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10 Things to Know About the OTT Takeover

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1. OTT is the fastest growing media and entertainment segment

In 2019, Netflix spent $15.3 billion on content, and that number is expected to grow to $26 billion by 2028. Netflix is spending $17 billion in 2020. Consider that Netflix has only been streaming for 10 years. OTT services have been around for less than 10 years and they’ve already grown to surpass the size of major broadcasters and studios around the world. In some markets, there are now more eyeballs watching OTT services than traditional broadcasters. One can surmise it’s having a major effect on broadcasters’ ability to earn revenue from advertising, and there will be a roll-on effect into the budgets that broadcasters will spend on content and services. 

Notwithstanding the impact of COVID-19, we can only imagine that OTT services will continue to acquire even larger audiences over the next five years and solidify their position as a dominant force in content distribution. 

2. OTT Services are hugely popular and are a fraction of the cost of premium cable services (around $7.99 for Netflix’s basic service) vs. $80 plus for cable

Unlike cable, where you’re required to subscribe to everything in a package, the audience has a choice with OTT to select the services they feel provide the most value, and they’re not bound by contracts—they can cancel anytime. 

In the first quarter of 2020, Netflix had grown to 182 million paid subscribers worldwide, with roughly 112 million coming from outside of the U.S. The growth in subscriptions does not seem to be running out of steam. At the same time, broadcasters are losing audience numbers globally, and cable operators are experiencing unprecedented loss of audience as subscribers cut the cord.

3. OTT allows you to watch anything from anywhere in the world

The growth of OTT services with global reach has driven the revival of the localization industry to make content available to a broader audience community. Traditionally, viewers only watch content in their own language. Today, they can watch content from around the world. 

Content localization has opened viewers’ screens to a world of content they traditionally have not experienced. Audiences that typically only watch content in their own language are streaming shows in multiple languages, helping to share cultures and experiences and make the world smaller, (i.e.: “Money Heist,” “Dark,” “Terrace House”). 

4. The most popular OTT services, like Netflix and Amazon Prime, provide a premium experience with no commercials

This trend, combined with the drop in viewership of traditional television and cable programming, has advertisers scrambling to find alternative opportunities to reach audiences. In 2017, Netflix saved their viewers from 160 hours of ads. In 2019, according to BGR, the average Netflix subscriber avoided 219 hours of commercials over the course of the year. However, broadcasters and content owners are seeing new opportunities and are establishing their own OTT services, many of which are free to the consumer and advertising-supported. 

Premium OTT services are becoming the source for high-quality, highly entertaining original content. The shift in advertising dollars has seen many broadcasters adopt lower quality, cheaper programming. 

5. The demand for content has reinvigorated the global content creation industry

Service providers, just a few years ago, were complaining about declining business. Now they’re reporting record numbers because of unprecedented demand to serve the ever-growing content budgets of services like Netflix, Amazon Prime and now HBO Max and Disney+. In the last year, the competitive landscape has changed dramatically with the launch of new premium services, including Disney+, HBO Max, Apple TV+ and NBCUniversal’s ad-supported service, Peacock.

6. Demand for content is driving studios and content owners to find a more efficient way to monetize their libraries

This has driven the growth of automated cloud-based services like OWNZONES Connect, which can service thousands of titles using the power of the cloud. As broadcasters respond to the shift in audience viewing habits, they’re looking for new ways to deliver content to the home. This has led to the rise of inexpensive services, like OWNZONES Discover, which is a platform that allows content providers to quickly and inexpensively launch OTT services across every delivery platform.

7. With the increased competition in OTT, services are looking for new ways to stand out to the audience

There’s a trend for specialized services that are genre specific and cater to audiences with unique interests. For example, there are now OTT services for people who love tennis or soccer, and that’s all they broadcast—tennis or soccer. You’ve got services like Tastemade for foodies. Recently launched Quibi serves quick bites of content optimized for mobile consumption for younger audiences and people on the go.

8. OTT is agile 

Content providers can react in real time and serve up relevant programming in response to current events. Online delivery allows companies to respond in real time to global movements, such as the Black Lives Matter Movement, with collections of Civil Rights focused content. Another example is building catalog collections dynamically to respond to the Women’s Movement/ Me Too Movement.

9. Services like Netflix and Amazon allow parents more control with the ability to filter content and create childproof user accounts 

New services like Kabillion dish up strictly kid-friendly content that is safe to watch and educational. Some are calling it the online babysitter where parents can feel safe plopping their kids in front of the TV knowing that the content will be age appropriate and they won’t be barraged with advertisements.

10. During the COVID-19 crisis, the cinema industry has been particularly hit hard with screens going dark

Studios have had to turn to alternate methods of generating revenue from first-run movies using OTT services. It has been an overwhelming success.“Trolls 2: World Tour” wrapped up nearly $100 million in rentals in its first week. Unlike theaters, which typically take over 50% of box office sales, Universal retained around 80% of the digital revenue from the online release. In response, the studio announced a strategy where they plan to release movies online at the same time as in cinemas in the future. A recent study conducted by Variety found that 70% of consumers would rather watch new movies at home

Bill Admans is a consultant and advisor for OWNZONES.