F i n d e r s - K e e p e r s : Scenarios in the open market for TV entertainment
Author: Colin Dixon, Chief Analyst, nScreenMedia | Date: Q3 2017
Introduction
The emerging market for TV entertainment online What became clear from these conversations is The experience of a service is vital is unlike anything we have seen before. Gone are that the experience of the service is vital to its the constraints imposed by the days of restricted success. From the first-time viewer to the long- to its success. From the first-time bandwidth and entrenched content gatekeepers. term subscriber, the process by which users find Anyone with a video catalog and a target market and watch great content is pivotal to their viewer to the long-term subscriber, can launch a service. decision to stay or to go. the process by which users find and However, launching a video service is just the Each industry executive we spoke to articulated the beginning. The rules by which online providers need to keep the experience at the forefront of watch great content is pivotal to must play are radically different than in every decision. Moreover, nowhere is the impact of traditional media. Whereas the technical and experience more keenly felt than in the user their decision to stay or to go. business rules in pay television have been interface. An obsession with creating a great user established for decades, online everything is interface is a common thread the reader will find in flux. throughout this paper. That said, the online economy for TV This paper presents five key scenarios which came entertainment has existed long enough for some up repeatedly during our executive interviews. rules and trends to become clear. The five topics covered are: Analysts at nScreenMedia spoke with multiple • Being found TV/video industry executives about how they see • Simplifying authentication the open market for TV entertainment evolving. • Turning binge-and-bolt into anchor tenancy We also talked with them about the major • Increasing the funnel challenges they are facing, and approaches they • Coping with multiple distribution partners are taking to overcome them. Many of the We review each topic in one of the following discussions revolved around a single theme: how sections. Each section leads with a quote from an to find subscribers, and how to keep them. industry insider which distills a key challenge, and we present approaches to address it.
This paper is made possible Finders-Keepers: Scenarios in the open market for TV entertainment | Page 1 by the generous contribution of
Being Found
Challenge
I believe It is becoming increasingly difficult for online video services to be found by potential customers. For entertainment“ ’s example, T-Mobile lists 105 online video services available through its Binge On unlimited streaming plan.1 The top online video services are having no problem being found in this environment, but this is not the future is going to be case for smaller providers. 54% of consumers use Netflix, but one tenth that number use the fourth largest a bunch of apps, and I service, HBO Now. Worse still, just 1.3% use all of the other 90+ services altogether.2 think discovery is going This data shows just how challenging it is for a smaller service to be found by its potential audience. Online to be the big thing to prevent people video service operators (OVSOs) must have a strategy in place to aid in being found. from jumping in and out of a bunch of Approach apps to find out what’s on. That is what Jason Friedlander, Director of Verizon Digital Media Services, recognizes the challenge smaller video providers face in being found. He also thinks new cross-service search facilities could help: Apple TV has tried to do with their search and voice across multiple apps, “I believe entertainment’s future is going to be a bunch of apps, and I think discovery is going to be the big thing to prevent people from jumping in and out of a bunch of apps to find out what’s on. That’s what Apple and what Xbox’ One guide tries to TV has tried to do with their search and voice across multiple apps, and what Xbox’ One guide tries to do.” do. The ability to search across content sources, and recommend content across services, can have a huge ” impact on the ability for a service to be found. Consider its impact on the pay TV PPV. Between 2013 and Jason Friedlander, Director, Solutions 2017, the number of pay TV customers with access to search functionality has steadily risen from 44% to Engineering, Media & Entertainment, 51.2%. At the same time, some operators have begun to make TV show and movie recommendations to Verizon Digital Media Services their subscribers. The proportion of customers receiving recommendations has risen from 15.8% in 2013 to 26.8% in 2017. Over the same period, the proportion of subscribers making at least 1 PPV purchase per month increased from 21.5% to 35.4%, a 65% increase.3
Finders-Keepers: Scenarios in the open market for TV entertainment | Page 2
