The rising adoption of the internet has provided individuals the opportunity to use social media to a large extent, ranging from social networking sites like Facebook, Instagram, and Twitter, to Video on Demand (VoD) platforms. VoD, an interactive TV technology, are media distribution systems that allow users/subscribers to view/listen to video or audio content in real-time or download programs and watch them at their convenience.
The Global Over-the-Top (OTT) Market is flourishing. Subscriptions for online streaming services have grown from 150 million in 2014 to a staggering 600 million last year. By 2021, the number of viewers is expected to stand at around 1.1 billion.
The Video on Demand (VOD) Industry: An Overview
Until recently, "watching TV" meant sitting in front of a traditional TV in your living room, waiting for your favorite show to begin at a particular time. With the growth of video on demand (VoD) programming systems, views can stream video content in real-time or download it either from a TV or online platform. This transition is significantly creating lucrative opportunities for users who have complete control over the programs they watch, irrespective of thelocation or devices they use for watching content.
The Global Video on Demand Market is expected to reach a staggering USD 87.1 billion by the end of 2025. The number of VoD users has grown exponentially over the years. The global marketing research firm Nielsen conducted a survey involving 30,000 online respondents spanning over 61 countries to evaluate global sentiment about VoD services and advertising models. Almost two-thirds of participants (65%) admitted to watching content on VoD platforms, including short- and long-form content.
The transition is not just limited to viewing habits. Conventional advertising models are also changing as advanced technologies enable advertisers to reach a broader audience in new and creative ways. Many traditional TV providers, such as multichannel video programming distributors (MVPDs) and broadcasting networks, are revamping their business models to cater to consumers' evolving needs. While it's evident that the traditional business models won't do well in a rapidly transforming landscape, the industry is large, and players are looking to expand their reach.
Two things will always remain true, regardless of the business's evolution: Content will always be king, and customers' habits will keep on changing and demand greater control over the customization of the viewing experience. Companies who succeed on both the fronts gain an advantage over their competitors.
Nearly one-quarter of participants from the survey said that they pay to watch shows via subscriptions to an online platform such as Netflix, Hotstar, Amazon, and Hulu, compared to 72% who pay to cable providers to watch shows on a traditional TV. North America and the Asia Pacific lead the VoD market, with 35% and 32% of participants from the regions suggesting that they pay an online service provider to stream video content. Only 11% of online respondents in Europe reported viewing content from a VoD service provider, which falls below the global average. On the other hand, around 21% of online respondents from Latin America and MEA reported viewing content online via subscription models.
The Ins and Outs of Video on Demand
On-demand is becoming an essential part of our daily lives. In fact, 80% of global participants who watch VOD content say they watch movies, trailed by television shows. When it comes to famous TV series, viewers are more likely to go for comedies (38%) and originals (32%), followed by history documentaries and sports channels (31% each). Besides, 22% of global respondents reported watching short-form video content, running 15 minutes or less in length.
Video on Demand Industry Outlook amid COVID-19 Outbreak
The global OTT market is expected to witness staggering growth because of the growing awareness of OTT platforms as more viewers are going for subscriptions to keep themselves entertained during the COVID-19 pandemic. The market is projected to reach USD 161.37 billion by the end of this year, up from USD 104.11 billion in 2019 at a CAGR of 55%. This major growth is primarily due to the coronavirus pandemic lockdown, during which subscriptions to different VOD channels and subscriptions have increased.
What has really changed is users' social behavior, switching from conventional memberships to broadcasting services, and on-demand video content. This will drive the VOD market over the forecast period exponentially. Different segments of populations have started watching content on video streaming platforms rather than watching shows on traditional television due to the additional benefit of ease of access.
Competitive Landscape: Global Video on Demand Industry
Amazon.com, Inc. is a U.S.-based multinational technology company that specializes in e-commerce, cloud computing, AI, and video streaming. It is considered one of the Big Four tech companies and Microsoft, Google, and Apple. Prime Video, also known as Amazon Prime Video, is a U.S.-based video-on-demand service built, owned, and managed by Amazon. Launched in 2006 as Amazon Unbox, the service launched worldwide (except for Syria, North Korea, Mainland China, Iran, and Cuba), expanding its reach beyond North and Latin America, Asia Pacific, and EMEA.
In 2018, the company spent over USD 5 billion for original content on Prime Video. Amazon's Prime Video Channels Biz generated USD 1.7 billion the same year, which is expected to reach USD 3.6 billion by the end of 2020. As of January 2020, Amazon has more than 150 million users globally, including 56 million subscribers in the United States. At present, Amazon Prime has around 75 million videos, including 40 million in the U.S. that is expected to reach approximately 100 million by the end of this year.
