S URVIVE AND THRIVE: The Changing Environment for Content and Video Services With Drop Shadow SPONSORED BY IN PARTNERSHIP WITH Without Drop Shadow For Black Background For Black & White in color For Black & White in color For Black & White in white Survive and Thrive: The Changing Environment for Content and Video Services TABLE OF CONTENTS About the data 3 What we looked at and why 3 The video market today 3 Maturity issues challenge today’s video services 4 Developing new distribution partners 5 Being discovered tops the list of challenges 6 Features to improve service experience 7 Online video technology today 8 Leveraging the cloud 9 Artificial intelligence 9 Improving monetization 10 Conclusion 11 TABLE OF FIGURES Content and video provider distribution channels Figure 1 Will all TV channels launch D2C services? Figure 2 Technical and business issues challenge success Figure 3 Most important CAVP distribution channels Figure 4 Connected TV delivers the highest engagement Figure 5 Biggest business challenges Figure 6 Features either implemented or planned by CAVPs Figure 7 Importance of online video achieving TV quality and reliability Figure 8 When will online meet/exceed TV quality/reliability? Figure 9 Artificial intelligence use by CAVPs Figure 10 Monetization methods used by VSPs Figure 11 Comfort level with cloud infrastructure Figure 12 2 Survive and Thrive: The Changing Environment for Content and Video Services ABOUT THE DATA For ease of reference, this report will refer to all survey respondents as content and video To better understand how corporations with providers (CAVPs). media assets are planning to deliver them to end consumers, nScreenMedia partnered with Broadcasting & Cable and TV Technology, two WHAT WE LOOKED AT AND WHY Future Publishing brands, to field a survey to The objective of the survey was to understand 205 United States company managers with better how content and video providers are responsibility for the technical implementation of leveraging online resources and delivery their video distribution services. The respondents mechanisms to optimize the business and were drawn from the following groups: technical performance of their services. The survey covered a number of topics, including the • Broadcast television stations, station groups, or networks following: • Pay television operation/MSO/MVPD • Programmers: syndicators, studios, other license holders • Types of services and monetization methods • TV services: Producers, distributors, talent, television rep • Video service differentiation methods and approaches firms, or other providers • Attitudes to new technologies such as AI and the cloud • New media: Digital, internet, or interactive companies • Video platform approaches used to deliver the service • Other companies with video assets to be delivered to • Threats and challenges to success consumers. Neither Comcast Technology Solutions nor Future Survey respondents were all based in the US and Publishing influenced the data, analysis, and drawn from the following disciplines: conclusions presented here. • Corporate management • Engineering/IT management THE VIDEO MARKET TODAY • Programming management Content and video providers (CAVPs) today can reach viewers through many different routes. The Figure 1 Content and video provider distribution channels Online syndication 25% Pay TV - PPV/EST 8% D2C app - TVOD 8% D2C app - ads 20% D2C app 20% TV Everywhere app 29% Pay TV - VOD 24% Pay TV - linear 34% Over-the-air 44% 3 Survive and Thrive: The Changing Environment for Content and Video Services Figure 2 Will all TV channels launch D2C services? No 3% Yes, in 10+ years 15% Yes, by 2022 67% Yes, within a year 16% media executives who participated in our survey happen as early as 2022. Recent developments reflect this diversity. Over-the-air broadcast and indicate that it could happen sooner than that. pay TV linear channels remain an important part of the distribution strategy for 44 percent and 34 The Walt Disney Company, a company that percent of respondents, respectively. Additionally, has been distributing media for decades, has online delivery in the form of TV Everywhere announced plans to deliver a new US direct-to- apps is now another very important way to reach consumer (D2C) service in 2019. The service viewers. Three in 10 survey participants already will deliver much of the company’s top assets, have apps in market tied to their distribution including movies from Disney Studios, Marvel, through pay TV operator systems. Pixar, and Star Wars, as well as original content such as Flora and Ulysses.ii A minority of the media executives in our survey use direct-to-consumer (D2C) services to reach With Disney’s entry into the D2C market, others viewers. One in five has a D2C subscription are sure to follow. service, and the same percentage have launched a D2C ad-supported service. However, this could MATURITY ISSUES CHALLENGE be about to change. TODAY’S VIDEO SERVICES There are 215 online