Cross-service search is becoming increasingly easy to use as voice capabilities become more common. A cross-device app platform can take Between Q1 2016 and Q1 2017, the number of people with access to voice search and control services from a TV connected device increased from 17.4% to 20%. Each of the top streaming media players supports care of many of the differences cross-service search and voice services, and many smart TVs and game consoles do, too. between devices without incurring As useful in aiding discovery as it is, cross-service search comes with its own set of challenges for OVSOs. One such problem is that all the connected TV devices have a different format for metadata.* Peter North of higher costs that come with native CuriosityStream points out that every time they get a new piece of content, the metadata must be translated and updated to each of the devices the service supports. However, working with a video app development. development company that provides a cross-device platform, rather than a developer providing device- specific apps, can ease this thorny issue. A cross-device app platform can take care of many of the differences between devices, including cross-service search incompatibilities, without incurring higher costs that come with native development. Another problem with cross-service search is that providers just aren’t happy with how the results are displayed. BritBox’s Soumya Sriraman is not comfortable with how some platforms prioritize their content over other providers in the search results. For example, a search on Amazon Fire TV for a recent movie shows Amazon’s sources for the title first. However, this is far from consistent across devices. Platform providers like Roku would like to do more to aid in discovery. Steve Shannon, General Manager of Content & Services, Roku, would like to put a link to the next episode of a show someone is watching right on the Roku homepage. Many service providers (Roku channel providers) just aren’t comfortable exposing that data to a platform provider: “The challenge is that content partners are not really interested in us knowing what people are watching. For Roku to know what the next episode of the show is that you’re watching, I have to do a deal with the content owner.”4 Despite these difficulties, however, cross-service search is an invaluable tool in helping consumers find a smaller video service.
* Metadata is information that describes TV shows and movies
Finders-Keepers: Scenarios in the open market for TV entertainment | Page 3
Simplifying authentication
The Challenge
If you are at home Pay television viewers expect to be able to watch the shows they love on their connected devices. In response and“ using the Internet to this need, TV channel providers are launching online video apps. To use these apps, all a viewer needs to do is enter their pay TV operator username and password. However, this step could be preventing viewers from your ISP, and they from connecting with the channel brand online. are also your TV 29% of US consumers have downloaded a TV network app onto their connected device. The vast majority of provider, you will get those apps require the user to log in with their pay TV operator credentials to view the content. Of those that authenticated without needing to enter have a TV network app on their device, only 21% use it daily.5 The authentication step could be a big part of why people do not use the apps they downloaded more. your pay TV credentials. ” TV channel providers need to simplify the authentication step for their viewers. Only by doing this can they Juan Weiss, VP User Experience, and Product guarantee that the maximum number of people that download the app use it on a regular basis. Design, Fox Latin America The Approach
We see five times Adobe is the main provider of TV Everywhere authentication services to the pay TV industry. According to “ Horia Galantanu, Group Product Manager for Adobe Primetime, there are three basic approaches to more users of Fox Play simplifying the login procedure. in the regions that The first relies on the operator being both ISP and pay TV provider. When a customer is at home and opens implement these a broadcaster authenticated app on a connected device, the operator automatically allows the access without approaches than in the user entering any login credentials. The operator does this by recognizing the IP address of the device and connecting it to the pay TV account used at the same physical address. regions that don’t. ” The second approach requires a user to only sign in once on a particle device. After that, the device retains the Guillermo Contreras, Executive Director of login credentials and automatically uses them if the user opens another authenticated app. User Relationship Management and Business The final method is only to ask the user to log in once every 30 days. Mr. Galantanu says some operators are Intelligence, Fox Latin America even looking to extend the persistence of the login to a full year. These techniques can have a huge payback for the channel providers that employ them. Fox Latin America provides services in multiple countries in Latin America. In many of these countries, they also provide authenticated access to the channel and its shows through an online app, Fox Play.
Finders-Keepers: Scenarios in the open market for TV entertainment | Page 4
Juan Weiss, VP User Experience and Product Design at Fox Latin America, says the company has been very focused on the login problems experienced by their customers. They have implemented several schemes to make things easier, including the approach outlined by Mr. Galantanu. Mr. Weiss said: “If you are at home and using the Internet from your ISP, and they are also your TV provider, you will get authenticated without needing to enter your pay TV credentials.” Guillermo Contreras, Executive Director of User Relationship Management and Business Intelligence, Fox Latin America, said this had been a huge success in the countries where it had been implemented: “We see five times more users of Fox Play in the regions that implement these approaches than in regions that don’t.”
