The third trend on our list for content owners is the rise of over-the-top (OTT) pure plays (see posts one and two in this series to catch up if you are just joining). Over-the-top pure plays such as Netflix, Hulu, Amazon Prime Instant and CinemaNow have blossomed, and as a result the floodgates have opened for new content providers. Even cable channels aren’t immune to the turn toward alternate distribution channels and ever-broadening of content interests. In the first quarter of 2012, the average audience for 11 of the 15 most popular cable channels fell from a year earlier.
The economics of this shift threaten traditional distribution models as well as the content providers that support them, suggesting that OTT is cannibalizing its premium programming. In response, large content owners are pulling their most valuable assets from the OTT provider lineups, unless subscribers can prove they’ve “paid” for traditional cable or satellite packages. OTT providers’ are responding in kind by licensing and deploying their own content. Netflix recently said it will spend as much as 15% of its content acquisition budget on original streaming content like David Fincher’s House of Cards and Lilyhammer, a Norwegian-produced program.
How are content owners responding?
Content owners are conducting systematic content audits, segmenting titles by age, shelf life, viewer demographics and personas. Many are also beginning to make their entire library of content available online (across multiple devices) to drive consumption and further understand their customers’ viewing tendencies. Marginal costs for adding a title to a website library is near zero due to ever-decreasing storage and bandwidth costs. Additionally, content that may seem outmoded or stale can unexpectedly drive significant traffic or index towards uniquely valuable audiences. Once armed with an understanding of viewing frequencies and other consumption data, content owners can better market broader distribution through an OTT or other online venue.
As viewers increasingly turn to OTT for their favorite programming, the need for additional storage and methods to optimize online delivery becomes critical. Utility cloud computing and storage services working in tandem with optimized connectivity and content delivery network capability can provide cost-effective ways to store and deliver the assets of traditional publishers, online gaming outlets and other entertainment and media companies. Established OTT vendors who are experimenting with a number of business models are also benefiting from outsourced data center services that can hybridize infrastructure across hosting and colocation platforms to increase performance, add functionality and improve reliability relative to on-premise options.
Next, we’ll discuss how mobile is hastening the demise of the content schedule and how content owners are responding.
To learn more, download the complete white paper, Five Trends to Watch for Content Owners in 2013.