subscription video services It has been 10 years since Netflix launched its in the US.i Our survey indicates that broadcasters streaming video service. Today, nearly seven in 10 and cable channels are responsible for just a consumers in the US use a subscription video on handful of them. It doesn’t appear likely that demand (SVOD) service, while in the UK a third of things will stay that way. We asked our survey homes have at least one service.1 The market for group if they thought all major TV and cable online video is maturing, and as it does it presents channels would ultimately have their own D2C a different set of challenges than it has the past video service, and 87 percent thought that would 10 years. Figure 3 Technical or business issues challenge success 39% 61% Technology-related Business-related 4 1 In the UK, nine million of the 27 million households have at least one SVOD service. Survive and Thrive: The Changing Environment for Content and Video Services Figure 4 Most important CAVP distribution channels License partners 41% Syndication partners 42% CE vendors 44% Aggregators 33% Wireless ops 33% Pay TV 30% In the early market for online video, the a third of survey participants, as were wireless technology of delivery posed many different operators such as T-Mobile and Sprint. challenges. From creating apps to keeping the video secure, everything in the video streaming CE vendors are particularly worthy of close technology ecosystem was in flux. As we enter attention from CAVPs, since they also act as the second decade of SVOD services, it is video service aggregators. However, building business challenges that dominate. Three out of relationships with streaming media player, five participants in our survey group said business smart TV, and connected device makers is issues posed the biggest challenge to success. something quite new for programmers and CAVPs are dealing with a variety of maturity broadcasters. The effort is worth it, as they can issues as they work toward building sustainable be tremendously influential in helping customers online video businesses. Our survey results find a video service. highlight some of these issues. Consider the connected TV, which is one of DEVELOPING NEW the most important screens for any CAVP. With average viewing sessions of 77 minutes and DISTRIBUTION PARTNERS completion rates of 80 percent, the connected Although programmers are beginning to focus TV delivers better engagement than any other their efforts on online D2C services, they won’t be abandoning current distribution channels. The survey group continues to see their long- Figure 5 Connected TV delivers the term partners, such as pay TV operators, as highest engagement important. 80% 75% However, developing new distribution channels 64% requires that CAVPs develop new relationships. 77.0 70.4 When asked to identify their most important 50% distribution partners, CE vendors were rated eight Average completion rate 45.2 or higher in importance (on a 10-point scale) by 42.2 39.2 32.2 35.0 44 percent of the survey group. Syndication and 31.6 license partners were also rated as important by over 40 percent of participants. Smartphone Tablet PC Connected TV Online video service aggregators, such as TV show playtime per unique viewer (minutes) Amazon Channels, were rated as important by All day Primetime 5 Survive and Thrive: The Changing Environment for Content and Video Services screen.iii Forty-seven percent of households with One approach to solving this problem is to Wi-Fi have a streaming media player such as maximize distribution of a smaller service. Roku or Apple TV.iv Roku owners have thousands For example, CuriosityStream, a video service of channels from which to choose, so it’s critical offering nonfiction documentaries, delivers not to ensure that a video service is easy to find. only through branded apps but also appears in aggregation partner services such as Comcast BEING DISCOVERED TOPS THE X1, Amazon Channels, and Elation VRV. LIST OF CHALLENGES As a business matures, it’s natural to focus on We asked our survey participants to rank the optimizing revenue generation and reducing importance of 10 of the most pressing business costs. So it is with our survey group. Controlling challenges for content and video providers. operational costs and maximizing customer The most challenging issue, with 71 percent of lifetime value are the second and third most participants rating it eight or above on a scale of frequently cited challenges. It’s interesting one to 10, was ensuring that audiences could to note that our survey group put far less find the service easily. Given that there are importance on churn (rated almost last in our already over 200 premium video services, it’s survey) than customer lifetime value (CLV.)2 The little wonder CAVPs are so concerned. cost of signing up a new subscriber is very small for online services, so high churn costs very They have every reason to focus on the discovery little.