Video on Demand vs. Pay TV
While it isn’t true to say that “No-one watches television, any more”, the linear restrictions of traditional TV scheduling and the proliferation of mobile devices, social media, online gaming and new ways of viewing are contributing to a decrease in popularity of television as the visual entertainment medium of choice.
One of the biggest challenges to TV is video on demand.
What’s Video on Demand?
Video on Demand (VoD), or more specifically, Subscription Video on Demand (SVoD) is a paid service that can include popular television series, concerts, sports coverage, and major box-office movies.
Subscribers have a full measure of control over their accounts, and can determine when they want a programme to begin. Content can be paused, rewound, fast-forwarded, or stopped at the viewer’s discretion.
Internet Protocol TV makes Video on Demand content available for viewing on computers and mobile devices, through the Real-Time Streaming Protocol of data transmission. The technology may also be used for video-conferencing.
And Pay TV?
Pay television or pay TV requires viewers of a particular channel to pay a subscription fee – typically monthly, per programme, or annually. Services range from the television licensing fee imposed by the UK government broadcast network BBC, to commercial packages offered by independent broadcasters.
In many cases, TV signals are scrambled in transmission, and programming may only be accessed by subscribers who have paid their fees – which include the codes and hardware needed to decrypt the scrambled signals. The pay TV model applies to a range of terrestrial, satellite, and cable broadcasters.
Viewing the Figures…
The uptake on Subscription Video on Demand has been high in the US, with a 2014 report from the Nielsen rating agency suggesting that more than 40% of US homes had access to an SVoD service. Amazon Prime Instant Video, Hulu, and Netflix have remained among the market leaders, along with premium services offered by the likes of HBO and Showtime.
in the UK, SVoD services accounted for around 3% of the viewing market in 2014, with live, on-demand and recorded TV accounting for some 90%. But the growth of Video on Demand has been rapid, since then.
The leading platform for SVoD – the Netflix channel – now has a presence in more than 15% of homes in the UK, with Amazon Prime boasting a growing 5% share. Market analysts at Mintel predict that revenues from SVoD subscriptions in the UK will grow from their 2014 level of £437 million to £1.17 billion by 2019 – with the number of subscribers doubling, in that same period.
This, at a time when viewing figures for more traditional TV output are falling, and the future viability of the UK (BBC) licence fee is itself in doubt.
Schedule? What Schedule?
A big part of the appeal of SVoD services is their independence from formal programme scheduling. Subscribers can pick and choose their viewing from the provider’s archive of programme content, and screen it at their own convenience. The providers aren’t bound by broadcasting regulations to the same extent as TV networks, and have a greater degree of freedom in what they can put out.
For advertisers, this can present a challenge, as there’s no “daytime, family, watershed” distinction that can be made within the hours of a day, with no formal time-table. Targeting appropriate promotional content is something that has to be done on a show by show or movie by movie basis.
Production, Production, Production
Competition between SVoD carriers and against their TV rivals is stiff, and is reflected in the amount of investment being made in maintaining content quality, and creating awareness of the merits of on-demand service.
With no schedules to fill, and the ability to target specific demographics with video content, SVoD providers with big pockets are in a position to spend hundreds of millions of whatever currency they’re dealing with, to land top-name stars and production teams, exotic locations, and cinema-level special effects. Recent offerings from Netflix (“Daredevil”, “Jessica Jones”, etc.) and HBO (“Game of Thrones”) are proof of this.
Bigger Screens, Wider Reach
Moving beyond the early days, when streaming video was best consumed on desktop or mobile computing devices, the evolution of Net-connected smart TVs has meant that SVoD content may now be watched in a more traditional “TV in the lounge” setting, and be accessible to entire households, at a time.
Bandwidth remains an issue, with average data speeds of around 23 megabits per second (Mbps) still common in the UK. With a multitude of connected devices in one household, picture and audio quality may suffer. Still, it’s a big step up from a smartphone, and an opportunity for clever marketers to extend the reach of their brands.
This already occurs to some extent, with the availability of free Video on Demand downloads used for outreach to potential subscribers, or as dedicated advertising streams.
Generation Gaps to Fill
A 2016 report from Ampere Analysis identifies the core customer base for SVoD as the “content connoisseurs“: young men and women in the 20-30 years age bracket, with sizeable incomes, and a high level of technological and media literacy. These people made up 20% of the report’s survey population of 10,500 respondents spread over 10 western markets.
Proportionally though, “content connoisseurs” punch above their weight, in the overall market figures. For example, this group accounts for some 42% of SVoD subscribers in the UK. And their influence is growing – so providers and advertisers are going to have to tailor their new offerings, accordingly.
An Emerging Ecosystem
Both sides in the ongoing battle between Video on Demand and pay TV are borrowing elements from the other team’s play book.
SVoD providers are continuing to lure viewers away from the television platforms, while supplementing their original output of big-budget dramas and feature films with archives from the best that network TV has to offer.
Pay TV carriers are fighting back with “skinny bundles”, featuring highlighted offerings from the likes of Netflix and HBO, and standalone streaming services of their own.
What’s emerging is a hybrid market, that favours the viewer – and presents opportunities for those advertisers adaptable enough to take advantage of the medium and its associated technologies.