As the monsoon comes, social media is flooded with a deluge of poetic expressions from users ranging from songs, to music, essays, romantic recollections, and verse of course. However, I have some rather prosaic challenges every monsoon, as the clouds and rain interrupt my Cable TV transmission. Much to my irritation, the screen shows the message the bad weather is preventing transmission. This time around I found a workaround; I bought a smart TV.
Whenever the interruption happened I switched the TV to the Internet mode and logged on to YouTube to watch my favorite programs from news to films to tele-serials, et all without any interruption. Very soon I got addicted to my on-demand viewing and found it much better than the scheduled package of programmes offered by the Pay TV service provider. Right now I am pondering whether to cut the cable. Worldwide, this is already happening and cord-cutting has become an accepted phrase.
The battle between cable TV operators who sell us the black boxes and the over-the-top (OTT) video broadcasting which allows the viewer the flexibility of on-demand viewing is reaching a critical point where the OTT players are most likely to disrupt the way we have been viewing television so long. A model has emerged which offers, against a subscription, a catalogue of programmes which viewers can select from to watch it at their time of choosing, as opposed to a fixed schedule offered by the cable television operators.
Perhaps the most interesting move in the TV space has been made by Facebook which is talking to Hollywood studios and agencies about producing scripted, TV-quality series for the social networking website. With a reported budget of up to $3 million per show episode, Facebook is aiming to start airing the original programming on its site. According to analysts, the social media giant is planning to flood the site with higher-quality video content.
Besides funding such high-end, cable-like productions as Strangers, a relationship drama targeted at millennials, and Last State Standing, a game show, it is also seeking short-form, largely unscripted videos that would run about ten minutes in length. Facebook is aiming its programming at viewers between the ages of 13 and 34. Looks like Pay TV is in for another round of disruption as viewers migrate to on-demand viewing of their favourite programmes instead of watching a fixed schedule of programmes.
Facebook’s initiative is part of a move by OTT players, who were content aggregators to becoming producers of original content. According to research, the US internet video market is by far the largest and most established in the world, accounting for 47 per cent of global revenue in 2016. The landscape continues to evolve at a fast pace, with the more established over-the-top (OTT) players making the significant transition from aggregators of non-exclusive programming to providers of original content that they can offer on an exclusive basis.
According to a PricewaterhouseCoopers (PwC) report on media and entertainment, on-demand models have also transformed the media and entertainment industry from owning to streaming. We no longer need to own a music CD or a works of our favourite film maker, as everything is available either free or for a fee from the Internet for download.
The Internet has accustomed consumers to the idea of instant access to content. In most cases, this content was initially delivered at no cost to the end user, and this apparent lack of a monetisation model caused owners of expensive content to hold back from making it available online. However, as sales of physical media continue to decline, services such as Spotify and Netflix are managing to build a sizeable paying audience for content delivered over the Internet. The on-demand model is not solely about making digital versions of content available to paying consumers.
These new services are also building their business on an understanding of the way consumers’ expectations are changing. The model of traditional media asks consumers to pay to own a physical copy—a CD or DVD. But attempts to replicate the ownership model in digital media have struggled. The same shift from owning to streaming can also be seen in the subdued demand for electronic sell-through (EST) versions of movies, in the face of competition from not just stand-alone OTT video services, but also enhanced multiscreen and OTT offerings from broadcasters. For some consumers—those who are happy to pay for content to be aggregated for them rather than going out to discover it for themselves—this model is proving attractive but at the same time will be disruptive to the current Pay TV players.
These are definitely not happy days for legacy pay-TV providers. While they are still the dominant force on the video landscape and will likely remain so for years to come, the traditional pay-TV business is shrinking and will keep shrinking over the next few years as OTT video and other streaming video options keep surging in popularity, according to a new wave of industry studies and forecasts.
Leading the latest drumbeat of bad news for pay-TV operators, SNL Kagan predicts that traditional multichannel video subscriptions will accelerate their decline over the next four years because of stiffer competition from the growing crop of new video providers. In a new forecast released this morning, Kagan predicts that legacy US pay-TV providers will lose 10.8 million subscribers between now and 2021, reducing their collective total to 82.3 million.
At the same time, Kagan projects that the number of US households relying solely on OTT delivery of "self-aggregated content" will climb to nearly 18 million, or 14 per cent of occupied households by 2021. Plus, Kagan figures that such skinny bundle, or virtual multichannel video programming distributors (vMVPDs) as Sling TV, Sony PlayStation Vue, DirecTV Now, YouTube TV and Hulu Live will claim nearly another 11 million homes four years from now. As a result, subscribers to such “alternative” video services will exceed one quarter of occupied households by the end of this year and climb as high as one third of all homes by the end of 2021.
More bad news for pay-TV providers comes from comScore Inc. In its latest presentation on the state of the OTT business last week, comScore estimated that 3.1 million US homes already subscribed to a skinny bundle service at the end of April, before the national rollouts of YouTube TV and Hulu Live took effect. Sling TV led the way with more than 2 million subs, followed by PlayStation Vue and DirecTV Now.
The comScore research also found that vMVPD customers use their new services plenty. Skinny bundle subs watch their programming for an average of 5.3 hours per day.
As if pay-TV providers didn't face enough new competition from the growing crop of vMVPDs and more established OTT services like the ones from Netflix Inc.(Nasdaq: NFLX), Amazon.com Inc. (Nasdaq: AMZN), Hulu LLC and YouTube Inc. , they now face the prospect of competing head-to-head with Facebook . In a story reported first today by the Wall Street Journal, Facebook is talking to Hollywood studios and agencies about producing scripted, TV-quality series for the social networking website. With a reported budget of up to $3 million per show episode, Facebook is aiming to start airing the original programming on its site by late summer.
As its ambitious video strategy evolves, Facebook’s programming push is reportedly part of a two-track effort to flood the site with higher-quality video content. Besides funding such high-end, cable-like productions as Strangers, a relationship drama targeted at millennials, and Last State Standing, a game show, it is also seeking short-form, largely unscripted videos that would run about ten minutes in length. Not too surprisingly, Facebook is aiming its programming at viewers between the ages of 13 and 34.
All these developments come as cord-cutting by consumers continues to climb. In the first quarter of the year, for instance, the US pay-TV industry shed 762,000 video subscribers, making it the worst first quarter ever for the business, according to figures compiled by Wall Street analyst firm MoffettNathanson LLC . Even heavier losses could be coming in the second quarter, which is typically a weak period for subscriptions because of seasonal disconnects by college students and families on the move. (See Cord-Cutting Hits New Heights.)
But, even in the spate of these depressing reports, there are still some glimmers of hope for pay-TV providers. In yet another recent forecast, Strategy Analytics predicts that pay-TV providers will continue to dominate the US TV/video market for the next few years despite a steady decline in subscribers. In fact, Strategy Analytics Inc. projects that such big pay-TV players as Comcast Corp. (Nasdaq: CMCSA, CMCSK) and AT&T Inc. (NYSE: T) will control 82 per cent of the revenues in the $126 billion market in 2022, while Netflix, Amazon and crew will account for less than 20 per cent. (See Why You Can't Quit Cable TV.
Facebook is willing to spend on securing original video content – up to $3 million an episode, which is comparable to big-budget cable TV shows. And that’s certainly interesting, though it’s not yet clear just how much content Facebook is willing to commission at that cost level.