Content Chaos and the Evolution of the OTT World

The Emergence of Narrowcasting and Disintegration of Brand Pricing Power

When you were describing your epic final season binge of The Americans this past spring to your friends, did you take the time to carefully spell out the way in which you watched the show?

“Hey, guess what? Last weekend I watched The Americans, an FX show, on Prime Video and streamed it through my Apple TV.”

No, you didn’t say that because you’d sound ridiculous, but also because most of that information is entirely irrelevant to your casual conversation with your friends about the Matthew Rhys and Keri Russell-focused drama.

When I first wrote about The Candy Bar Theory of Media Aggregation, it was primarily as a means to describe the sublimation of channel brand in favor of show brand, as content increasingly gets aggregated and distributed on a few key OTT platforms going forward.

And, over the course of the last few years, we have come to a place in which channel or studio brands have been almost entirely lost in the lexicon for everyday viewers.

The over-saturation of content (495 scripted shows were created in 2018) and seemingly limitless number of new live and time-shifted content sources (Netflix, Prime Video, HBO, Sling TV, YouTube TV, among others) has created a world in which it has become almost impossible to sort through the chaos and clutter to find shows you actually want to watch, unless…

1. A platform’s algorithm surfaces it for you
2. Targeted digital advertising bludgeons you with banner ads
3. Word of mouth from friends and family

A far throw from the day’s in which a multi-cam comedy could command 76 million viewers for it’s finale, the five most intimidating words in the English language have now become, “What should we watch tonight?”

And, if you don’t already have something in mind, odds are you’ll land right back on an episode of The Office and let autoplay rock you to sleep on the couch.

However, as we listlessly toggle through the World Content Library, there is one positive that has emerged: through the advent of streaming, the proliferation of new content production and steady fragmentation of the traditional cable universe, we’ve come to live in an era of Narrowcasting.

Roku, Amazon and Apple TV are becoming the homescreens we need on a nightly basis, surfacing shows directly to you and above the individual app level.

Likewise, Netflix, YouTube and Prime Video have become the only streaming platforms on which you stand a fighting chance of actually finding something new to watch, as your consumption habits place you in dozens of viewer sub-categories and recommend new content to you on a second-to-second basis.

The world of Narrowcasting is one in which your TV homescreen is curated with the specific shows you actually watch and the apps that you frequent algorithmically serve you content that you might actually like, instead of an archaic cable guide of loosely grouped channels and an on-demand experience of yesteryear that suffers from minimal personalization, if any.

However, while OTT devices like Roku, Amazon Fire TV and Apple TV help to deliver content above the individual app level, the pending launch of several new subscription services in 2019 and 2020 (prompting an eventual re-shuffling of which shows live on which services) will force already overwhelmed consumers to perpetually mull:

• Where in the world are the shows I want to watch?
• Is it remotely worth the investment of time to find them on a given service?
• And will that service be worth an additional monthly subscription?

Though further fragmentation of the streaming ecosystem poses a litany of consumer concerns, there are equally pressing questions for brands and media entities alike, who have to learn on the fly how to drive user acquisition, subscription and consumption while contemplating:

• Will consumers go out of their way to find content they have known and loved, especially as it matriculates from an existing service to a new one?
• Given that streaming platforms have been investing in new content at a prolific rate, how much will legacy companies need to invest in platform-native content in order to continually increase consumer watch time?
• How close does a new service’s interface and experience have to be to that of Netflix, YouTube and Prime Video, now that consumers have built habits around navigating those services?
• What is the saturation point in the number of services that consumers are willing to subscribe to?
• How will existing subscriptions (Netflix has almost 60M US subscribers) impact growth prospects for existing services and possibly cap market penetration for new entrants?
• How will the growing market of new streaming services impact churn going forward and will consumers be more likely to cancel a service given the number of alternatives?
• How does a new service balance building a unique brand, while also raising awareness and promoting a wide-range of specific shows that will live within it?

While the litany of questions above describe a streaming world that has yet to fully mature and could develop in a number of different ways, here are a few predictions for the OTT environment for 2019 and beyond:

1. OTT marketplace will quickly become saturated

• You may have dozens of apps downloaded on your phone, but you only really use 5–7. The OTT marketplace will follow the same trend, making it increasingly difficult for individual brands to reach consumers at scale, if they are not integrated within a larger portfolio
• Brands will struggle going Direct-to-Consumer for individual subscriptions, unless that transaction is done through a 3rd party platform (Roku, Prime Video etc.) via a revenue share (the current model for Prime and Roku channels)

2. OTT device penetration will continue to grow at a double-digit pace YoY

• As cord-cutting/cord-shaving becomes more prevalent and consumers look for new ways to aggregate content, Roku, Amazon Fire TV and Apple TV will benefit as platform-based providers
• OTT devices will also leverage their ability to surface and integrate content to extract annual carriage fees from media companies, essentially replacing traditional cable companies as content providers

3. Bundling of content will happen within large-scale services

• As content spend increases in the arms race for consumer attention and media companies continue portfolio expansion to gain reach, services will look to drive incremental revenue from high-usage users and leverage the inelasticity of high-affinity, niche audiences

4. Live TV services will be bundled with SVOD streaming services

• These opportunities will likely be offered on a limited promotional basis, as the SVOD and vMVPD markets become more saturated, the battle for walletshare evolves and streaming services look to acquire new audiences and get new data on subscriber viewing habits

5. Saturation point for # of services people actively subscribe to will converge on 3

• This does not count the number of services in which people are given access to content as part of a member or device-level benefit (i.e. Prime Video, future Apple streaming service, possible mobile streaming services, a product you receive access to as a part of your existing cable subscription)
• However, this saturation point does include live products (YouTube TV, Sling TV, DirecTV Now, Hulu Live and PS Vue), as well as SVOD products. 2019 will likely be a year in which all services attempt to get better data on the subscription marketplace by limiting the number of promotional offers, raising prices to test elasticity/churn rate and steal walletshare before consumer habits/preferences become ingrained

6. Audio and SVOD platforms will form promotional partnerships for subscription products

• As subscription audio storytelling becomes more prolific, audio platforms will partner with SVOD platforms in order to get initial scale for subscription podcasts and drive awareness around new offerings
• SVOD platforms will use these partnerships as a means to reach new audiences and grow subscriptions, but also to acquire video licensing rights to potentially popular podcasts that may be turned into video series in the future

Whit currently works at NBC News in Marketing Strategy. You can reach him at whitharwood@gmail.com or @WhitIsHere on Twitter.