A simple and consistent UI/UX across devices can drive service adoption and usage.
Figure 1. In the future, people will be able to use their Facebook or Twitter account for TV Everywhere authentication
In-home auto-authentication illustrates how powerful simplifying the user interface and taking a consistent approach across devices can be in driving service adoption and usage. It is an area Fox plans to innovate on in the future. Mr. Galantanu foresees a time when a user will be able to use their Facebook or Twitter account to authenticate access to broadcaster apps online. He also thinks biometric measurement, possibly leveraging a consumer’s smartphone, will supplant the need for passwords and login names altogether.
Finders-Keepers: Scenarios in the open market for TV entertainment | Page 5
T u r n i n g Bin g e - a n d - Bolt into Anchor Tenancy
Challenge
There are three Binge-and-bolt behavior is epidemic among online video viewers. According to a study by Paywizard, in pillars“ that we stand for: December 2015, 31% of consumers said they planned to sign up for an SVOD service during the holiday season. However, a third of those were signing up with the intention of canceling again within six months.6 first, fresh, and finest. Binge-and-bolt is one of the hardest facts of life for OVSOs. They must offer just one month of commitment for We want to be the first most consumers to feel comfortable signing up. However, that means consumers can sign up for a service, to bring you British spend hours on end watching a show, and then cancel the service when done. Moreover, long viewing content that we think you will enjoy sessions are very common among binge viewers. watching. We want to bring it to you fresh. Deloitte’s 10th Digital Democracy Survey revealed that 70% of respondents binge watch an average of five episodes in one sitting. The behavior is even more prevalent in those aged 14 to 25, where 35% binge view on There are going to be new things appearing a weekly basis.7 on the service every single day, and some The objective for SVOD providers is simple: convince the binge-and-bolt viewers to stick around, and make of them will go away if you don’t keep up. the service an anchor tenant in their entertainment bundle. This is the finest British television you can Approach find anywhere, the great classics from the It is ultimately the content, and its relevance to the audience, that determines the success of the service. How libraries of BBC and ITV. The library is that content is deployed, however, is critical to addressing the binge-and-bolt phenomenon. According to Soumya Sriraman, President of the new BBC/ITV US SVOD service BritBox, the way her team handles it is by where the binge-and-bolt will be focusing on three core values, or pillars, of the service: happening. How do you play with ‘first’ “There are three pillars that we stand for: first, fresh, and finest. We want to be the first to bring you British and ‘fresh’ to minimize the bolt? content that we think you will enjoy watching. We want to bring it to you fresh. There are going to be new ” things appearing on the service every single day, and some of them will go away if you don’t keep up. This Soumya Sriraman, President, BritBox is the finest British television you can find anywhere, the great classics from the libraries of BBC and ITV. The library is where the binge-and-bolt will be happening. How do you play with ‘first’ and ‘fresh’ to minimize the bolt?” Ms. Sriraman says this strategy has been very successful so far, as very few people have canceled since the service launched in the first quarter of 2017. The BritBox approach is seeking to demonstrate the full value of the content catalog to the customer base. This is a smart move. Next to cost, the second most popular criticism of SVOD services is that there is too little to watch. Conversely, the top reason for staying with a service is that there is plenty to watch.
Finders-Keepers: Scenarios in the open market for TV entertainment | Page 6
The FilmStruck UI engages new users immediately and provides lasting value to regular users.
Fresh and finest are the guiding principles behind the new Turner Classic Movie service, FilmStruck. Jennifer Dorian, GM of TCM and FilmStruck, says the service aims to deliver some of the finest movies ever made to an audience that is passionate about them. The experience is heavily curated to ensure that audience is engaged. Each month a fresh set of content is brought to the audience around several themes and focuses. For example, recent themes include Film Noire and Alfred Hitchcock. A key to the experience is exploring the current themes and focuses. The app interface facilitates this, turning a simple browsing experience into a journey of discovery and delight. Quoting a comment by one of her customers, Ms. Dorian says, “Fans are not consumers; fans are participants.” The FilmStruck user experience embodies the spirit of that statement. It lays out the current themes, allowing the user to step into the theme and explore in more depth. It also provides a simple browsing mechanism that gets right to the movies. The FilmStruck interface was built on a cross-device platform making it easy to carry the same experience across every device it appears on. In this way, the interface engages the new user immediately, while providing lasting value to the regular user.
