We all know that content distribution is evolving at the speed of light. The shift from traditional broadcast services to over-the-top (OTT) content delivery via the Internet has changed how people consume content for good. We want to be able to check out the latest films and our favourite TV shows whenever, wherever, on-demand, on the device of our choice.
With their traditional revenue streams under threat, content owners, distributors and advertisers are transforming their business models to be able to satisfy people’s growing hunger for content. According to figures by Digital TV Research, revenues from pay TV subscriptions and on-demand content crossed the $200 billion threshold in 2014, up from $176 billion five years ago. As people’s content consumption habits change, we’re also witnessing an explosion in connected devices. To illustrate, the number of homes with a digital TV is set to reach 1.65 billion in 2020 – a huge increase of one billion from 2010.
These numbers sound impressive, but as new trends emerge, I always like to take a step back and see how they’re reflected in my own family. My eight-year-old son checks out video tutorials on Minecraft while my teenage daughter creates her own video blogs and shares the most popular YouTube clips of the day with her friends. And it’s not just about the younger generations – my wife walks around the house with her iPad binge watching True Detective on Amazon Instant Video. So, with ever increasing volumes of different types of video content being consumed on smart phones, tablets and smart TVs, how is this evolution shaping content delivery?
Traditional broadcast services were a point-to-multipoint solution, so in the good old days, content had to be delivered to a limited number of distribution points. From there, content was broadcast far and wide. Now, broadcasting on the Internet brings a whole new ecosystem to bear.
The real benefit to using the Internet to deliver content is that point to point content delivery is no longer a one way communications medium. It is possible to learn a great deal about individual content consumers, including the types of content they like and, crucially, what they’re willing to spend their money on – which is obviously highly valuable to advertisers.
As an added bonus, more and more people using OTT services seem perfectly willing to pay a subscription fee. This makes two revenue streams available to those seeking to distribute content. The result has been an explosion of innovative business models built on OTT content delivery. With OTT, you can also run multiple business models concurrently, offering the right balance between subscription and advertising for different market segments, maximising the number of consumers that content providers are able to reach.
This may have been difficult – even novel – a decade ago. But now, the opportunities offered by different subscription models makes OTT an attractive option. As technological barriers have come tumbling down, the business risk of not using OTT as a content distribution method is far higher than the risk of sticking to traditional methods.
Big names like HBO have acknowledged that the realities – and the economics – of content distribution have changed. The Internet and the explosion in connected devices has created unprecedented opportunities for content providers to boost revenues through new levels of audience engagement. OTT is no longer a question of “if” or even “when” – those who take the plunge with OTT will reap the rewards.