OTT streaming: Not another app!

These are exciting times for audiences. The last few years have seen the rapid proliferation of low cost streaming devices (Roku, Chromecast, Fire TV etc.), streaming services from Netflix, Amazon, Hulu and standalone apps from television networks. A 2017 comScore report on OTT streaming points to a rapid adoption by consumers:

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Source: comScore Connected home & OTT Intelligence report 2017

 

 

The population of OTT streamers includes cord cutters, cord nevers, and cord shavers – consumers who supplement their existing cable subscription with OTT streaming. In other words, its a mix of people who are fed up of the limitations of pay TV (cord cutters and cord shavers) and people who cannot or will not pay for a cable subscription (cord nevers).

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Source: comScore Connected home & OTT Intelligence report 2017

 

 

There are problems inherent to the the current OTT streaming landscape which don’t bode well for its future. Some of these problems are carryovers from pay TV, while others are unique to the OTT streaming domain:

So many apps, so little time

OTT streamers are faced with an increasingly long list of apps to choose from – Hulu, Netflix, Amazon, YouTube, FuboTV (for sports), apps from TV networks – HBO Go, ShowTime, AMC, FX and others. As a viewer, I hate having to launch 3-4 different apps and having to switch between Roku, Chromecast in order to find something to watch. Research shows that 75% of OTT streamers use 3 or less of these streaming services per month.

No personalization

The challenges with content discovery and personalized recommendations are compounded in the OTT streaming world. Every OTT service exists in its own bubble, with no knowledge of the consumer’s viewing habits outside of the service. For example, my Hulu service where I watch The Handmaid’s Tale doesn’t know I also enjoy Game of Thrones via HBO Go and Odd Mom Out on the Bravo Now app.
With this disconnect, viewers are not the only ones who lose out. Advertisers lose out since they are unable to track and target a single consumer across all the devices and services he uses to stream content. Content creators lose out too, since consumer habits from one streaming service are not being used to drive the discovery of niche/long-tail or new content in another streaming service.

Content scattered across services

Content blackouts and network viewing windows mean that often one OTT service will have 5 seasons of a series while the latest season will be available to stream via the network’s app/website. Similarly, the latest installment in a trilogy of movies may be available for purchase on Google Play while the older installments are available via Netflix. Today, consumers are expected to hunt through apps and find out which service has the content they are looking for. This makes for a poor and frustrating experience.

The question is, how long will consumers be willing to deal with these frustrations even though many are paying more  than cable TV for all their OTT services combined ?

Aggregate. Aggregate. Aggregate.

Clearly, what consumers need is a unified experience across OTT streaming services and their pay TV subscription. One single service that:
(a) knows the streaming devices , OTT services, and pay TV subscription the consumer has.
(b) In a few clicks, allows the consumer to find out which streaming service has the movie he wants to watch, for the lowest price.
(c) Keeps track of the consumer’s lists – favorite TV shows and movies, TV shows and movies that the consumer is in the middle of watching.
(d) Provides personalized recommendations for the consumer that span all the OTT services and pay TV subscription the consumer has. Upselling services the consumer does not have should be kept to a minimum.

Sadly, there is no incentive for networks and pay TV operators to create such a service – there is no monetary benefit and such a service would draw eyeballs away from the network’s own website and streaming apps. There are some players in this space such as ReelGood, which are trying to address the pain points discussed in this post. Read the TechCrunch review here.

What’s Ahead

The phrase ‘Content is king’ almost always comes up in every discussion about OTT and pay TV. New types of audiences such as millennials and 1-2 member households have added 2 more factors to the mix – cost effectiveness and ease of use. Pay TV operators have stepped up their game of late by addressing common complaints against pay TV – price and inability to find content – with skinny bundles and better discovery capabilities. Any service, be it pay TV or OTT or a combination thereof, that succeeds in combining access to quality content with ease of use through personalization, offered at a reasonable price will prevail.

Set Top Box VoD in the age of Netflix, Hulu, iTunes

State of VoD today

Every night, millions of families in America turn to their pay TV Set Top Box (STB) in search of something to watch. And every night, an increasingly large portion of these pay TV customers turn away  from their STB after finding yet again that there is ‘nothing to watch’. These customers then turn to Netflix, Amazon, Google Play, iTunes and Hulu. They use a Roku, Google’s Chromecast, or an Apple TV to get the content of their choice onto the biggest screen in their home – the living room/family room TV. This scenario is being repeated with increasing frequency and has led to cord cutting, cord shaving and similar terminologies. This begs the question – why aren’t consumers using the 1000s of titles already available to them via their pay TV provider’s On Demand (VoD) library?

