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VOD & OTT Services (Part I): Maximising the Monetisation Opportunities for Broadcasters 2Nd Edition (April 2020)

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VOD & OTT Services (Part I): Maximising the Monetisation Opportunities for Broadcasters 2Nd Edition (April 2020) egta insight VOD & OTT services (Part I): maximising the monetisation opportunities for broadcasters 2nd edition (April 2020) www.egta.com legal notice This publication has been researched and produced by egta’s TV department, and it draws inspiration from open sources, egta materials and databases, conversations with industry experts and literature from multiple sources. Whilst every effort has been made to ensure the accuracy of the information in the publication, egta does not accept responsibility for possible errors or omissions. The opinions and analysis expressed in the publication are those of egta and do not necessarily reflect the views of the other parties. introduction In our ever-evolving media landscape, people are inundated with a wide range of options when it comes to how, where and when they can access TV content. A world of powerful stories at their beck and call, simply by asking for them. By demanding them. It is fair to say that TV advertising is experiencing a renaissance, and that egta members have innovated more than ever in the last two years to reinvent their businesses and make their offer more attractive. As the evolution from television to video swiftly progresses, TV (and Total Video) is no longer perceived only as a proven and brand-safe, but also as a forward-thinking medium, which is incessantly looking to the future. This egta Insight dives deeper into the landscape of OTT/VOD services across Europe and beyond. The report, which focuses on existing services, business models and monetisation opportunities is the first part of a two-volume series that egta intends to release in 2019. The objective of this overview is to help broadcasters strengthen their position in the video space by delivering not only inspiration but also hands-on case studies and providing members with the practical knowledge and tools to aid them on the global advertising battlefield. Chapter one sets out the key strategic challenges and opportunities that TV publishers need to consider while developing their online offers and outlines the main priorities to tackle in these areas. Chapter two examines the different revenue models present in the OTT/VOD space. Chapter three looks at the different elements necessary for the success of any video monetisation strategy. As OTT/VOD continues to resonate with consumers across the globe, becoming an integral part of the video viewing habits, we hope that our analysis, combined with a number of practical cases from France, the Nordics, Belgium and the US, will prove a valuable resource and support TV publishers in their online endeavours. We wish you plenty of inspiration and reading pleasure. The egta team table of contents 6 CHAPTER 01: PIECING TOGETHER THE 25 CHAPTER 03: WELCOME TO THE BROADCASTING AND OTT PUZZLE: WORLD OF TOTAL VIDEO. MAXIMISING HOW OTT/VOD IS CHANGING THE TV OTT MONETISATION OPPORTUNITIES WORLD FOR BROADCASTERS 6 1.1. Definitions 25 3.1. Types of content on OTT/VOD services 6 1.2. TV broadcasters in the video space 3.2. Exploiting the potential of video 9 a. Changing viewing patterns are 25 driving the OTT boom inventory 3.3. Yield and capacity management 9 b. Opportunities for TV broadcasters 26 and advertisers 26 3.4. Video content distribution channels and their effects on the monetisation 10 c. Challenges for broadcasters and brands opportunities 3.5. Pricing models 12 d. How broadcasters can strengthen 27 their position on the OTT/VOD 27 a. CPM-based pricing model market 28 b. Cost per view method 14 Building sustainable business models to 29 c. Other pricing models exploit new monetisation opportunities: a roadmap for TV sales houses 29 d. The mechanism behind pricing options 16 CHAPTER 02: AN OVERVIEW OF e. The future of pricing models EXISTING OTT/VOD BUSINESS MODELS 30 3.6. Advertising formats on OTT/VOD 16 2.1. SVOD 31 services 16 a. Advantages and disadvantages for viewers 31 a. Basic digital video ad units and formats 17 b. Benefits and challenges for publishers 31 b. Standard advertising formats on OTT/VOD services 19 2.2. AVOD 32 c. Special formats. Towards greater 19 a. Advantages and disadvantages for engagement: user-engaged ad viewers experiences and interactivity 20 b. Benefits and challenges for 33 3.7. The resurgence of ad-supported publishers models. Ad load on OTT/VOD 21 2.3. TVOD/PPV 33 a. Advertising as a key element to a 21 a. Advantages and disadvantages for flexible business model viewers 39 b. Ad load 21 b. Benefits and challenges for 41 3.8. Integration of video assets into the publishers overall media offer 22 2.4. HVOD 44 3.9. Organisations of sales 23 a. Advantages and disadvantages for 