OTT TV myths and realities, Over the top TV launch

Transcription

Executive Insights | SPOTLIGHT ON MEDIA & ENTERTAINMENT
OVER THE TOP TV TRENDS
OTT TV Myth #8:
OTT TV Is a Mature Market Phenomenon
The growing importance and
opportunities presented by
over-the-top (OTT) TV are not
limited to mature media markets.
In fact, it is highly relevant to
emerging markets, which in
many cases have leap-frogged
the traditional media evolution
cycle to embrace digital content
distribution methods.
OTT TV represents an intriguing
option to roll out content
internationally (assuming, that
the underlying infrastructure can
support video streaming).
Reality
Myth
OTT is a
mature market
phenomenon
Definitely not
For Myths 1-2, please see
part one of “Over The Top TV
trends” in our Executive Insights’
“Spotlight on Media &
Entertainment” series. Myths 3-7
can be found in part two.
Is OTT relevant beyond the U.S. domestic market?
L.E.K. Consulting / June 2015
»
LEK.COM
Crouching Tiger, Hidden Dragon:
Demand for Online Video in China Is Vibrant
The rapid growth of China’s
broadband infrastructure (~39%
penetration, ~168M households
in 2014), has fueled the
emergence of multiple online
video platforms (alternative video
platforms or AVPs) with national
audience reach.
A set of large, well-funded,
national digital players, including
Tencent, iQiYi (Baidu owned),
Youku/Tudou (Alibaba minority
ownership) and Sohu are driving
demand for content.
These players are increasingly
considered as a viable
monetization alternative to
traditional TV, particularly as
AVPs recognize the value of
exclusive premium content (e.g.,
Tencent’s exclusive agreements
with the NBA and HBO).
Users of Major Chinese Online Video Providers1
Millions of users
350
309
300
254
250
200
168
162
Diversified digital player
ranging from ads and
pay-for-click services
to gaming
Online video arm of
Baidu, leader in
mobile video users
150
100
50
0
Previous share leader in
online video, acquired
Tudou in 2012
Major digital player
active in mobile, social
(QQ), gaming, online
ads and e-commerce
Note: 1Stats as of September 2013
Source: L.E.K. analysis
Can TV organizations take advantage of
domestic and international opportunities? »
LEK.COM
OTT TV Myth #9:
TV Organizations Are Digital Ready
Digital readiness refers to a
company’s ability to:
1. Engage with their viewers
regardless of channel
(traditional Pay-TV,
broadcast, VOD, over-the-top
(OTT) Internet)
2. Provide a seamless and
integrated entertainment
experience across platforms,
anytime and anywhere
Myth
Reality
TV organizations are
digital ready
Not really
3. Develop a direct connection
to the consumer (higher
margin and lessintermediated by others)
What cautionary tales exist for organizations that
attempt to get into OTT TV without being digital ready? »
LEK.COM
Risky Business:
The OTT TV Territory Is Treacherous
The OTT TV market is littered
with failed experiments because
organizations are not sufficiently
prepared to take on the
challenges of OTT.
Case in point: Despite large
organizational support and deep
investment (~$150M), Verizon
and Redbox shut down Redbox
Instant just 19 months from
initial launch after being
plagued with issues.
While fortunes will be made
going forward, the high levels
of current investment by
incumbents will require new
entrants to develop clever
strategies, find deep-pocketed
partners and carefully leverage
existing assets.
“… The service was plagued with problems right out
of the gate. The library of movies was nowhere near
as expansive as Netflix’s, Amazon Instant’s, or even
Hulu’s. They also didn’t offer any TV shows …”
Fast Company, October 2014
“… Compounding the misery of the service was the security
vulnerability – criminals were using Redbox Instant to
verify stolen credit cards and Instant was forced to shut down
new user sign up for three months .…”
Fast Company, October 2014
“… We made the mistake of putting traditional Telco and media guys
into the venture instead of bringing in someone who understands
digital media and digital subscriptions. It was a disaster .…”
Company board member, November 2014
Source: CNET, BGR, Variety, The Desk, Gigaom
How can organizations develop the right capabilities to succeed in OTT?