A typical pay TV VoD library has over 100,000 titles readily available. These include movies available for rent or purchase (i.e.: transaction or TVOD) and TV shows, which are either free (FVOD) or tied to the customer’s subscription package (SVOD). And yet, consumers seemingly ignore this vast content library.. While the reasons for this include the rise of OTT viewing apps and the changing habits of young consumers, there are some basic reasons why STB VoD usage is falling:

 

Poor content discovery: Pay TV platforms have very poor content discovery capabilities. While operators such as Time Warner and Verizon do offer personalized recommendations, these tend to highlight only the popular, buzz worthy VoD titles while leaving the ‘long tail’ of 1000s of VoD titles unexposed to the customer. The design of VoD user interfaces make it hard for consumers to find episodes of TV shows on Demand.

Poor Pay TV mobile apps: Today most pay TV operators offer a companion mobile app which permits customers to watch a few 100 channels (with fewer channels available outside the home), stream VoD titles, and in some cases download recorded shows to watch later.

There are two main areas where pay TV companion apps fall short when compared to Netflix, Hulu and others:

  • pay TV mobile apps have the same old and outdated menus and navigation as the STB. VoD is buried under a separate menu the way it is on the STB TV, instead of being front and center.
  • pay TV mobile apps have the same content discovery limitations as the TV: poor recommendations, no surfacing of short form content which may be of greater interest on the mobile device.

 

Impact of a poor STB VoD experience

Diminishing engagement with pay TV service

As a result of these limitations, when people want to consume video on mobile or tablet devices, the DON’T think of their pay TV operator’s app first and instead go to Netflix, Hulu, and iTunes/Google Play/Apple TV (for purchases). Even though the same content may be available on the STB and the companion apps.

TV Industry data shows that customers are willing to pay extra in *addition* to their cable subscription to quickly and easily access the content where they want  and when they want it.

NCTA

 

Towards end of 2016, the number of customers with Netflix surpassed the number of customers with pay TV for the first time.

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ARPU impacts

As customer engagement/affinity for the pay TV provider’s platform reduces, the ARPUs from VoD will continue to decrease. Every Netflix subscription, Google Play/iTunes movie purchase equals lost ARPU for the pay TV operator.

 

The way forward

There are multiple avenues pay TV operators can use to improve VoD usage and ARPUs:

Improved UI: The VoD library should be easy to navigate. Don’t force the user to drill down through various folders (resulting in 6-8 clicks of the remote) before getting to a title.

Transition between Linear and VoD should be simplified. Movies listed in the guide and also available on VoD should be marked as such, TV shows with episodes available on VoD should be highlighted.

VoD to go: Make it easier for the customer to transition from home to mobile – if the customer was watching a movie at home and hits Pause, make it seamlessly available on the mobile app.

 

Video-first mobile apps: The mobile apps provided by payTV operators need to be focused on video. The mobile apps should stop mimicking the linear TV menus of Guide, VoD etc. The apps should focus on content, and not on categorizing the content  as live TV or On Demand.

 

STB VoD – the bright side

STB VoD still has a number of factors in its favor.

The convenience factor: In most homes, at least one STB is hooked up to the largest TV in the house, usually in the living room or family room. This means the entire catalog of 100,000+ VoD titles is at the fingertips of all family members.

PVOD (Premium VOD): PVOD is the concept of selling early (and more-expensive) digital access in the home to new theatrical movies. Though still a year or two away, PVOD is a good ARPU and customer retention opportunity for pay TV operators – by offering PVOD titles via the STB and companion mobile apps, pay TV operators can increase customer usage of their On Demand catalog and increase ARPU. While the exact revenue share split for PVOD is yet to be worked out, the APRU could still benefit from customers who come in for the PVOD and stay for (i.e.: rent, buy) TVOD or SVOD.

The return of the cord cutters

Though the numbers are small, a number of users have started to realize how inconvenient and cost prohibitive it is to cut the cord entirely. A recent article from Business Insider is illuminating on many fronts: It highlights the inconvenience of juggling multiple OTT service subscriptions and the cost involved. While pay TV is never going to be cheaper than a Netflix (say), it can  be cheaper than a Netflix + HBO Go + Hulu + FuboTv. Pay TV already has content aggregated in one place, which takes away the inconvenience factor.  

A recent survey from YouGov found that steady deterioration of ratings figures for TV shows is more a function of fragmentation (via VoD, OTT viewing) than decline in TV viewing overall. Pay-TV operators must recognize that traditional behaviors such as VoD rentals and purchases are still an important revenue source, and must continue to be supported

 

With improved UI on their mobile apps, a seamless transition between the STB and mobile for both content and recommendations, pay TV operators can still effectively monetize their On Demand library and make it a go-to destination for their customers.