News launching a new AppleTV app with no authentication required. With a focus on live video where users can browse while watching to find related video and video playlists. With the ability to bookmark on demand videos.

An interesting point. CBS News reports that the average viewing session is the longest when users use AppleTV versus other devices. 96 minutes per session.

In addition, according to Brian Wiser from Pivotal Research, viewing of TV programming on internet connected devices rose 62% in June 2016 vs a year ago when he analyzed Nielsen’s data. He also noted that there was a boost in viewing on gadgets (Roku, AppleTV and Chromecast) that pushed the total use of TV up 2.4% in the 18-49 age group. And accounted for 7.7% of all viewing.

From an addressable TV advertising perspective, Tim Hanlon, managing director of FTI’s Consulting Telecom, Media and Technology Practice, has some interesting insights:

  1. cord cutting and unbundling are affecting/pressuring the economics of MVPDS (MVPDS can’t raise their subscription rates to compensate for the decline in subscriber numbers) and
  2. the advantage of television’s scale, when it comes to advertising, is a “red herring” as marketers are comfortable with precision targeting because of digital advertising thanks to audience data and the IP-ization” of media channels.

In addition, as the television audience continues to fragment (eg: HBO Now, CBS All Access), any advertiser who wants to advertise on these channels can’t because no measuring device has emerged to measure the audiences.

Add that about 50% of online viewing occurs in ad free or ad light formats, advertisers are asking this question – will consumers gradually get used to viewing no ads? If they do, then what happens? How can they quantify the program’s being watched online?

The challenges, from an advertising point of view, remain. Without any audience statistics, advertisers are unable to determine where to place their ads.

From a customer POV? It’s never been more easier to watch content online when they want it.

Sources:

https://techcrunch.com/2016/02/15/the-appification-of-tv-and-the-web-and-four-other-mobile-trends-to-watch/

http://www.nielsen.com/us/en/insights/news/2014/uncommon-sense-the-appification-of-tv.html

http://www.thetvoftomorrowshow.com/video/emerging-primacy-app-appification-tv-and-its-implications

http://www.digital90210.com/2016/02/the-appification-of-the-web-and-tv/

http://blog.ihs.com/why-has-the-us-been-so-vulnerable-to-cord-cutting

http://www.mediapost.com/publications/article/279882/hanlon-addressable-tvs-inevitable-moment-is-co.html

http://www.broadcastingcable.com/news/currency/internet-connected-tv-boosts-viewing/158136

https://www.bcgperspectives.com/content/articles/media-entertainment-technology-digital-future-television-where-us-industry-is-heading/

https://www.cedmagazine.com/news/2016/07/new-apple-tv-app-launched-cbs-news?et_cid=5394888&et_rid=801075268&type=headline&et_cid=5394888&et_rid=801075268&linkid=https%3a%2f%2fwww.cedmagazine.com%2fnews%2f2016%2f07%2fnew-apple-tv-app-launched-cbs-news%3fet_cid%3d5394888%26et_rid%3d%%subscriberid%%%26type%3dheadline

Why you need niche OTT

The viewer controls the dial. Not you.
The media and entertainment world is changing.

Viewers want to see their content when and where they want. Without the annoying advertising. With no breaks in between episodes. Without the noise, expensive movie tickets and snacks. And without paying for an expensive cable bundle with useless channels they refuse to watch.

Even though Netflix, Hulu and Amazon Video are generating the most press for their product (and mainline TV networks belatedly enter the OTT scene), there’s still room for you to prosper amidst all the competition.

Operators need solutions to increasing video consumption

According to Cisco, video traffic is increasing. By 2019, 80% of all IP traffic crossing service provider networks will be video; 42% will be viewed online.

Operators will be challenged with managing this traffic and extending traditional TV services to new devices. One possible solution? Turn to content delivery networks (CDNs). This means
1) distributing local content caching and multi screen streaming platforms out towards the edge of the network. This in turn reduces operator bandwidth requirements for delivering loads of IP Video content while giving their customers multi screens experiences they want or
2) operators can use the CDNs to offer “whole sale” CDN services to their content provider partners and other B2B customers who will pay to distribute their content over CDN.

Either way, this brings an enhanced live and on demand TV experiences to a range of screens (connected TV, tablets and smartphones through a single cloud).

Niche OTT = future profits
Even though the operators have the pipes, they will still need content to prosper. This leads us to niche OTT. It’s growing rapidly. In the US, it was worth $4 billion in 2014. By 2018, $8 billion.
Even though there are a lot of problems in
A) integrating infrastructure components from different vendors
B) acquiring large amounts of premium content and

C) retaining subscribers

niche OTT has a lot of potential as consumers are willing to spend on the content they love and easily can’t get. Fans willing to pay for the merchandise, interact with the actors, create content and talk about the brand.

