By Elizabeth Parks, President & CMO, Parks Associates
Since its inception, OTT has represented independence from the traditional MVPD bundle. However, without the bundle, consumers are left to fend for themselves, with some getting overwhelmed by the number of available options. As it turns out, some level of bundling is helping consumers by offering flexibility and convenient packaging and pricing.
In addition, OTT aggregation services, such as Amazon Channels and The Roku Channel, are now offering consumers a bundle of their own, making it even easier for consumers to find and subscribe to their favorite OTT services.
The Rise of Hybrid Business Models
Increased OTT adoption and competition force service providers to get creative by leaning into hybrid business models that blend advertising, subscription, and transactional monetization strategies. These newer business models are effective in converting viewers who are on the fence and want to “try before they buy,” or simply want to consume content a la carte.
This new approach benefits consumers and has the potential to offset slowdowns in SVOD revenue growth but complicates an already tedious reporting process since data must be captured and analyzed across multiple distribution channels, each with proprietary data formats and requirements.
Services Must Remain Agile
Service providers must remain flexible regarding their monetization and distribution strategies to stay competitive. For example, an OTT service might execute various windowing strategies regarding select titles made available on an aggregation service, such as Amazon Prime Channels, or The Roku Channel as an AVOD offering, with more premium content behind a paywall as an SVOD offering on the owned and operated app.
These strategies require out-of-the-box thinking to create the necessary strategic partnerships with distributors for select titles. Having multiple content monetization strategies per title drives the need to manage and analyze a greater amount of data.
New Measurements Required for Partnership Structures
Content partnerships are evolving as services are experimenting with new partnerships and distribution strategies. To make a more compelling offer to consumers, some device manufacturers are striking partnerships with content providers and creating bundles that are part of the connected television (CTV) operating system.
Licensing and distribution deals are evolving from multi-year contracts with subscription services based on fixed, predictable revenue shares to more diverse, shorter-term, experimental arrangements– evaluating a licensing deal based on both parties’ changing businesses as the industry shifts from more predictable SVOD engagement to fast-moving markets where consumers engage based on changing variables.
All of this reduces friction for the consumer: one device, one place to find their content. VIZIO recently announced a partnership with TikTok to integrate the social media powerhouse into their media carousel, which is part of the VIZIO Smartcast OS. This is not TikTok’s first smart TV integration, but the unique carousel on the VIZIO home screen is an industry first for TikTok on television sets. Once viewers interact with social TikTok content, VIZIO may leverage the resulting data to enhance program content experiences across its smart TV platform. VIZIO believes the custom integration of deep links into all the trending social genres of content has positioned it to be the first TV manufacturer with a rich social content TV experience. Those with a VIZIO smart TV and an existing TikTok account may connect their accounts to see “For You” and “Following” video feeds on the TV screen.
Startup and niche OTT services are taking advantage of partnerships with larger service providers, aggregators, and FAST channels to accelerate growth. Major movie studios are releasing new movies simultaneously in theaters and on streaming services. Sports leagues are striking deals directly with OTT services for exclusive streaming rights. Some specific services, such as Disney+, Discovery+, and Curiosity Stream, have capitalized on these bundling strategies, and even as of Q1 2022, over 10% of their user bases reported originally subscribing through a mobile service provider, according to Parks Associates.
With these new and experimental partnerships and business models, the accurate and timely measurement of financial performance is critical. While aggregator partnerships offer many benefits to participating services, there is also a downside. Aggregators control app placement and user data, receive a substantial portion of subscription revenue, and maintain the primary relationship with the end customer.
Download Parks Associates’ white paper “Optimizing Video: Enhancing Content Performance for OTT Success,” in partnership with SymphonyAI Media, to examine the current state of the competitive streaming video market, its challenges driving the need for deeper content insights, and the benefits of implementing data-driven solutions able to handle today’s complex revenue models.