By Kenneth Wong, Strategy Director
Over the past few years, the TV industry has been heavily affected by the rise of VOD (Video on Demand) and OTT (Over-The-Top) which allow users to conveniently stream over the internet their favorite video content and watch it any time, in any place and in the format that best fits their needs. As traditional TV networks are struggling to offer the same quality of content provided by on-demand services, customers are increasingly cutting the cord on pay TV in favor of platforms like Netflix, Amazon Prime and HBO Go which have been picking up across the globe shaping a new era in the entertainment industry.
Re-evaluating traditional TV services
Due to the unprecedented freedom of choice offered by VOD and OTT, video streaming viewers started reassessing the value given to their traditional linear TV services. According to Deloitte’s Digital Media Trends, nearly half of all pay TV subscribers are disappointed with their service and 70% feel that they are getting too little value for their money. In the light of these figures, telco companies started evolving their offerings towards a more digital reality and partnering-up with on-demand services to bring more value to their customers. In Singapore for example, the two leading telcos Singtel and Starhub are now offering bundles with Netflix and HBO Go.
The golden age of content
With customers becoming everyday more demanding in terms of content exclusivity, it is crucial for VOD platforms to invest in content quality to retain market dominance. According to a recent report published by Lab42, users of VOD platforms are rarely loyal to one on-demand service only and use an average of 2.5 different providers. The reason behind this trend lies in the unique content shared by each platform which leads users to be more loyal to certain VOD services over others. A recent study published by Nielsen, analyzing the factors motivating adults to adopt VOD services, reported that 45% of viewers subscribe to on-demand streaming platforms to gain access to video content they like or to watch a specific program they heard about. Think about the final season of Games of Thrones which is exclusive to HBO Go in the APAC market – only subscribers of this VOD platform will be able to stream it in premiere. Games of Thrones is a great example of top-quality content adored by video streaming viewers worldwide. At the same time, it is also a great example of content which caused customers to raise their bar too high – if it is not as good as Games of Thrones, it is not good enough. In this golden age of content, producers must deal with customer dissatisfaction and invest big resources to keep satisfy audiences. In 2018, Netflix spent $12.04 billion on original content and is expecting to invest more than $17 billion on it by 2020.
Traditional TV isn’t dying, its evolving
While it is true that cable viewership has fallen drastically, traditional TV isn’t going to be abandoned anytime soon. With revenues accounting for almost 75% of the total $265 billion global TV market, traditional TV still dominates the industry over OTT which now accounts for $69 billion and is expected to reach revenues of $129 billion by 2023. On-demand streaming services are developing fast and while it could seem that they will soon take over, it is important to remember that linear TV is developing too. With more opportunities to consume media, often simultaneously, it is normal to see a redistribution of daily viewing time across platforms. However, considering the innovations in the traditional TV industry to answer new customer needs, the complete abandonment of the television box is unlikely to happen as the industry will continue to evolve together with consumers and marketers.
The arrival of VOD and OTT has undoubtedly twisted the traditional TV market giving more power to the viewer than ever before. Able to control what, when and on which device to watch their favorite programs, today’s video streamer has become extremely demanding in terms of quality content and is rarely loyal to one on-demand provider only. The only certainty is that the ascent of on-demand services has only just begun and regardless of which video streaming method will prevail in the future, consumers will always be in control.
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