This blog is the first in a three-part series. Click through to read Part 2, OTT: Challenges and Opportunities.
Remember the dot-com boom days? Uncharted territory with the promise of massive transformation.
No norms, exciting new services, uncertain demand, unclear business models and a rush of investment. A mix of “old world” companies and brash newcomers. It was the Wild West.
It was a crazy time of trying approaches and offerings — and confusion for consumers. Over time, better offerings succeeded and norms for consumers and businesses emerged. Winning required perseverance, foresight, sharp analyses and clarity of vision combined with flexibility — and more than a little luck.
We are in another Wild West period — the boom of over-the-top services, including skinny bundles and direct-to-consumer services from content creators.
Three dynamics are driving it: consumer dissatisfaction with cable companies, especially price, as reflected by cord-cutters and cord-nevers; viable online alternatives; and advancements that allow near-seamless live streaming. Established players and upstarts alike are scrambling to negotiate content deals, assemble packages to appeal to targeted viewer segments, and drive subscription growth.
While there are now reportedly more than 5.5 million OTT TV subscribers and a huge number of consumers subscribing to Netflix, Amazon and Hulu, the vast majority of them still get a video offering from traditional multichannel video programming distributors. We expect major cable players to break borders and offer video services outside their franchised markets to compete with AT&T’s DirecTV Now, Dish Network’s Sling TV and others. We also expect programmers who cannot support a go-it-alone direct-to-consumer business will band together to form their own skinny bundles.
This new era will be characterized by several major dynamics: very low switching costs for consumers, much greater competition, a continually shifting landscape of offerings and pricing — and confusion for consumers, likely lower margins and potentially lower revenue/profit opportunity. Developing and maintaining relationships with viewers and flexibly responding to consumer/viewer desires will be essential.
So how does one proceed in such uncertainty that will be continuing for some time?
Among other things: Accept this will remain a thin-margin business. Be clear about motivations (e.g., profit or placeholder or other business enhancement). Understand viewer behaviors/segments and translate that into offerings that meet needs without costly extras. Develop retention strategies to hang on to customers. Persevere, yet be flexible — don’t hesitate to pivot as the landscape evolves.
These are scary times to be sure, but the reward for success is a foundational place in transforming the TV industry.
Glen L. Friedman is president of Ideas & Solutions!, a Los Angeles-based firm helping media and technology companies transform to respond to the changing business landscape. This is the first of a three-part series.
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