jthibeault

Three Critical Challenges to Solve for OTT to Really Succeed

Blog Post created by jthibeault on Jan 13, 2016

I think we can all agree that OTT is booming. But why hasn’t it overtaken the traditional television experience yet? According to the data, online video consumption represents only a fraction of the video content that viewers consume everyday[1] and yet, as our December State of the Online Video survey revealed, people are watching content from more connected devices (Figure 7).

 

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The trends are all pointing in the same direction—everything going online—but it’s unclear how far off the event horizon is. When will the bulk of the video we watch be consumed online? Will it be 10 years? 20? 50? What’s interesting is that the tipping point isn’t being held back by a lack of consumer desire. On the contrary, it’s a result of three critical challenges that must be addressed. Only when OTT overcomes these hurdles will mass adoption finally happen.

 

Aggregation

Let’s face it—finding OTT content, unless you know where to look, is hard. Many people Google the show they are looking for to find out which provider offers it. As Wired magazine points out, that is a needless extra step: “If a viewer wants to see Suits, NCIS or Game of Thrones, they shouldn’t have to know whether it is carried by a USA, CBS or HBO app. Any additional step that is added to the process of getting to the program a consumer wants is a wasted step.”

 

What’s needed is a “super aggregator”—an independent service provider that brings together content across OTT platforms into a single location. Of course, the super aggregator isn’t serving the content to viewers, it’s just directing them to the appropriate locations to find them. Kind of like an uber TV guide.

 

Thankfully, this problem of super aggregation is being addressed. Take the application Fan TV as an example[2].

 

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As per the application’s description, “browse over one million movies and shows; find where to watch them across live TV and over 50 premium streaming services including Hulu, Netflix, HBO, Amazon, iTunes, Comedy Central, & NBC.” In essence, the application provides a TV-Guide-like experience across both live, linear TV (you enter your cable company and region) and OTT. TechCrunch did a nice write up of the app as well.

 

Aggregation, though, is only part of the underlying problem. Once the content has been brought together, a new challenge emerges—how to enable consumers to watch it like they do broadcast, linear television.

 

Transparency

In the future of OTT, the super aggregator does more than just bring all of the content to the consumer. They enable consumption of it. Let’s say that a viewer just wants to watch the latest season of Game of Thrones. They don’t want to have to remember to cancel their HBO subscription after the season is over. Nor do they want to have to enter a bunch of information to subscribe in the first place. They just want to click on the season and start watching. For a super aggregator, all of the subscribing and unsubscribing will happen transparently in the background. The viewer will consume the content similar to how they do today with traditional broadcast television by just clicking on a title or picture.

 

Of course, this subscribe/unsubscribe process (although very beneficial for the consumer) throws a monkey wrench into the OTT provider’s operations because it embraces something that OTT providers hate—subscriber churn.

 

Subscriber Churn

Right now, many content owners are embracing OTT because they feel they have to. Consumer demand for the “three Ws” (watch What they want, When they want to, and Where they want) is forcing OTT providers to play along. Of course, some are opting to just license their content (Hulu’s massive licensing deal for the entirety of the Seinfeld episodes) but a growing number, like Home Box Office with their service HBO NOW, see the benefit of going directly to consumers.

 

Only as OTT services are web-based, it makes it entirely too easy for subscribers to cancel their subscriptions. It’s just a matter of logging in and clicking a “cancel now” button. When imagining a super aggregator that makes the subscribe/unsubscribe process transparent for the viewer, this could create a level of churn that is unprecedented in subscription television—viewers could sign up for just a few days to binge watch a series and then cancel!

 

OTT providers must figure out a way to keep subscribers on their system (such as through specialized niche content that’s only available on their platform) or build churn into the business model. Perhaps it will become more commonplace for OTT services to be A-VOD (advertising video-on-demand) supported in addition to S-VOD (subscription video-on-demand). That way, they are generating revenue from those binge viewers even as they are churning on and off the platform.

 

Creating a Shared Experience

A rosy future of OTT revolves around a single experience like we have today with broadcast TV—content discovery is as easy as content consumption. But, what’s more, it’s a shared experience across devices. For example, Fan TV would be on my phone, tablet, PC, and my television (it almost is, by the way), providing me a singular experience for accessing all of the content that I want to consume. And, as I’ve pointed out, it would transparently manage the subscriptions I need to watch what I want to watch.

 

Perhaps the success of OTT (and the super aggregators) is just a matter of mindshare[3]. Perhaps it’s just a matter of the heavy hitters getting into the game (hint, hint, Apple) and making the transparency I talked about a reality. Regardless, OTT won’t be really successful until these three challenges, and the fragmentation they create, are solved.


 


[1] The average American watches 5 hours of TV per day, according to Nielsen.

[2] Note: Fan TV is a division of Rovi Corporation which provides content discovery and television guide technology to cable operators, telcos, and set top box manufacturers.

[3] It’s rumored that Fan TV only has about 2.5m users; a fraction of the people watching online video and subscribing to OTT services.

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