OTT Companies Spent Over $105 Billion Producing Original Content – OTT Trends 2020
Published on Aug 10, 2020
Is it our imagination that people are ‘binging’ on streaming services more than traditional TV? Probably not. The OTT statistics from 2020 clearly highlight the shifting trend where consumers are willing to move on from the traditional ways of devouring content. People all over the world are increasingly getting obsessed with “binge watching”. According to Forbes, more than 50% of all American adults are consuming content such as seasons of popular shows, movies, stand-up comedy, OTT-originals, documentaries, concerts etc on Over-The-Top (OTT) platforms.
In an OTT (Over-The-Top) platform, users can access the content via an internet connection on multiple devices – mobile, desktop, OTT devices such as Smart TV, Apple TV, PlayStation, Amazon Fire Stick, Chromecast, Xbox etc.
The rise of OTT
OTT platforms are rapidly emerging as one of the most preferred mediums of entertainment. Over-the-top service providers are spearheading the exploitation of new opportunities as more and more people make the switch to online content by cutting the cable cord. One of the prime reasons for the surge in popularity of OTT video streaming platforms is high-quality-unlimited-access to original content on the go. OTT players such as Netflix, Hulu, Amazon Prime video, HBO Max, Disney + etc are operating an ecosystem which is much more crowded than it was a decade ago. A report by eMaketer reveals that in 2019, the United States witnessed the OTT subscribers to reach over 182 million – that’s more than 50% of the population. According to a report by PWC Global Entertainment & Media Outlook 2019-2023, the pay-TV subscription model dropped to $81.8 billion in the US, and will continue to decline despite the introduction of internet bundle packages, advanced set-top boxes and 4K TV.
Lots of OTT video platforms to choose from
Consumers these days have more than 300 video streaming services to choose from, according to a research by Deloitte. The US being one of the most advanced OTT markets in the world, more than half of the population has subscription of at least one OTT service. However, the Asian and European markets are still in a growing stage. According to Magnet Global, 46% of the population has subscribed to two or more OTT services.
OTT trends 2020
The M&E market is flaring up with innovations and services. An unprecedented spike has been witnessed in the demand of OTT originals – the original content being created by the OTT service providers. The demand is on a continuous rise now that more and more M&E companies are entering the space with D2C offerings (Direct to Customer). In 2019, 8 largest M&E companies in the United States spent around $105 billion on original content production, majorly for their own platform.
Here are some of the OTT trends of 2020:
1. Good UX to drive OTT app engagement
In addition to content variety, ease of content discovery and stellar original content, amazing User Experience (UX) plays a crucial role in inspiring brand loyalty and helps a brand become the most preferred video streaming platforms for users. Intuitive functionality, seamless navigation and eye-catching aesthetics are some of the hardest things for new OTT service providers to get right. 51% of people agree that ‘accessibility to discover new content’ ranks as one of the key reasons for choosing an OTT platform.
2. More focus on 4K and HDR original content
Top OTT platforms in the world are actively putting their efforts in attracting viewers with their exclusive content which is tailored to specific audiences. Content localisation in certain regions has also increased, where more of regional language content is being binge-watched. On top of that, there is an increase in the demand for original content in 4K and HDR format so as to comply with the latest technology being used in consumer hardware.
3. Targeting the niche
As consumer viewing habits evolve and the giants in the industry expand their dominance, one way in which OTT platforms can create a competitive advantage is to produce niche content for specialized audiences. In recent times, many platforms have adopted this strategy to make their mark on their target audiences. These include, CuriosityStream, DocsVille, DocuBay and LoveNature etc which are targeting documentary lovers. Voorstelling by Dutch Channels are targeting a niche audience comprising people interested in theatre, stand-up comedy and cabaret.
4. Hyper-personalized targeting
Since, there are a lot of options to choose from, quick cancellations and churn are some of the key concerns of the industry. M&E companies are revamping their retention strategies and exploring new ways to target their services to the target audiences. Hyper-personalization of content is on the rise and companies are leveraging artificial intelligence (AI) and machine learning (ML) to reach the ‘right’ audience with the ‘right’ video recommendations and previews – based on user behaviour and interest.
