MAD Perspectives Blog

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 OTT is Not THE Panacea

Peggy Dau - Wednesday, November 12, 2014

We're all excited that HBO's direct-to-consumer streaming service will be available in 2015. We don't even know what it's going to cost. But we do know that it's market shifting. These thoughts were on everyone's mind at the Video Industry Forum, hosted by Ooyala and Vindicia, discussion regarding video monetization. While the very informed panelists, including Jim O'Neill, believe in the opportunity enabled by OTT service providers, none of the panelists could provide explicit insight into the best way to monetize video.  And, that's OK.

Like everything internet oriented, the key is to keep an open mind and understand that multiple iterations of business models must be tried, tested and tweaked.  Sure, HBO is going to benefit from streaming content directly to their consumers. As mentioned my previous blog, they will benefit from the volumes of data and gain further insight into the behavior and opinions of their audience. HBO also benefits from already having a rich content library. They've put the time and money into developing and producing compelling drama, comedy and sports productions.

They will drive incremental revenue through their streaming service. But their inability to define the monetization model is not unusual. Theirs will likely be a subscription model and the open question is the cost of that subscription. In the OTT arena the options are 1) subscription, 2) advertising, 3) Pay-per-view, 4) Subscription VOD (SVOD), and 5) electronic sell through (EST). The primary challenge is in how to attract and retain the ever so elusive millennials. 

Millennials are the demographic consuming content on laptops, tablets and smartphones. They are the target for multiple advertisers. Yet, they don't all have sufficient income to commit to a subscription model and t is unclear if they are attracted to ad-supported models. In fact, they are the generation with an expectation of free music (hello Spotify) and that expectation may extend to video content.

The OTT business model is the challenge. Verizon is investigating options. Jim O'Neill highlighted the challenge of "lassoing" millennials at Ooyala's Video Industry Forum last week, in New York. In fact the panelists at the forum all agreed that:

     - monetization is hard and it's a moving target
  •      - OTT is still the wild west and no one is sure what the end goal is
  •      - OTT is long over due as there are audiences everywhere
  •      - Despite the abundance of data, few are using that data to target ads, despite this being a      prominent discussion for years.

The second challenge, which could completely obliterate the first, is that of authentication. Right now all network designed tablet apps require a cumbersome authentication process binding OTT access to an existing cable subscription. If the content is compelling enough, the process is manageable, however it is not intuitive or easy. Nor do the apps retain your authentication details for more than two weeks.

The bottom line is that OTT must drive a revenue stream. The challenge is that no one model is THE solution.  Like the adoption of social media, it's an iterative process to determine the right mix. The right business model could depend on the content, or the target audience, or the consumption device, or the content format. Despite this challenge, OTT is here to stay. Sure, we will still consume content  on our HD and UHD TVs, but we will increasingly turn to the smaller screen.

What's your perspective?