Differentiation Essential as OTT Market Gets Overly Crowded

Over-the-Top (OTT) market acceleration has been creating a change in pay TV landscape over the past few years. As media companies continue to join the video streaming market, the pace of the OTT market is set to increase in the years to come. Apple is ready to launch Apple TV+ streaming service, a one-stop shop that combines Live, on-demand, and Apple TV original content in 100 countries. Entertainment giant Disney is set to launch direct-to-consumer streaming service Disney Plus, initially in the United States, Canada, and the Netherlands, followed by Australia and New Zealand. As both Apple TV+ and Disney Plus are scheduled to launch in November 2019, competition is expected to get stiffer, both among OTT players and against pay TV services.

At present, Subscription Video on Demand (SVoD) services dominate the video streaming market. International players such as Netflix and Amazon have gained hundreds of millions of subscribers worldwide and Pay TV operators are joining streaming market in different ways. Many pay TV operators develop Virtual Multichannel Video Programming Distributor (vMVPD) services such as Sky’s Now TV or DirecTV Now, and some are integrating third party OTT services like Netflix into their pay TV platforms. New OTT sports aggregators such as DAZN target sports fans by streaming live sports events as well.  Service providers monetize video streaming services in multiple models, SVoD, ad-support VoD, or pay-per-view. While players in mature markets focus on subscription-based models, ad-support models are still popular in emerging markets. Operators can also attract audiences by providing ad-support models and upselling monthly subscription-based or pay-per-view services.

According to ABI Research’s State of OTT Services and OTT STBs 2019 (AN-5051) Application Analysis Report, video streaming subscriptions are expected to exceed 638 million by the end of 2019. Consumers now have a several options for video streaming services with relatively lower costs compared to traditional pay TV packages, which results in a number of households subscribing to multiple streaming services.

As the video streaming market gets crowded, service providers that can offer competitive pricing and differentiated quality of service will survive in the long run. SVoD services are usually priced between US$8 and US$20 in mature markets and can reach lower than US$5 in emerging markets. Monthly fees of vMVPD services available in North America are relatively high compared to SVoD services. For example, DirecTV Now raised its basic package monthly fee by US$10 to US$50 per month, resulting in a subscriber loss of nearly 2,000 in 2Q 2019. This indicates that competitive pricing is crucial in the overly crowded OTT market.

Quality of content is another differentiator. Netflix charges premium for 4K content, however, Disney+ includes 4K content for almost half the cost of Netflix’s 4K package. Therefore, including higher resolution content, 4K, and High Dynamic Range (HDR) can provide competitive advantage, although there is only limited revenue generating opportunity now. Investment in original content, along with exclusive rights to provide premium content and channels, are also important to maintaining subscriber base. Pay TV operators are usually well-positioned to have premium channels and sports rights, and so can capitalize on this advantage. Creating packages with the right choice of content and pricing structure can help their vMVPD services win the OTT game.

While User Experience (UX) is important for all types of video services, latency can be an issue for live streaming services, especially during live event streaming like sports games. Service providers need to enable the best possible quality delivery regardless of the number of simultaneous users, with as close broadcast latency as possible. Deployment of scalable content delivery platforms and edge computing platforms to deliver content with minimum latency is essential for these low latency scenarios.

Content recommendation is an area of opportunity for providers. Searching for the right content is a challenge for many SVoD users, especially when they have multiple subscriptions and near limitless content in each subscription. User friendly User Interfaces (Uis) based on device type as well as smart content recommendation systems are essential for improving churn, since users unable to find the right content in the library are more likely to terminate the service. Service providers can deploy Artificial Intelligence (AI)-assisted content categorizing and suggestion solutions to automate some of this workflow and improve recommendation quality. Such solutions can analyze and categorize the content to a deeper level. For example, an AI-assisted solution can analyze content frame by frame and categorize it like an action movie into different levels of action, stress, and emotion in order to recommend the content that is closest to the users’ likely desire.

As the video streaming market gets increasingly crowded with multiple players’ competitive offerings, service providers need to watch out for consumers’ needs and technology trends that can provide best UX in order to be successful in the streaming battle.