Netflix, Inc. is a U.S.-based Production Company and technology and media service provider with over 7,200 employees worldwide. In 2017, the company generated over USD 11 billion in revenues and reported sales of over USD 15.7 billion in 2018, which is regarded as the most successful year to date. Netflix is now worth around USD 157.3 billion and was the highest-rated VOD service provider in the United States in 2018.
Netflix has over 193 million paid users globally, which includes 73 million in the United States. In the first quarter of 2020, the company gained 15.8 million new subscribers compared to 7 million new subscribers in the first quarter of 2019. Netflix has the highest percentage of VOD users, with over 74% paid subscribers of the 18 to the 29-year old group. Besides, the company was awarded in 23 Primetime Emmy Awards in 2018.
Comcast Corporation is a U.S.-based telecommunications conglomerate that also offers on-demand video services to its customers worldwide. In 2019, the company launched its video streaming service called Xfinity Flex, allowing customers to access their subscriptions to services such as Netflix, Hulu, and Prime Video. Almost 95% of VOD content is made available at no additional charge. The company generated revenues over USD 108.94 billion in 2019, up from USD 94.5 billion in 2018, marking an increase of 15.3%.
Rakuten, Inc. is Japanese e-commerce and online retailing company that also specializes in mobile and FinTech businesses. In 2012, the company acquired popular streaming platform Wuaki.tv, which changed its name to Rakuten TV in July 2017. In June 2019, the company launched Rakuten Sports that offers live streaming and on-demand video sports content worldwide. The streaming platform targets South East Asian soccer fans.
The Walt Disney Company, also known as Disney, is one of the world's leading producers and entertainment and content providers. The company operates through four business segments: Studio Entertainment, Parks Experiences and Products, Media Networks, and Direct-to-Consumer and International (DTCI). The Media Networks segment includes TV production and distribution operators, cable and broadcast TV networks, domestic TV stations, and radio networks and stations.
Disney has a USD 224 billion market cap and generated USD 59.5 billion in FY2018, up from USD 54.9 billion over the previous year. In November 2019, the company launched Disney+, a video streaming platform that offers shows and movies, including originals, movies, vintage Disney content, and exclusive shows. As of June 2020, Disney+ has gained more than 57.5 million subscribers.
Hulu is a U.S.-based premium VOD streaming platform operated and majority-owned by The Walt Disney Company's Direct-to-Consumer & International Business Segment, with Comcast's NBCUniversal, as an equity stakeholder. In December 2018, Hulu and Funimation Productions, LLC, announced a partnership to offer access to globally popular anime content.
In 2018, the company's advertising revenue increased by 45%, with a subscriber base of over 50% from the previous year. As a result, the average time subscribers spent on Hulu increased by 20%, acquiring around 25 million subscribers in the United States by the end of 2018. At present, Hulu is only available in the U.S. and Japan.
Microsoft is a U.S.-based multinational technology company that develops, manufactures, licenses, supports, and sells software, electronics, PCs, and related services. Valued over USD 1 trillion and reporting over USD 125 billion in revenues in FY2019, the company's portfolio includes a wide range of products. Microsoft Stream is the company's smart video app where users can share, upload, and watch videos securely.
Top Trends in the Video on Demand Industry
In the media entertainment front, change is the only constant. VOS may be one of the fragments that have infiltrated the foray, but it represents a continuance of the rollercoaster ride the industry has been on for the last few years. The industry will continue to grow at the same pace over the next few years. Winning new subscribers has never been more challenging. While change is constant, and uncertainty can be tough, content providers must stay patient, agile, flexible, and ahead of the competition.
Viewers are watching content as per their preferences, and they’re demanding even more control. They’re demanding packages that deliver all the programming they want, with the benefit of excluding those that they don’t. Besides, flawless integration of content across devices will be crucial as views grow habituated to watching on-demand content at all times and places. Moreover, helping customers paddle through the abundance of available content and select the programming as per their convenience will be paramount.
It’s been said over and over again, but it bears repeating: Content is king, regardless of the streaming platform or device on which it is watched. The evolving media & entertainment industry has not lessened the demand for professionally released, quality content. If anything, it has gained prominence, as customers are not likely to settle for content that is merely streaming, given the abundance of available choices. It should be noted that the quality and not quantity of content will gain traction now and in the years to come.
The trend of tailored content also applies to advertising. Advancements in addressable and programmatic advertising are paving the road for lucrative opportunities for marketers to gain views more accurately. In fact, 65% of global respondents who preferred blocking ads now intentionally tune in for them. Regardless of the potential for programmatic and addressable advertising, another thing that holds the utmost importance is broadband advertising, as both models serve different purposes. Additionally, one model will not replace the other.