Three examples:
Crunchyroll. In 2013, the OTT had over 200,000 subscribers paying $7/month for premium, ad free access. By 2015, the channel grew to 700,000 subscribers with around $60 million in revenues from subscribers and ad revenues from the site’s 10 million registered users. That’s the reason why it secured an extra $22 million in funding.

NBCU’s digital chief Evan Shapiro. Not only is he launching Seeso but 9 others as well. A strategy similar to the expansion of base cable networks over the last several decades.

Klowdtv focus on Spanish programming: http://www.broadcastingcable.com/news/currency/streaming-ott-service-klowdtv-adds-estrella/147433

Technological barriers getting cheaper by the day
First, the technical barriers to OTT cost less. It’s cheaper to outsource technology systems to others. The old way? Building a team that can manage content, delivery, transcoding, search, storage, management etc. Time consuming and expensive. The new way? Outsource this to others like Brightcove, MLS Advanced Media, thePlatform (Comcast), Ooyala (system integrators).
Second, tons of new entrants are selling and distributing long tail content for more narrow topics. These new entrants are coming from different backgrounds versus web companies like Netflix or Google. These multichannel video programming distributors (MVPDs) might have a major impact on the market. In terms of content delivery, each OTT provider’s content delivery strategy (IP peering, private caching programs, use of SSL, multi-CDN sourcing) is an extension of their business strategy, the key to achieving desired cost and quality goals.

Other considerations 

According to Ralf Jacob, President of Verizon Digital Media Services, some OTT providers platforms were designed with VOD in mind. Live video is the perfect opportunity to target advertising at individual viewers, rather than broad demographic segments. Be prepared for a 100x spike as viewers tune in at the same time. This means your servers must be ready to handle big surges in viewership. 

Conclusion
In an ever changing market, the viewer wants to see compelling content at their convenience. Even though a lot of viewers tend to watch Netflix or Amazon Video, there’s enough room in the marketplace to create your own OTT channel.
One which allows you to capture and profit from a niche audience.
An audience which is willing to pay for your content. Spread the word about your channel. And becomes a devoted fan of your product.

P.S. An update. For those thinking that the US cable industry will be DOA due to the cord cutting, SNL/S&P Global Market Intelligence has some interesting statistics: http://www.prnewswire.com/news-releases/next-10-years-look-upbeat-for-the-us-cable-industry-300312221.html

P.P.S. Update number 2: from an online video platform technology POV, continued growth as these equipment providers continue to provide the glue for everything to work together: http://marketintelligence.spglobal.com/blog/online-video-platform-vendor-revenue-to-grow-70-from-2015-to-2020?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%253A+spmarketing2+%2528S%2526P+Global+Market+Intelligence+-+Insights%2529

Sources
—, Cisco Readies Shaw’s Content Delivery Network to Share Thousands of Video Sources Across Multiple Devices, January 6th, 2016 courtesy of @CiscoSVP Video tweet (http://investor.cisco.com/investor-relations/news-and-events/news/news-details/2016/Cisco-Readies-Shaws-Content-Delivery-Network-to-Share-Thousands-of-Video-Sources-Across-Multiple-Devices/default.aspx)

Frankel, Daniel Fierce Cable “Seeso boss NBCU will go creating niche SVOD services just like it did cable channels” January 11, 2016 (http://www.fiercecable.com/story/seeso-boss-nbcu-will-go-creating-niche-svod-services-just-it-did-cable-chan/2016-01-11?utm_medium=nl&utm_source=internal&mkt_tok=3RkMMJWWfF9wsRonsqzIdO%2FhmjTEU5z14%2B0qXKexlMI%2F0ER3fOvrPUfGjI4CTMpiN6%2BTFAwTG5toziV8R7LMKM1ty9MQWxTk)

Haynes, Megan StreamDaily TV “How niche is too niche?” November 27th, 2015 (http://streamdaily.tv/2015/11/27/how-niche-is-too-niche/?utm_source=stream-newsletter&utm_medium=email&utm_campaign=how-niche-is-too-niche&_u=Hvo9PUxDWIw%3d)

Hultgren, Kaylee Cablefax “OTT Services to Grow to + $8 Billion by 2018; Niche Services on the Rise” July 15, 2015 (http://www.cablefax.com/screenster/ott-services-grow-8-billion-niche-services-rise)

Jacob, Ralf M&E Journal “How to Power a Live Video Event”, April 12th, 2017 (http://www.mesalliance.org/2017/04/12/journal-power-live-video-event/)