»
LEK.COM
The OTT TV Hunger Games:
Big Opportunity Poses New Challenges for TV Organizations
While (OTT) TV is top of mind
for network executives, most
firms are not digital ready.
Studio executives acknowledge
OTT is a rising trend in home
entertainment. However,
traditional TV organizations
don’t know how to conduct
billing, collections, customer
service, app development and
other critical tasks.
TV networks that switch to an
OTT-ready mindset face content
acquisition challenges and
cannibalization risks. Competing
effectively in OTT requires a new
approach to content acquisition
and creation. There are also
inherent risks, especially for
networks that rely heavily on
traditional revenue streams.
Level of Preparedness
“Digital Ready” Functions (2015+)
Viewer / customer data warehousing
Traditional TV Functions (pre-2014)
Platform / app development
Data analytics
Scheduling
Billing / collections
Content acquisition
Legal / privacy / PII data management
Content development
Viewer / customer service
Offline marketing
Subscriber acquisition / retention
Time
What are the required criteria for a successful OTT launch?
»
LEK.COM
Fantastic Four:
Here Are the Required Criteria for Successful OTT Launches
Successful OTT TV network
launches require the following:
Affinity Base
Ongoing Pipeline of
Differentiated Content
• Affinity base must be
reachable and can be
activated to a paying
audience
• Ongoing pipeline of
differentiated or new content
to keep the audience
interested
OTT Launch
Success
Factors
• Promotion platform to
access your affinity base and
drive it towards your service
• Excellent technology
delivery and ubiquitous
placement on devices for
anytime, anywhere viewing
– meeting these criteria are
table stakes for OTT TV
networks
Promotion Platform
Excellent Technology
Delivery and Ubiquitous
Placement on Devices
What tips and traps should organizations know about?
»
LEK.COM
The Craft:
Pricing an OTT TV Service Correctly Requires Research and Flexibility
This installment of our Executive
Insights’ “Spotlight on Media
& Entertainment” series
covering “Over the Top TV
Trends” aims to highlight a set
of tips for launching an online
video network and some pitfalls
to avoid.
Do Your Homework
Making Pricing
Competitive
Conduct extensive market research to understand price parameters,
benchmark to competing offers, trade-offs and opportunity costs
Low switching costs and comparable features require pricing to be at least
comparable to other OTT services to facilitate adoption and steal market share
Here are our lessons learned on
pricing.
»
Be Flexible
Test multiple offers to see consumer response beyond the
initial launch price
How can you deliver a great service?
»
LEK.COM
The OTT Engine That Could:
Successful OTT TV Services Deliver a Great User Experience
Fundamentally, no OTT TV
service will succeed if it is not
intuitive and ergonomic.
Simplify the Service
Remove barriers to easy sign-up and payment, ensure availability across
devices, facilitate discoverability and develop intuitive navigation tools that
empower the consumer (e.g., library queue, recommendations)
Have a Leading
Edge UI
Consumers expect OTT networks and platforms to provide a seamless and
high-performing viewing experience from any device
Here are more lessons learned
on pricing.
»
Partner Strategically
Understand product requirements and partner with vendors that can handle
seamless back-end support, including KPI monitoring
How should you acquire and retain subscribers?
»
LEK.COM
What To Expect When You’re OTT-ing:
Getting Consumers and Investors on Board with Your OTT TV Service
Driving new customer acquisition
and return usage is critical to the
long-term success of an OTT TV
network.
Here are our lessons learned on
consumer offers and managing
expectations.
