For many individual channels that have small- or medium-sized audiences, a switch to over-the-top (OTT) streaming as their sole means of video delivery could become an option over the long term, according to IHS Screen Digest.
The research firm asserts that about two-thirds of the UK’s 192 major channels could potentially afford to switch to a unicast OTT-only delivery model within the next five to ten years.
Of the 192 channels rated by the Broadcasters’ Audience Research Board (BARB), only 58 have such large audiences that moving to a pure-OTT approach would be cost ineffective for the foreseeable future, says the study.
The remaining 134 standard-definition channels carry a weekly content delivery network (CDN) cost of 10,000 euros per week or less – around 1.5 times or less than the cost of satellite broadcast.
“The economics of OTT streaming remain highly unfavourable”
“For large consumption channels—i.e., channels with large audiences—the economics of OTT streaming remain highly unfavourable, with the cost in some cases hundreds of times greater than broadcast on satellite,” said Guy Bisson, research director for television at IHS.
“However, for channels with a low to medium viewing share, scaling for OTT may not be such an issue. It’s true that high-definition (HD) makes OTT unaffordable for any channel regardless of its audience size, and that any discussion of moving away from traditional satellite, cable and terrestrial and to OTT is academic at the current time.
“Nonetheless, as television business models change and subscribers’ viewing habits evolve, there could be a gradual move among smaller SD channels to begin to investigate OTT unicast and multicast as a substitute for traditional broadcast during the next decade.”
IHS Screen Digest takes pains to clarify that OTT delivery is not free: when it comes to larger audiences and HD content, it is not cost effective and represents an “onerous incremental cost”.
In addition, current on-demand consumption patterns suggest that a shift to unicast OTT delivery would also impact viewing market share, further reducing the value of the channel and its business model.
Two major changes
Two major changes are needed before a channel can even consider shifting to unicast-only: the emergence of a consumer-facing OTT platform with significant reach which acts as the primary means of television delivery in the majority of homes that it touches, and a larger shift in consumer behaviour away from linear scheduled television.
Without these two changes, the costs of unicast delivery will remain an additional expense with traditional broadcast, says Bisson, who does however believe that the seeds of both these changes have been planted in the UK.
On the platform side, Youview, Sky’s Now TV and BT’s evolving Vision service all have the potential to realise the first fundamental shift, while the second shift concerning viewer behaviour cannot occur without the first taking place – meaning that the shift will be gradual rather than sudden.
Signs of the transition will appear when the smaller channels begin to investigate unicast and multicast as a substitute for broadcast, predicts Bisson: “Over what time scale this will occur is difficult to predict, but it is certain to be longer than five years.”