5. Subscription services are dying
Except Netflix, Hulu and Vudu, other OTT services which are subscription based have been struggling to build audiences or generate revenue. In 2019, it was noticed that several niche subscription services revamped their revenue models and switched to ad-supported models. Some of them such as FilmStruck had to even shut down due to insufficient revenue. In a recent event, YouTube decided to take down its original content from its paid service – YouTube Premium and made ad-supported shows available to all users. For long term benefit, OTT service providers must focus on ad delivery optimization, targeting their audiences and monetization tactics to drive revenue rather than locking viewers in a subscription-based model.
6. Adopt hybrid-monetization models
SVOD (subscription-based video on demand), AVOD (advertising-based video on demand) and TVOD (transactional video on demand) are three primary monetization models that OTT platforms operate on. An example for each of the models: SVOD – Netflix, AVOD – YouTube, TVOD – iTunes.
OTT service providers have started to experiment with hybrid monetization models while exploiting opportunities where subscribers are willing to shell out money for premium content. The SVOD model, which is offered by majority of OTT players like Netflix and Amazon Prime Video, accounts for 51% of global spend on OTT services (A.T. Kearney).
YouTube works on the AVOD model, where viewers willingly wait for the advertisement to get over before they can start watching their choice of video. AVOD is unsuitable to new entrants, who don’t have a big subscriber base, in the OTT market as volume of audience drives AVOD model. However, TVOD, in simple words, is a-la-carte OTT where a viewer pays for specific content of their choice. Volume of audience is not a factor here.
7. Intensive competition leading to content fragmentation
The rising competition in the OTT space is giving rise to content fragmentation, where certain type of content will be ‘exclusive’ to a particular OTT platform. The competition is expected to become fiercer since Apple, Disney and WarnerMedia have launched their own video steaming services. In 2017, Disney announced the pulling of Marvel and Star Wars content from Netflix. This decision was taken way ahead of the launch of Disney+ in 2019. The company made a decision to let go $350 million worth of revenue being generated via Netflix as Disney understood that the future of video streaming on OTT platforms will be driven by D2C content creation and distribution.
8. Mobile to be the primary content consumption channel
As people move away from the traditional TV screens, mobile has taken over as the primary content consumption channel and is an emerging growth channel for content distribution. A report by eMarketer states that mobile devices stream more than 75% of the worldwide video content. According to Netflix, a notable 20% of the viewing occurs via mobile devices with 50% of the viewers logging-in from mobile app at least once in 30 days. Since 5G will boost video consumption on mobile devices, the United States is all set to explore this new opportunity. Technologies like AR & VR will thrive with the arrival of 5G as users would be able to access data faster.
Top OTT platforms & new entrants
As consumers continue to subscribe to multiple OTT video streaming services, competition in the OTT space continues to intensify. Big brands are competing for a small yet growing customer base. Some of the top 10 OTT video services (SVOD) in the United States include Netflix, Amazon Prime Video, Hulu, HBO NOW, CBS All Access, Starz, Showtime, MLB.TV, ESPN+ and Sling TV.
It is expected that with the entrance of Apple TV+, Disney+ , HBO Max, Quibi, Peacock and other direct-to-customer (D2C) services launching in 2020, the OTT space will be disrupted. It would act as a reminder to all OTT players that they must deliver unique value to their customer base in order to retain them.
What does the future look like?
From 2018 to 2025, the global OTT market is expected to reach $332.52 billion by 2025, while growing at a CAGR of 16.7%. As consumers dive deep into binge watching, advertisers wait for grabbing this opportunity to captivate the audience. According to Video Advertising Bureau, 45% of all video revenue on online platforms is contributed by advertising. It is expected to reach 60% in the next ten years.
OTT service providers are now more interested than ever to analyse consumer behaviour statistics in order to make critical decisions helping them reach their target audience. Actionable insights churned out after analysing huge sets of data can help OTT service providers to accelerate their growth.