»
Feed Your
OTT Service
Ensure the product offering has a rotation of “fresh” and repeat value
content; follow up on marketing efforts that work and don’t work to support
subscriber base
Offer a Comparable
Catalog
(for aggregator)
For content aggregators, consumers will not be motivated to add an additional
or replace their existing subscription if the new OTT service does not provide at
least the comparable catalog as offered by existing competitors
Manage Expectations
Building a successful OTT service takes time and requires a different set of
measures than are traditionally followed by investors; ensure that this is
communicated clearly and do not over-promise on the expected growth
What pitfalls should be avoided in launching an OTT service?
»
LEK.COM
Hawaii Five-No-Nos:
Pitfalls to Avoid When Launching an OTT TV Service
These critical mistakes can nip
promising OTT TV services in
the bud.
Here are our pitfalls to
avoid.
»
Not Organizing
Appropriately
Shifting to a subscription-based model requires a focus on subscriber care and
acquisition, a continuous refinement of the product, and ongoing monitoring
of subscriber analytics
Not Anticipating
Partner Reactions
Be prepared for adverse reactions from other content carriers
(be they networks, MVPDs or other OTT providers) after you announce a
channel that circumvents their service
Launching Too
Quickly
Avoid launching before appropriately beta-testing and working out the
”kinks” in the service to limit negative PR at launch from technical issues
Underfunding
Marketing
Don’t short change the marketing resources needed to generate trials from
prospective users (wherever they may be), subsidize trials and support
ongoing retention. CACs will be painfully high at outset but will come down
over time as the network effect builds
Launching
Internationally
Without Appropriate
Due Diligence
Global expansion — beyond simply making the domestic service
available — necessitates a strong understanding of localization requirements
including dubbing/sub-titling costs, billing/payment infrastructure, local
regulations, in-country marketing etc.
So what can TV organizations do to become digital ready?
»
LEK.COM
Maps To The Stars:
TV Organizations Can Chart a Path to Digital Readiness
The path to becoming digital
ready requires organizations to
re-think their strategic
positioning and answer some
tough questions.
Here are our four steps to
success and digital readiness.
»
Digital Readiness Is Where TV Organizations Can and Need to Act Now
1.
2.
End State
Definition
• What is the ideal end
state for digital
readiness?
• How much control do
we want over our digital
rights?
• Which approaches are
most attractive?
– MVPD subscription
– Standalone subscription
–Transaction-based
platform
3.
Current State
Diagnostic
• Where are we today?
• What is the current
status of digital
rights / licensing deals?
4.
Gap Analysis
• What are key gaps
between current state
and end state?
–Capabilities
• Do we currently have a
touch point with the
end consumer?
–Organizations
• Where are we
distributed today?
–Systems
• Is there sufficient
scale / demand for our
content?
– Ad-supported platform
• Where do we have
permission to play?
– Utilize a third party’s
platform
• Who owns digital within
the organization?
–Processes
– Content rights
–Distribution
partnerships
Barrier Identification
/ Resolution
• What are key
roadblocks to
addressing gaps?
• For each, what are our
options and pros / cons?
• What subscriber
numbers are required
for each approach to be
attractive?
• What are the financial
implications?
– Incremental revenue
potential
–Others?
– Cost requirements
– Scenario analysis
–Others?
What have we learned?
»
LEK.COM
Our Outlook:
Digital Ready Is the New Black
Our Executive Insights’
“Spotlight on Media &
Entertainment” series covering
“Over the Top TV Trends”
presents a case to debunk a
few of the key myths around
online video services.
What Have We Learned About OTT TV?
1. OTT is for real
2. Traditional TV viewing is not dead, but under pressure
3. Millennials do consume OTT disproportionately but have not abandoned
cable/satellite
4. Virtual MVPDs will pressure the traditional cable bundle, but it will persist
for the time being…
5. …in no small part due to live sports, even if premium networks are at risk
6. OTT is not constrained to mature markets as many emerging markets such as China
represent tremendous growth opportunities
7. Despite the opportunity, many TV organizations are not “digital ready” to avoid the
risks of and realize the benefit from OTT
L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of
their respective owners.
© 2015 L.E.K. Consulting LLC
LEK.COM

OTT TV myths and realities, Over the top TV launch

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