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CBS had plenty to smile about in the aftermath of the Super Bowl: not only did millions watch (3.96 million uniques, apparently), but viewers seem to have reconciled themselves to the inevitable latency that comes from the need to re-package and re-distribute the stream. And, in a first for this sort of broadcast, the TV ads played online as well, adding some extra value for the advertisers who dropped $200k a second for access to the year’s (likely) largest overall audience.
To many members of the streaming audience, the Super Bowl seemed like a simple extension of what they’re used to. This isn’t surprising, as Hub Research is reporting that the OTT market in the US is nearing saturation: there’s nothing new here, it would seem, just the opportunity to do it better. With the same research suggesting that Netflix will increase its share of OTT video service users to 71.7% by 2019, the pressure is on for its competitors to chip away at its lead. Conviva research clearly demonstrates that consumers now recognize that content – other than the most unique pieces – can be found in multiple locations, meaning they can choose the service that delivers an experience that meets their needs.
Intriguingly, the oft-forecast ultimate disruption to the market – Apple getting in on the game – seems to have slowed right back down, with Les Moonves of CBS commenting this week that talks with the tech giant have stopped. Given that he also noted that 40% of the revenues CBS is seeing “didn’t exist five years ago”, it’s worthwhile to consider why Apple might not want to step into transitioning industry. Apple has tended to enter established markets that are to at least some degree stalled, and fix the broken pieces: iPods and iTunes made MP3 and music acquisition work; the iPhone made actual web surfing a joy rather than a slog; the iPad took the moribund tablet concept and turned it into an irresistible entertainment hub. As long as they can’t turn this segment on its head, it’s not clear why they’d get into the fray – but as soon as the opportunity arises to beat everyone else at something that is broken (perhaps delivering at massive scale?), expect them to start making noise.
Meanwhile, not only is the US starting to saturate, the China market seems poised to explode: news has emerged that Baidu’s stake in streaming company Qiyi.com may be on the block, at a valuation of the platform of $2.8B – less than the $4 billion being paid for Youku Tudou, perhaps, but real money nonetheless. Consolidation is, as often as not, a solid bellwether for the maturation of a segment from innovation hub to cash creator, and there’s plenty going on right now.
How is that cash going to get created? The jury is still out, overall, as most of the largest players are charging subscriptions, and ad-supported services are wrestling with the ascendance of sophisticated ad blockers (and those pesky technologists at Apple and Google making it ever easier to make the ad blockers easy to use). 2016 promises to be the year when server-side ad stitching finally – finally! – gets to move from perennial Next Big Thing to Actual Big Thing: once the ad is simply a part of the stream, there is little to nothing one can do to avoid it. Now, it’s true that on native apps, ad blocking is less hairy for providers (great write-up on that by Dan Rayburn here), but the reality is that PCs still represent a significant portion of the viewing device ecosystem. It’s fair to assume that, as MediaPost pointed out, consumers and publishers need to call a détente and agree on the simple reality: someone has to pay for the content somehow, and if consumers don’t want to pay up front, they’re going to need to accept that ads are here to stay.
Finally this week, let’s tip our hat to the UK, which is truly turning OTT TV into just plain-ole TV. On the heels of the venerable BBC taking the BBC Three channel off the air and onto the Internet, we hear that Channel 5 is building an exclusively-Internet channel of its own: My5. While not as distinctly separate as BBC Three (it will carry more catch-up content and less exclusive titles), it will still be shopped as its own thing – we have our eye on the exclusive Heroes Reborn: Dark Matters.
TV isn’t distinct from OTT any more. Just as newspapers came to understand that their business was more news than paper, the television industry is forging ahead under a new banner: it’s about the content, not the delivery system.
