Hello OTT 2.0!

OTT video is growing up with consumers latching onto their mobiles for viewing content of all shapes and sizes. Broadcasters are reaching out to them directly with their own OTT options, expanding globally in search of fresh opportunities, and harnessing new technologies, enabling deeper viewer immersion and analysis. Competitive pressures are raising the stakes and budgets for content, and VOD is no longer the only game in town. New formats and strategies for monetization are taking hold, with success assured for companies that fully understand their audiences and can give them what they want.

Consumers
Content and screens have become inextricably intertwined and today’s viewers expect any content, anywhere, anytime on any device. As fragmentation of content presentation and consumption continues amid proliferation and diversification of smart devices, video has become a social butterfly, attracting new audiences and revenue, pollinating new platforms, and flying beyond the living room.

All content, all screens. With every type of content available on all screen types, mobile viewing is on the rise as consumers capitalize on fast internet speeds for better video streaming quality. Long-form comprises the majority of content on every screen while OTT subscription households today avail multiple OTT video services driven by ubiquitous consumer desire for content choice, convenience, lower costs, coupled with technological advancements.

Cord cutting. As mobile viewing and content availability grow, pay-TV cord-cutting has accelerated. People who cut the cord consume 60 percent more OTT content than other viewers with skinnier content packages and bundling multiple SVOD services becoming key trends.

Changing demographics. Broadcasters are seeking to tap younger viewers by introducing engaging millennial-focused content coupled with engaging formats, while leveraging social platforms and deep data reserves to discover novel ways of bringing video to the masses.

The social season. With social video coming of age, major social platforms are seeking to enhance their existing strong engagement with younger audiences by expanding investments in short-form and long-form video and capture attention from other digital platforms and entertainment options.

Industry
As pay-TV subscribers untangle themselves from the cord for new content treasures, content providers face a new business reality moving into 2018. Companies are exploring new direct-to-consumer (DTC) routes, going global, and re-imagining content to connect with more demanding consumers everywhere.

Take the direct route. The impact of OTT and its potential to not just augment linear TV but replace it is a painfully obvious fact for traditional broadcasters and operators. Virtual MVPD (vMVPD) skinny bundles – the poster child of the OTT 2.0 world is another key factor in OTT growth. Telcos also are getting into the mix. Operators are turning to these offerings to hold onto at least some cord drifters with pared-down and customized OTT channel packages at lower price points and live TV options. Also in play are packages pitched as add-ons for current customers.

2018 will see bundling experiments as companies balance network licensing fees and carriage restrictions with their own revenues. Operators and programmers are adapting as consumer interests shift online, saturation in some markets grows, future linear carriage remains uncertain, and technology companies push into traditional broadcaster territory. Partnerships across multiple business areas including distribution and ancillary smart home services will be crucial to their strategy and revenue mix.

Consumers have direct access to OTT. Amidst the dizzying options in the marketplace for consumers, a continued shakeout of services and re-aggregation among content players is on the horizon to address the business realities of competition and simplify viewer experience. Regulation, deregulation, and their impact on video will be major discussion points worldwide this year.

Go global, think local. Today, content providers are charting a global course, looking to scale OTT services and bundles beyond their traditional regional reach to capture new audiences and revenue. OTT TV episode and movie revenues for the top 138 countries will hit USD 83 billion in 2022. Expansion is not without its ongoing challenges, including business regulations for market entry, licensing restrictions and piracy issues, multilanguage versioning requirements, payment options, and network and broadband capability. Yet, OTT is growing everywhere. Along with premium video that works across international markets, local content continues to be a critical differentiator for regional success, driving audiences, premium pricing, and ultimately, revenue. India is witnessing fierce OTT competition and a rise in niche programming that is popular locally, such as cricket and Bollywood movies.

Technology
Technology is giving way to many new broadcast and service opportunities, while video and consumers are being bonded via deep data, wild immersion, and artificial intelligence.

