Guest post by Adam Nightingale, Senior Director Strategic Sales, Global, Irdeto
The value of both premium and live content for the pay TV and broadcast industry reached new highs in 2013. Traditionally seen as a telecoms provider, BT rocked the UK TV market with its audacious acquisition of Champions League rights at the end of 2014, and with streaming services like Netflix an increase of 630,000 US subscribers during the latest launch of Arrested Development it is clear that content consumption was a major trend in 2013.
But what can we expect in 2014? Will consumers continue to change the ways in which they decide access content? Will we see the value of content continue to rise? If so, how will broadcasters and content owners adapt to support consumers’ changing needs?
Binge viewing will continue to be popular with consumers, but operators will start to realise this is not a very sustainable business model.
In 2013, OTT services such as Netflix capitalised on consumer demand for quality, premium content with original series such House of Cards and the rebirth of popular shows including Arrested Development. We also saw different approaches to windowing and releasing, allowing viewers to binge on episodes of streamed content.
While clearly interesting to consumers and satisfying a hitherto untapped market for video gluttony, the long-term future for binge viewing as a business model is shaky. There is a proven advantage when traditional pay TV operators take advantage of episodic viewing to create social hype and tension around content. Such scheduling creates a sense of anticipation amongst viewers, which in turn creates valuable free advertising across social networks and by word of mouth. The core reason content has been drip-fed is to retain and grow viewers over a protracted period of time.
So will 2014 see the rise or fall of binge viewing? Given consumer desire to watch content when and how they want, we predict binge viewing will continue in 2014 – a second series of House of Cards is coming in February, so expect more hype that release. Irdeto’s recent CES survey highlights strong popularity for this trend amongst younger generations. But what’s important for both pay TV operators and OTT services is to establish a sustainable return on increased investment in premium content. Content continues to be assessed on a case by case basis and serialised depending on how much value it can bring. We can expect to see more sophisticated models emerging in 2014.
Pay-Per-Click consumption will heat up, and for consumers, the line will blur between traditional pay TV services and OTT.
Content consumption was all about the experience in 2013; a trend that will continue into 2014 as consumption becomes more about the individual and their needs. As it is often difficult to subscribe to a single service that satisfies all consumer requirements, the consumer will start to cherry pick the content, select the device he or she will consume the content on and will navigate based on personalised and social recommendations, paying for content as and when they want it.
The pay-per-click approach is not as straightforward for operators however and to meet these demands, 2014 will see operators invest more in aggregating content from all sources (such as Virgin and Netflix in the UK) into one offering. While it’s still some way off, we would eventually expect to see a subscription model develop that is similar to that of Spotify – where consumers have to option of an “all-you-can-eat” package with advertising, or a premium package where they can get all the content ad-free.
New entrants continue to edge out traditional broadcasters and drastically change consumer viewing habits
Programming costs keep increasing, with the three top public cable operators in the US seeing them grow at around six times the pace of video revenues between 2008 and 2012 (according to SNL Kagan). That fact the newer entrants, with weaker negotiating power, will need to pay higher rates may slow down the threat posed slightly, but 2013 still saw a number of shocks to the broadcasting industry with big money moves. In the field of live sports when BT announced an exclusive £897 million deal to broadcast live Champions League and Europa League match for three years from 2015. New entrants like BT understand the value of premium content and will continue to buy up rights in 2014 to compete with traditional operators and, in the case of BT, to help reduce churn rates of broadband subscribers, a strategy which is starting to pay dividends. Not only impacting the broadcast industry, this move will cause consumers to change their viewing behaviours, moving from a one-stop-shop to a marketplace mindset and shopping around for the best content available.
Sony also recently announced at CES that it plans to pilot a Cloud-based TV service this year, and this constantly-evolving marketplace will cause rights owners and operators to become more competitive in offering content to consumers – for example by relaxing content release windows and introducing pay-per-click to make content more attractive.
New Year, new challenges
While pay TV operators swiftly adapted to meet the changing needs of consumers in 2013, we can’t expect it to stop there. Now more than ever consumers demand more high quality content whenever and wherever they want – many of our customers are seeing consumption on mobile devices regularly exceeding 30% of total traffic. And with features such as personalisation and recommendations gaining traction, 2014 is shaping up to be more exciting – and probably even more consumer centric – than last year was.