The rise in consumption of video and audio streaming services over the past few months due to extended lockdown periods arising out of the COVID-19 pandemic has been covered extensively in media. On hindsight, it was a natural fallout of having to stay indoors for long periods of time. People resorted to options in indoor entertainment – through streaming services and mobile games. According to a recent report from Comscore, in the US, 69.8M homes used OTT in April 2020, an increase of 5.2M homes compared to April 2019. The same report also indicates the average home viewed 102 hours of OTT content during that same month, an increase of 17 hours compared to April 2019.
The trend was similar across the globe, for both video and audio streaming. The BARC-Nielsen report from April indicates that in India, VOD viewership on digital was at 3 hours 59 minutes a day in week three of lockdown, with a 12 per cent increase from pre-COVID time. In March, audio streaming too saw a spike in India – there was a 42% increase in time spent on listening to them. In the US and UK, consumers shifted from audio to video streaming as the former was more suited to a commute while the latter for in-home consumption.
But will things be the same hereon for OTT brands, once the situation eventually eases with regard to COVID-19 and more people step out of homes for their regular work? Here are a few trends and opportunities likely to impact the way forward for both established and new players in the OTT segment:
Need for a sharp brand value proposition
The OTT market is already cluttered in many geographies. In 2017, India had 36 OTT streaming services and the number has gone up to 60 by June this year. New entrants are eyeing the market and the competition is only going to increase. In this context, brands need to offer a sharp, differentiated value proposition primarily led by either a demographic or psychographic segment. A diverse like India offers opportunities to target consumers by language preference – hence we specialist services such as Hoichoi targeting the Bengali audience and Aaha for Telugu content. Segmentation through a lifestyle preference is also possible as seen with the successful launch of Discovery+ in India which has a unique proposition of unscripted content aimed at lifelong learners.
According to a survey conducted in May this year among US consumers, the reason for choosing a particular brand of service seemed to indicate a preference for both a broad range of shows & movies and content ‘not available elsewhere’.
It reflects in the content strategy of several brands which are now laying emphasis on ‘originals’ which then call for huge investments in creative talent and production costs. As consumers we have also chosen to snack a streaming service based on a particular show or movie and not renewing the subscription when the show completes a season. To that extent brand loyalty cannot be taken for granted in this segment. Late entrants in a particular category will then have their work cut out to wean away audience from established players.
No room for complacency in the post COVID-19 era
The traditional cable TV is still the most popular option for entertainment for households in developing markets like India. Apps and digital experiences through personal computers and smart TVs have increased in popularity due to unexpected extraordinary circumstances. When the situation eases in the months to come, two factors will come into play – app fatigue and subscription fatigue. The former existed even prior to COVID-19.
A Deloitte survey indicates that even prior to COVID-19, the average US consumer had 12 paid media and entertainment subscriptions – with millennials averaging the highest at 17. The report goes on to say ‘with more subscriptions being added or sampled during the lockdown phase indications are that consumers have signed up for more services than they can handle or afford’. In my view it indicates that streaming services have a twin task of answering ‘why choose me?’ and also work at retention strategies. The price-value equation will be worked out by consumers driven primarily by the quality of the content and the ‘worth’ of such in dollar value. In the world of apps while a user may have 30-40 apps the ones which get used daily are perhaps 4-5. However, here it’s a question of payouts every month and there’s a limit to number of subscriptions and the monthly payout.
Room for growth, new audience, new devices
The OTT market already has big global players with deep pockets. YouTube, Netflix, Amazon Prime, Hulu and Disney+ are considered the Big Five in a Comscore report and they accounted for 82.5% of the streaming hours in April 2020. Yet, the next 5 service have a higher percentage change in hours per household in April as compared to January.
Over the last few months, Apple TV+ has also garnered an audience with a captive base of iOS, Mac and Apple TV users. Indications are that there is still room for growth in terms of audience and devices.
Table stakes: success factors and expected features
Content creation, processing, storage & retrieval, content distribution and management continue to be the backbone of the OTT business. Over the past few years, growth and engagement has been dependent on customer experience, customer acquisition & retention, use of recommendation engines, technologies such as voice and presence in large screens such as Smart TVs. As parity features come into play (no pun intended) in OTT services, some key features will become table stakes for streaming services. These include:
Monetisation strategies: ad-support is welcomed
Streaming services are making the barrier for entry low by offering free trial periods and price-offs for subscription. In markets like Asia, ad-supported services are common. As with publishing, a relatively smaller percentage of the market will be willing to pay a premium to avoid ads or have an ‘ad-lite’ experience and commit to a subscription. Deloitte’s COVID-19 survey found that in the US, 35% of consumers will pay a premium to avoid ads. In the months to come, streaming services may opt for a combination of snackable, short-term subscription options and advertising revenue to offset the high cost of production. The consumer, hitherto used to high-value, big budget movie productions from Hollywood and other film industries, will expect similar production values from OTT content providers.
More than just consumption: value addition
Brands in the OTT space can also position their services as beyond passive consumption by enhancing their offering to include gamification engines, interactive live television, real -time polls and more.
In sum, the situation which existed prior to the COVID-19 pandemic has been accelerated over the past few months. Consumers who used to sample a service due to free offers or a favourite piece of content have had a plethora of options to choose from. A churn is inevitable in the coming months as both the consideration set and the purchasing power of most consumers are limited. Yet, with a sharp differentiated positioning, investment in relevant content, smart acquisition & retention strategies and above all, crafting a great customer experience across devices the future augurs well for both established and new players in the domain.
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