Television maintained its status as broadcast and pay TV for decades. However, the internet and emergence of streaming video services has greatly impacted the content industry’s windowing strategies.
Digital distribution creates an abundance of monetization opportunities, in contrast to previous television models which relied on advertising revenue, home video sales, and subscription revenue from pay-TV service operators. Important strategic trends in digital television content distribution include live digital streaming of sports content, the early authenticated and transactional VOD window, the early and mid-subscription VOD window, and digital syndication.
Emerging trends in streaming media & OTT
For live sporting events, fans often struggle with local broadcast rights to out-of-town teams. These transplants are left with the options of watching local teams only, going to a location with an expanded sports package (such as a restaurant or sports bar), paying an incremental amount for an out-of-market sports package, or illegitimately accessing games. Expanded streaming models through digital distribution apps like WatchESPN and Fox Sports Go provide displaced fans with instant access to their teams even if the local feed is broadcasting a local team.
These streaming services also play a role for live events with geographic time shifts. For international events such as the Olympics, broadcasters may delay coverage and put together a primetime broadcast package that includes a select number of events. Such was the case for NBC during the 2016 Olympic Games in Rio de Janeiro. Despite being in a similar time zone to the U.S.—only one hour ahead of Eastern Daylight Time—NBC still packaged popular daytime events into a primetime broadcast. NBC used their streaming capabilities to create a hybrid broadcast model, streaming most of the events live while retaining a primetime broadcast format.
Consumer uptake of OTT services has also proven to have significant influence on the industry, with 64% of U.S. broadband households subscribing to an OTT video service. Netflix boasts the greatest market share in this space and continues to be a dominant force globally.
Netflix and its OTT competitors employ a whole-season release strategy for original series, contrary to the episodic release model employed for decades in television. However, releasing the whole season, which allows consumers to partake in binge-watching behavior, does not work for traditional network television due to restrictions in the linear television model including audience aggregation, value of scarcity, and cliffhangers/buzz. Content providers can therefore use binge-watching to their advantage, building synergy through the previous season as a supplement to viewing current season episodes.
Challenges to TV services
These industry disruptors also bring along multiple inhibitors, with piracy, rights restrictions, service fragmentation, and live streaming apps posing significant challenges.
Live sports broadcasts, in particular, are vulnerable to these inhibitors, with piracy becoming a potential killer to sports content providers. Even something as seemingly innocuous as password sharing can be detrimental to live sports offerings due to uncaptured user revenue, mis-targeted advertising, and uncompensated distributors. For this reason, content security companies employ a variety of techniques to identify and shut down pirated streams. Among these techniques are digital fingerprinting, forensic watermarking, conditional access, and digital rights management.
Mobile live streaming applications like Periscope also bring the concept of bootlegging video to a new level. Live streaming applications immediately broadcast a live video stream over the Internet for the user’s social network followers to access. Compounding the problem, Periscope live streams are integrated with its parent company’s social network Twitter, giving live-streamers instant access to an audience. Given the value of sports content, being able to immediately stream illegal copies is a massive threat to monetizing the content. Partially in response to this, social media companies like Twitter and Facebook have bid for and won the rights to stream sports content legitimately, such as Twitter’s streaming of NFL Thursday Night Football and Facebook’s streaming of a Premier League friendly match between Manchester United and Everton.
Service fragmentation has also recently become a bigger issue among a significant number of OTT and SVOD services emerging in the North American market. New OTT services are entering other global markets as well, with each positioned for a variety of viewership bases. Despite the relatively low pricing for most SVOD services, disposable income and attention are limited for consumers.
Meanwhile, the network-owned SVOD services in the U.S. face an uphill climb against established OTT players. This is evidenced by the low usage of CBS All Access and HBO Now. Compared to Netflix as a general content aggregator, network-owned services are more restricted in their content offerings. However, specialized offerings like exclusive access to the upcoming series Star Trek: Discovery through CBS All Access may help the emerging service to generate subscribership.
Although consumers are watching more video than ever, competition for finite attention is only going to get more difficult. Content providers will continue to exploit multiple digital distribution outlets to monetize current and library TV content. However, the problems of piracy, service fragmentation, and live streaming will only grow and ultimately affect live sports and scripted programming alike.
Glenn Hower is a Research Analyst with Parks Associates.