Marshall McLuhan, in his classic publication Understanding Media, described media as “extensions of man”. He predicted that electronic media would lead to a global village in which our lives would intertwine without the historical limitations of time and space. McLuhan declared that the medium is the message and predicted that as media distribution evolved, so would its content. All dreams came true, as we can notice in 2016.
The begining: CNN, Cartoon Network…
In the 1980’s, the rise of cable TV began to alter the landscape. Ted Turner was the first to notice the opportunity. He transformed Atlanta based station WTBS, into an effectively national cable channel. Then he created niche networks CNN and Cartoon Network.
Next step: Pay TV’s
Another important development was the rise of Pay TV networks such as HBO and Showtime. These platforms offered movies and live sporting events. Mainly boxing matches then. They began investing in original content that was free from the restrictions broadcast networks had to follow. Passionate audiences became the coin of the realm.
In 90’s and 2000’s all these trends were accelerated by the Internet network. New websites gained influence. Blogging software allowed anyone who wanted to publish with a click of a button. Complete revolution was YouTube. The latest development is the unraveling of the cable business model. Platforms like Netflix have shown that one can reach large audiences and keep 100% of your subscription revenues. Traditional broadcasters are also choosing to go OTT on streaming devices like NVidia Shield, Apple TV or Roku.
As media evolves to a direct-to-consumer world, nowhere is the competition fiercer than in television. Video commands the most revenue of any E&M sector: about US$420 billion globally in subscriptions and advertising in 2015 and 2016. More and more people globally are choosing to stream video through OTT services. These platforms deliver content via the Internet. No need for cable or satellite TV subscriptions.
The response of traditional TV players has not been adequate to stop the OTT development. Over the last few years, the industry’s counteroffer has been TV Everywhere (TVE). Adoption of TVE has been disappointing, owing to low overall awareness. Many E&M companies have been selling their content — their libraries of movies and television shows as well as new originals — to streaming services such as Netflix, Amazon, and Hulu. These sales have driven short-term revenue gains for both studios and networks. Besides, they have also enabled OTT services to gain a firmer grasp on the end-user relationship, monetize viewership in more advertising-free and ad-light environments. They allowed to build their brands at the expense of the studios or networks supplying the shows.
Traditional video distributors, such as cable, satellite, and telecommunications companies, must weigh three strategic options as they react to consumer desire for fewer channels, more personalization and choice. They should implment some solutions like”
- creation of more segmented, affordable, and smaller video bundles to maintain pay-TV subscription rates
- launching OTT services to target cord-nevers (those who have never connected to a pay-TV service)
- full integration of OTT or packages of OTT services with broadband access
TV and digital media & entertainment are being reinvented by the Internet. Digital media companies are rethinking their production, distribution and business models as a result of massive industry changes and a paradigm shift in consumer behavior, as it relates to video and media consumption, especially younger generations. To many traditional TV and media companies, the emerging OTT industry has been seen as a threat to their businesses. Some analysts say: adopt, develop or die….
Forbes: As The Media Industry Evolves, The Business Model Becomes The Message; PWC 2016 Entertainment & Media Industry Trends; DAS: Emerging Business Models – We’re Down With OTT.