Finders-Keepers: Scenarios in the open market for TV entertainment | Page 7
Increasing the funnel
Challenge
For us, there’s this How many SVOD subscriptions are consumers willing to maintain at any one time? For smaller providers, this demand“ curve for is a critical question. Studies suggest people are increasing the number of services they pay for monthly. The 451 Research says that 19% are paying for 3 or more services, but that two of these slots are usually occupied audience, and what we by the top two SVOD providers, Netflix and Amazon.8 don’t want to do is turn One approach that providers are using to increase their chances of being the third service that consumers anyone away. At one take is the free trial period. With a third of those on a free trial converting to a paying customer, it is a very end you have the whales, who are willing successful strategy to employ.9 However, what about the two-thirds that did not convert? Many may have loved the service, but were not to engage with you on any dimension for able to subscribe. The challenge for OVSOs is how to remain whatever product. On the other end, you relevant to this large group of consumers, rather than turning them have people that love the content, but for away forever. whatever reason can’t afford, can’t fit it Approach into their life, can’t buy a premium Elation recently launched a new SVOD aggregation service called VRV, targeting the fandom community. The popular Crunchyroll subscription from you. Why would we turn anime anchors the service. It also includes other related services those people away? They might very well like Rooster Teeth and Seeso. Arlen Marmel, VP of Marketing and fall in love with the product. Distribution at Ellation, sees that large group of people that tried the ” service and didn’t convert to a subscriber as a huge opportunity: Arlen Marmel, VP of Marketing and “For us, there’s this demand curve for audience, and what we don’t Distribution, Elation want to do is turn anyone away. At one end you have the whales, who are willing to engage with you on any dimension for whatever product. On the other end, you have people that love the content, but for whatever reason can’t afford, can’t fit it into their life, can’t buy a premium subscription from you. Why would we turn those people away? They might very well fall in love with the product.” VRV is giving as many people as possible that try the service a reason to keep coming back. To do so, it is embracing the
freemium model. Each of the SVOD services partnering with VRV Figure 2. VRV aggregates content for has agreed to make a certain amount of quality content available the fandom community free-ad-supported. With the freemium approach, VRV brings value
Finders-Keepers: Scenarios in the open market for TV entertainment | Page 8
to everyone interested in the content. That should stop someone from deleting the app if they decide not to OVSOs need an app environment that subscribe, and keep them checking back often. VRV’s approach provides two distinct benefits to the OVSO: ad revenue and subscriber referrals. allows them to test multiple business Embracing multiple revenue generating models is a smart move according to Erick Opeka, EVP at Cinedigm. models and to innovate the interface “It’s important to bolster subscriptions with other revenue streams. That’s why I prefer a hybrid advertising and subscription model.”10 Rather than earning nothing from the two-thirds that don’t subscribe, ad revenue quickly to find the right balance can help better monetize the content. between them. The free viewers are also an important way to generate new subscribers. Every time a free viewer comes to the service is an opportunity to convert them to a paying customer. With more people using the service, there are also more people to recommend it. According to Mr. Marmel, building the funnel of potential new customers could be the most important benefit of all: “Free viewing is our funnel. We have multiples of users watching for free. And that’s great, because, from a business perspective, it is a low to no cost source of customer acquisition.” Striking the right balance between free viewing and premium up-selling in the app interface is critical to maximizing the value of the funnel. Taking too aggressive an approach to converting free viewers to paying subscribers will scare many users off. Not being aggressive enough fails to realize the full value of the content. It also illustrates why having a flexible app development environment is so important. OVSOs need to test multiple business models and to innovate the interface quickly to find the right balance between them.