44 a. Avoiding the risk of siloisation viewers 45 b. Programmatic and automation 23 b. Benefits and challenges for publishers 45 FUTURE PERSPECTIVES 24 2.5. Other models 47 CASE STUDIES 48 TV 2 Denmark: constructing a new flexible business model for the broadcaster’s VOD service 52 Hulu: an example of a successful BVOD service 56 LOVEStv: How broadcasters can better position themselves in the battle for premium video viewing on the TV screen 58 The future is streaming, says NENT Group as it reinforces its position on the video market 62 Sky Deutschland: embracing streaming services as a key to broadcaster’s position in the media space 64 DPG Media: examples of innovative online tv platforms 66 JOYN: transforming the German video market with a new streaming service 68 Ampere Analysis: 2020: the state of VOD. Insights on the recent developments on the video streaming market services on the Internet cover a wide range of chapter 01: offerings, whether free of charge or subject to payment. The video sharing services of the type Piecing together the provided by YouTube or Dailymotion normally broadcasting and OTT employ streaming. puzzle: how OTT/VOD is Catch-up TV is a system for watching TV programmes after they have been broadcast, changing the TV world using a computer, a smartphone/tablet, set-top- 1.1. Definitions box, smart TV or another device that is connected to the Internet. OTT (over-the-top) refers to any service that is directly delivered to users over the Internet, 1.2. TV broadcasters in the video bypassing telecommunications and broadcast space platforms that traditionally act as controllers or a. Changing viewing patterns are distributors of such type of services. In broad driving the OTT boom terms, OTT can describe a wide range of solutions and products (such as messaging apps, video The digital disruption of over-the-top video on- streaming systems, etc.) that once depended on demand services has irrevocably altered the path satellite or cable delivery mode (texts, video calls, of the TV industry. In today’s TV Everywhere (TVE)/ access to TV programming, etc.) but now use the Total Video (T/V) world, linear broadcast remains internet instead. In broadcasting, OTT refers to the a big part of the entertainment mix, but shifting delivery of video content via the Internet, without consumer viewing behaviours continue to drive requiring users to subscribe to a traditional cable global OTT growth. With younger audiences “raised or satellite pay-TV service. on” video streaming services, the media industry is witnessing major changes in terms of viewers’ VOD (video-on-demand) should be considered expectations of how video content is consumed as video content that is controlled, enabled, and and delivered. consumed whenever and wherever a viewer chooses to watch it. VOD content can be found According to a recently published report by Rethink on set-top-boxes, OTT devices, mobile web, Technology Research, the number of SVOD 1 mobile apps, and video streaming services . In subscribers will grow from 478 million in 2018 to this context, VOD refers to OTT understood in a 743 million globally by 2023 (with China having broadcasting context. Videos can be distributed the most SVOD subscribers by 2023, but North either by downloading them and storing on the America is still driving the largest dollar volume)3. user’s computer hard drive (or another device) The average viewing time for SVOD content is or as streamed content (also called progressive expected to equal the amount of broadcast TV download). In this case, the programme is not watched within the next 4 years4. permanently stored on the user’s device: the process permits video only to be played2. VOD 1 Video Adveryising Glossary, IAB, http://dvglossary.www2.iab.com/. 2 Video on demand and catch-up TV in Europe, European Audiovisual Observatory, October 2009, https://rm.coe.int/16807835d3. 3 The rise in SVoD viewing to swamp traditional TV by 2023, Rethink Technology Research, February 2019, https://rethinkresearch.biz/wp-content/uploads/2019/02/Executive-Summary-SVoD-to-Swamp-Traditional-TV.pdf. 4 Ibidem. Page 6 FIGURE 01: Ad-free SVOD viewing vs. ad-based TV viewing (per day, worldwide) Hours viewed Ad-funded TV vieiwing Ad-free SVOD vieiwing 5 bn 4 bn 3 bn 2 bn 1 bn 2018 2019 2020 2021 2022 2023 Source: The rise in SVoD viewing to swamp traditional TV by 2023, Rethink Technology Research, February 2019, https://rethinkresearch.biz/wp-content/uploads/2019/02/Executive-Summary-SVoD-to-Swamp-Traditional-TV.pdf FIGURE 02: Number of ad-free SVOD subscribers (per region) 800 m 700 m 600 m Latin America Europe 500 m 400 m Asia Pacific 300 m 200 m 100 m North America 2018 2019 2020 2021 2022 2023 Source: The rise in SVoD viewing to swamp traditional TV by 2023, Rethink Technology Research, February 2019, https://rethinkresearch.biz/wp-content/uploads/2019/02/Executive-Summary-SVoD-to-Swamp-Traditional-TV.pdf
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