Immersed in video. The industry has been gearing up for advances, enabling greater adoption of more robust video. 5G will bring higher data speeds and better video streaming quality to mobile devices and broadband, apart from catapulting new delivery technologies like fixed wireless, which is already being tested by top operators, thereby boosting demand for more robust video content. Similarly, US broadcasters are anticipating deployment of the ATSC 3.0 transmission standard, allowing increased ties between linear and digital delivery, and more interactive and personalized opportunities around video content. These capabilities are expected to propel adoption of higher broadcast resolution offerings like HDR and 4K. OTT providers remain strong drivers of 4K content as a continued point of differentiation to consumers and as a means for justifying premium pricing. Social companies are following suit. While HDR is helping to drive 4K TV set shipments, non-4K, HDR TV set sales are also booming. 8K is also now on the table for the industry. High-resolution video offerings will be embraced more widely this year as consumer hardware starts to catch up with demand.

VR, AR, and 360-degree video technologies are also ramping up in the marketplace. Companies are dreaming up ways to make real money from VR once audiences lean in. Mobile VR is likely to be a key conduit to success and faster adoption. Many industry observers are also bullish on AR. Compared to VR, AR is less solitary, less technically challenging, and less encumbered by the need for a headset – although some see possibilities in headsets. Pure 360-degree video is also gaining traction.

In the deep. Broadcasters are starting to go all in on IP technologies and metadata. From production to delivery, from discovery to monetization, both are now driving critical advances and efficiencies in every area of video. Content providers across linear and digital platforms are realizing that metadata’s ability to keep their teams connected to video assets – and to each other – throughout the entire content lifecycle brings richer insights and rewards. Consequently, platforms are changing the broadcast production business at its core. Metadata and analytics will be integral to the advancement of personalized video and discovery.

The proliferation of sophisticated metadata has powered the growth of artificial intelligence (AI). There will be more experiments to test the range of AI applications that harness data within video throughout 2018. Blockchain technology is going to play a more prominent role in video going forward as well by harnessing metadata to create more transparent, secure, and unalterable systems for activities like talent and production payments. Expect an uptick in block chain deployments to redefine many industry operations.

Programming
Content budgets are blowing up and originals are riding high. Revenue models are changing, new strategies are emerging, and if live OTT is the new it girl in town, sports content is her first starring role.

The sky’s the limit. Competitive pressures, consumer content demands, and advertising revenue opportunities are raising the stakes on industry programming and production budgets and premium content output, creating an urgent need to cut costs and increase efficiencies throughout the video lifecycle.

As tech companies move into the ring, peak TV is looking more like a base camp one. There are far more distribution options now, but everyone is battling over top talent and ideas to register with their core audiences. SVOD services are also seeing many network acquisition deals expire or costs rise, with networks pulling back after seeing their content help build competitive offerings. Program ownership and in-season stacking rights models are also changing. Consequently, among many of the largest SVOD and social companies alone, annual spending on originals for each has tipped over into the billions, making it even more difficult for smaller companies and traditional television networks to compete. More consolidation could be afoot soon. There will be show marketing budgets and activities increase in tandem to help viewers find content.

Companies continue to pivot to hybrid revenue models that combine subscription with advertising or transactions, or even all three. Premium video on demand (PVOD) for theatrical movies in the home is the latest potential entrant to the mix. Content providers are also exploring new ways of producing content and doing business as a means to deal with the realities of a changing marketplace. Many are looking at live video to change the linear and OTT industry dynamics for good.

Live thrives. Live OTT is set to soar going forward. While live TV viewing remains at top overall, there has been a continued shift to live connected device consumption. Live-linear OTT viewing will surpass typical broadcast TV viewing globally by 2020. Social giants like YouTube and Facebook are a prime conduit for live events. But SVOD services are also embracing live video to compete with linear, social platform, and vMVPD offerings. Sports remain a prime component of live content. Many leagues are offering their own DTC live offerings and becoming broadcasters themselves. Expect flurry of live OTT sports rights deals and experiments to continue unabated this year, with more direct competition for rights between linear networks and OTT companies, and exclusive content becoming a core element of offerings. High video stream quality, reliability, and low latency remain paramount to the live experience. For broadcasters, live TV is about creating the entire end-to-end experience holistically – from channel setup, playback, and monitoring to linear integration, live-to-VOD conversion, and monetization. Expect 2018 to bring more innovations in live video and the platforms to support its growth globally.

Conclusion
OTT is growing up and moving beyond what the broadcast industry has seen before. In the world of OTT 2.0, success will come to those companies that can dance with the consumer, and embrace technology, data, and new ways of thinking about video content and how to monetize it. It is time to charge forward and meet the future.