Finders-Keepers: Scenarios in the open market for TV entertainment | Page 9
Coping with multiple distribution partners
Challenge
Amazon has some The reality for many online video service operators is that they will need to support both stand-alone market of“ the best web approaches and work with aggregators. A multi-distributor approach is perhaps one of the most important strategies to maximize the value of the content. However, this creates special challenges. Managing a technical hosting available. So, infrastructure that can support multiple distribution partners can be a stretch. Moreover, often figuring out when we deliver our how well your content is doing on each platform can be a major headache. stuff to them they Approach handle the actual delivery of it, and they CuriosityStream is one of the premier video services dedicated to quality, factual television programming. do that excellently. But we don’t get to The company has its own SVOD service available on connected televisions, PCs, and mobile devices. Also, it is partnering with Amazon on the Channels program. Peter North, Chief Operating Officer of CuriosityStream, monitor or identify opportunities in the says that Amazon is one of the company’s most important distribution partners, because of its Channels Amazon variant of our service. We would program. However, he recognizes there are some limitations: love to know what’s popular and what’s “Amazon has some of the best web hosting not popular with the same content on the available, so when we deliver our stuff to them, they handle the actual delivery of it. Amazon Channels marketplace versus our And they do that excellently. But we don’t own. But we often don’t get to make the get to monitor or identify opportunities in comparison and learn from it. the Amazon variant of our service. We ” would love to know what’s popular and Peter North, Chief Operating Officer, what’s not popular with the same content CuriosityStream on the Amazon Channels marketplace versus our own. But we often don’t get to make the comparison and learn from it.” To cope with disparate distribution partners, OVSOs need flexible infrastructure technology. The best arrangement is to have one unified video management platform to handle all partners. However, this is easier said Figure 3. CuriosityStream is available as an app and an Amazon Channel than done.
Finders-Keepers: Scenarios in the open market for TV entertainment | Page 10
CuriosityStream, which launched in April 2015, developed a video management platform that worked well for Reducing technical infrastructure distribution to its own set of apps. Mr. North says it is a mix of vendor and home-grown custom-built apps. The company was also one of the original services available when Amazon launched its Channels program complexity — for example, by using (then called Streaming Partners Program) in December 2015.11 CuriosityStream had to adapt its process to a cross-device app platform — can cope with a very different set of distribution requirements. It is making progress toward the goal of publishing to Amazon and its apps at the same time, but more work remains. eliminate distractions, allowing the Content delivery network (CDN) management poses another headache for smaller OVSOs such as CuriosityStream. Mr. North puts it this way: OVSO to remain focused on their “We need 4K video; we need coverage in Canada, Australia, parts of Europe. CDNs, of course, inevitably say content strategy. we can do it all. But when we do the technical testing, they do have some strong points. But there is no CDN that can handle every one of our needs. So, we have different agreements with several competing CDNs. Nothing would be easier than to send all our business to one CDN, but that isn’t the reality.” Unfortunately, the toolset available to manage multiple CDNs is very limited today. For example, CDN management tools allow the OVSO to automate load balancing, so everyone receives the best possible quality. However, the tools cannot load balance and minimize distribution costs at the same time. As markets, partnerships, and infrastructure providers continue to evolve, the technical infrastructure to support them must change, too. At least for the time being, coping with multiple distribution partners will continue to be a challenge. However, looking for ways to keep the technical infrastructure as simple as possible — for example, by using a cross-device app platform — can eliminate distractions allowing the OVSO to remain focused on their content strategy.