In today’s digitalized world, content can reach the audience in an instant. Passionate people, and not just viewers, drive successful content. 58% of respondents reported using social networking sites while watching VOD content. Moreover, it’s not just the content that benefits from social media buzz but also live TV. A study by Nielsen showed that 68% of weekly Twitter activity occurs during live program airings.
Highly interactive programs, with more Twitter ratings and engagement, are seen during live programs. Particularly, a 10% increase in engagement from live series programs denotes a 1.8% increase in the audience. The more the Tweets are seen from live shows, the more are the chances of the audience looking forward to watching the show later that week. Nevertheless, content creators should look for different ways to engage the audience by introducing digital content and social media in their offerings.
The growing popularity of smartphones and tablets has increased the target audience for providers offering VOD programming and content services. The availability of broadband services and high-speed internet has given more access to VOD services. Initially, users could access VOD content on websites. But the advent of smartphones and other mobile computing devices has encouraged service providers to build smartphone applications for users to stream content.
Besides, the use of mobile applications simplifies payment processing and collection of personal details of consumers. Therefore, the number of mobile VOD users is constantly growing. Mobile applications also help VOD content providers to expand their reach and have become the most preferred medium to stream content. It is one of the major sources of generating revenue for application developers. Developers are continuously trying to improve functionality by including new upgrades, thereby increasing the number of downloads and driving the revenue of VOD platforms.
Video on Demand: New Frontiers of Growth
In 2018, the Motion Picture Association of America (MPAA) reported that the number of streaming subscribers (613.3 million) globally surpassed cable subscribers (556 million). Although Netflix is at the topmost position, many competitors from other industries have also shown interest in VOD programming and content services. They have recently sprung up to give it a run for its money.
For example, in November 2019, Disney+ and Apple TV launched its services online across the world. And by mid-2020, Disney+ acquired more than 57.5 million subscribers worldwide. Apple TV+ has reportedly invested USD 5 billion to produce original VOD content, committing USD 300 million for “The Morning Show,” starring Reese Witherspoon, Steve Carrell, and Jennifer Aniston. This sums out to approximately USD 15 million per episode, making it the most expensive show to air online, stealing the position from the final season of HBO’s “Game of Thrones.”
Modern content providers on VOD programming and services are taking ideas from popular international formats to localize as the next big approach to hook Indian consumers. For example, Banijay Group India is working on Indian versions of American reality show Survivor, Damages, The Mole (Belgian TV show), and Public Enemy (Turkish drama).
While the formats are based on both fictional and non-fictional content, providers say the other criterion to select what to remake depends on how the series or movie has performed globally. Remaking a series is challenging than making an original because you’ve to remain true to the original and yet make it relevant and applicable, which is a strategic, meticulous process. In the coming years, users can expect to see more revivals and nostalgic content. While content providers keep originality as the main focus, the list of creative, unique pilots that never got selected is never-ending. Producers are always trying hard to break through the clutter.
The Future of Video on Demand Industry
With the next generation of content underway in the entertainment and media industry, the future of on-demand video streaming would be dependent on five factors, namely the ability to provide personalized services to the audience, shifting from traditional revenue streams, high-speed internet connectivity, value shifting from content providers to platforms, and mobile devices becoming the major source of content consumption.
User-engaging and quality content is set to become the key to success for any VOD programming and content provider. Additionally, telecom infrastructure would be the cornerstone of the expansion of the overall VOD market. In short, technology would be a key differentiator in the future.
With the recent technological advancements and investments in technology and broadband services, consumers are promised high-speed connectivity. Technologies such as blockchain would enable VOD providers to track content resources, prevent contractual disagreements, and measure the impact of digital advertising. Additionally, blockchain technology can solve the issue of piracy faced by most of the OTT players by tracking file transfers over the internet. Robotics and artificial intelligence (AI) is being integrated to improve user experiences and create a platform differential. For instance, the ‘skip intro’ feature of Netflix and Amazon Prime Video is one such differential.
The advent of smartphones and low data tariffs has ensured that users and their devices are always connected. Cell phones and tablets are becoming the most preferred choice for consumers to watch VOD content, making it crucial for providers to personalize their content for mobile consumers.
The shift from the traditional revenue streams is one of the most significant aspects of surviving in the highly competitive entertainment and media industry. The majority of businesses and investors see OTT services as a profitable investment option, as they realize the potential of digital content and advertising. Therefore, there has been a value shift to platforms instead of content providers and packagers. Moreover, OTT players are focusing on making content more personalized, and emerging technologies would help players in delivering unique experiences that add value to the services provided to the consumers.