Analysis & Opinion

Competition, consumers and the year of choice

All-out war has broken out in the OTT space, and this trend is set to continue throughout 2012 (writes Alan Wolk, Global Lead Analyst at KIT digital).

Consumers’ appetite for multiscreen content is beginning to be satisfied as traditional pay-TV providers begin making OTT part of their service portfolio. The success of services like Netflix, which stream video via a third party device, demonstrate that even the most technophobic consumers are developing a thirst for accessing video content by any means necessary.

Battling the likes of Apple, Amazon and Google and a host of smaller online VOD services is not easy, but traditional pay-TV providers are preparing themselves for all-out war.

The increase in competition will fuel a land grab for subscribers, creating a frenzied scenario, as consumers invariably seek out better pricing and better content.

The industry has been taken by surprise at how quickly video streaming has been adopted and the intensity with which subscribers are pushing providers to deliver the experiences they can easily find elsewhere.

Consumer spend on entertainment has always been fickle, but the ever-growing number of VOD options for consumers will define 2012 as ‘the year of choice’.

This will also be a year of choice for service providers as they decide how they do battle in this new arena and what ammunition is needed to define themselves through the video services they deliver.

Infrastructure advantage

So far, the clear cut advantage traditional TV providers have is that buying bundled TV and internet service has been ingrained through the “triple play” packages (TV + Broadband + Landline telephone) that are common in Europe and the US. The number of people in the US who have internet and TV with the same company is incredibly high; for many major providers, the number can be well over 90%.

As the pay-TV providers own the infrastructure most consumers utilise to access the internet, they can fend off web-based providers by instituting bandwidth caps and other fees for excessive internet use.

As consumers drop the traditional TV portion of the triple pay package subscription in favour of OTT video services, triple play providers will stop offering unlimited data and guaranteed high-speed internet access to these internet-only subscribers, instituting a two-tier system favouring traditional pay TV subscribers over non-subscribers.

The infrastructure advantage is only one aspect of this increasingly dynamic competitive landscape. As always, content will be the prime differentiator among VOD services, answering the question “do we have something the consumer wants to watch?”

Content is the most obvious differentiator in the VOD market but not the only one. A more challenging question is: “are we making it easy and enjoyable for consumers to watch our content?”

Innovating in interface

In 2012, user experience will become a critical differentiator between VOD services. Top priority needs to be a well-designed interface. That is key. Just as consumers base a retail store by the look and feel long before they evaluate the actual merchandise, so too will VOD consumers make their choices based on the look and feel of what they see on their (first and second) screens.

All this investment and interest in OTT will also help push social TV forward. Brands and broadcasters both learned a hard lesson during Super Bowl XLVI this year as consumers rebelled against forced interactions and reverted to more natural reactions instead: promotions that asked the consumer to divert their attention from the game to an advertising site were not well received.

For social TV to develop, the human aspects of the viewing experience will need to be taken into account when developing the technology; ads need to act ‘socially’ as well.

2012 will continue to see the rollout of new social TV solutions and the best of these will ultimately be rolled up into a multipurpose app that is the core of the second screen experience, something akin to a social EPG.

Better for bingeing

What is particularly exciting about the move to OTT is that there is a real shift in mind set away from linear TV scheduling. As consumers become more used to the idea of a deep pool of available content, with full seasons of their favourite shows at the ready, the more likely they are to abandon the notion of “what’s on TV now?” in favour of “what do I want to watch now and how many episodes can I watch before I fall asleep?”

Consumers can therefore binge on content that they like and build a relationship around it that is both social and content focused. Binging can occur whenever the notion takes the viewer, and thus an emotional bond can be forged if produced and maintained correctly. This makes video stories more like written stories, in that the only limitation is the amount of available free time.

The idea of complete freedom of choice will continue to define a new age in video and 2012 will be an exciting time for everyone involved in the industry, as it changes dramatically, month by month.

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