Finders-Keepers: Scenarios in the open market for TV entertainment | Page 11
C o n c l u s i o n
In the discussions with the many OVSOs and It could take a decade or more for the industry to The problem with online infrastructure providers for this paper, one fact develop all the standards it needs to deliver the video“ is that it’s a different underpinned every discussion: customer choice. consistent experiences consumers desire. In the Everyone takes it for granted that the viewer is in meantime, OVSOs will need to evolve constantly as experience for everyone. control of his or her TV entertainment life. new scenarios and challenges appear. When you go from Netflix to Though some in the television business would like That means an OVSO must use an app and Hulu to Crunchyroll, the to wrest control back from the viewer, that ship, experience platform that can straddle the experience is so different. as they say, has assuredly sailed. Viewers will inconsistencies of the underlying technology of continue to dictate when, where, and how they online video delivery. The platform must also have All of these companies are doing whatever watch. Moreover, as they change, so must the the flexibility to adapt quickly because the they can to make it work because they’re OVSOs. standards of delivery continue to evolve. Such a platform will hide the “band aids and bubble being driven by consumer demand. One thing that is important to remember about gum” from the user, allowing them to be delighted the online delivery of television entertainment is They’re putting things together however by the service experience, and not to be distracted just how young the business is. The television by the inconsistencies. they can. It’s band aids and bubble gum, industry has had almost a century to develop a set and duct tape, and the lack of standards is of standards that give consumers a consistent As we saw with the Turner app for FilmStruck, an experience. Online providers are just beginning to interface and experience can be constructed that leading to really inconsistent experiences develop those same standards. spans multiple devices without exposing the user for end users. to the eccentricities of each environment. It also Jason Thibeault, Executive Director of the ” shows it can be done without compromising streaming Video Alliance, sees this lack of Jason Thibeault, Executive Director, experience in the process. Streaming Media Alliance standards as holding the industry back: All of that said, one thing is clear: playing finders- “The problem with online video is that it is keepers with subscribers will remain the most a different experience for everyone. When you go important challenge for OVSOs for years to come. from Netflix to Hulu to Crunchyroll, the experience is so different. All of these companies are doing whatever they can to make it work because they’re being driven by consumer demand. They’re putting things together however they can. It’s band aids and bubble gum, and duct tape, and the lack of standards is leading to really inconsistent experiences for end users.”
Finders-Keepers: Scenarios in the open market for TV entertainment | Page 12
References
1 T-Mobile, Binge On Streaming Video List, T-Mobile, www.t-mobile.com/offer/binge-on-streaming-video-list.html (accessed on 7/3/17) 2 TiVo, Q1 2017 Video Trends Report, TiVo, Q2 2017, p21 3 Colin Dixon, Search and Recommendations Deliver 65% Boost In PPV, nScreenMedia, June 14, 2017, www.nscreenmedia.com/search-and-recommendations-boost-ppv-dollars/ (accessed on 7/25/17) 4 Colin Dixon, Are Apps the Future of OTT Video Experience?, nScreenMedia, Feb 1, 2017, www.nscreenmedia.com/video-apps-future-ott-experience/ (accessed on 7/3/17) 5 TiVo, Q1 2017 Online Video and Pay TV Trends Report, TiVo, Q2 2017 6 Paywizard, OTT Isn’t Just for Christmas, Paywizard, Q1 2016, p7 7 Libby Hill, 70% of Consumers Binge Watch 5 Episodes In a Sitting, Survey Says, LA Times, March 23, 2016, www.latimes.com/entertainment/envelope/cotown/la-et-ct-binge-viewing-survey-story.html (accessed on 7/3/17) 8 Ben Munson, Study: 19% of SVOD Subscribers Pay For Three Or More Services, FierceCable, March 20, 2017, www.fiercecable.com/online-video/study-19-svod-subscribers-pay-for-three-or-more-services (accessed on 7/3/17) 9 Jeff Baumgartner, About a Third of Free OTT Trials Convert to Paid: Study, Multichannel News, April 24, 2017, www.multichannel.com/blog/bauminator/about-third-free-ott-trials-convert-paid-study/412391 (accessed on 7/3/17) 10 Janko Roettgers, Off the Beaten Path: Niche Subscription Video Services Between Boom and Bubble, Variety, Mar 21, 2017, variety.com/2017/digital/news/niche-svod-services-1202012100/ (accessed on 7/3/17) 11 Ingrid Lunden, Amazon Makes a Bid For Cord Cutters, Adds Showtime, Starz And More Streaming Partners to Prime, TechCrunch, Dec 8, 2015, techcrunch.com/2015/12/08/amazon-makes-a-bid-for-cord-cutters-adds- showtime-starz-and-more-streaming-partners-to-prime/ (accessed on 6/30/17)
www.nScreenMedia.com For more information contact: [email protected]
This paper is made possible by the generous contribution of
www.youi.tv
Finders-Keepers: Scenarios in the open market for TV entertainment | Page 13