Innovation in the OTT Industry - Essay Sample

Introduction

The entertainment and media industry has undergone a rapid change in recent years as traditional broadcasters have been subject to intense competition from OTT (Over the top) media services, with others such as Cable one cutting down on Cable television in favor of internet only subscriptions unlike before where TV and internet came together (CNBC, 2019) . Such services provide content that is distributed by streaming media as a standalone product over the internet and bypasses traditional distribution methods such as broadcast and multichannel television and satellite services. The streaming market has gained popularity at the expense of satellite and cable television services such as DirecTV and Dish which lost 1.24 and 1.13 million subscribers respectively in 2018 alone(CNBC, 2019). This dominance over traditional broadcasters and this has led to a huge deal of consolidation within the industry as they try to keep up. This has led to a battle for distributing content to customers that have been detailed in the news article provided as current giants of the industry want to continue asserting dominance while new players in the market want to establish themselves and offer competition for the services. The following section of this paper explores these players of the OTT industry.

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Netflix, formed in 1999 as a DVD rental business, has turned into the largest OTT media service provider in the world. Despite the competition, Netflix has thrived in the streaming business due to its original content which has attracted a lot of subscriptions while still securing rights to additional external content. It is known for being secretive with viewership data and has used this secrecy to drive decisions on how to spend the billions it's poured in on original data (NBCnews, 2019). This has allowed them to share their successes while their flops have disappeared from view. Their competition, however, has criticized this approach of withholding data as they say it makes their shows seem more successful than they really are (NBCnews, 2019). Netflix's dominance in the industry, however, is under threat from a couple of newcomers, chief among them Disney.

Disney will part ways from its deal with Netflix which was worth $150 million a year as to set up its own service, Disney+, which is set to be launched later in 2019. Disney+ will carry Disney's entire catalogue, which will not be found on any other platforms. This won't be Disney's first foray into the industry as they already own 60% of Hulu (another major streaming service) and are in the process of acquiring 21st Century Fox meaning that Disney+ will also have content from Fox (Zanoni,2019). The service will also end its vault program, a change that shows how seriously they take their Streaming Service (Theverge, 2019). In addition, its services will be cheaper than Netflix, showing their intention of bringing competition. Perhaps its biggest pulling factor will be betting on exclusivity and also using its family-oriented brand to pull in more viewers. However it is unlikely that it will affect Netflix's customers as the fair prices and availability of original content from both services means that they will likely go hand in hand, with subscribers paying for both (Seekingalpha,2019).

Another force coming into the industry is Apple. According to Shaw & Gunman (2018), Apple is working on a long-awaited streaming service and magazine subscription bundle that is set to be released before 2020. This will be in line with its commitment to give technological services as sales in services after the completion are projected to go up to $50 Billion in 2021 from $39.7 billion in 2018(Shaw & Gurman,2019). They are laying the groundwork as talks with HBO, Showtime and Starz are undergoing so as to secure additional content to go along with its original shows and movies. The services will be accessible on Apple devices and are projected to have 100 million subscribers in the next 5 years. This bold move hasn't gone well with their competitors as Netflix has even stopped customers from subscribing through the app store hence cutting apple off from a lucrative share of revenue (Shaw & Gurman, 2019)

Traditional broadcasters are also reacting to the decline in their revenues and competition from the likes of Netflix. One such example is the European broadcasting giant RTL group which is planning to invest at least $396 million in expanding its streaming services across three years. About $339 million of that is dedicated to the production of original content across all genres, with the rest going into development if its platform (Meza, 2019). This is seen as a battle for 3rd place between RTL, Disney, Warner media and Apple as Netflix and Amazon have had an early start and closing the gap would take quite some time.

While all these companies are striving to gain a foothold in the already booming industry by spending big on original content, one service provider, Roku, is thriving by doing things differently. Roku has amassed 27 million users and its stock is up by 105% (Yahoofinance, 2019). This is because it has aggregated 5000 different third-party streaming apps and more new streaming services such as Disney+ and Apple will reportedly sign contracts to allow their new services to be viewed by Roku users. Roku gets a share of revenue from all the apps on the platform and will keep growing as a host platform for video apps by other companies. Another, Future Today was acquired by Cinedigm in a deal worth $60 Million. Future today will bring in 5.2 million new viewers to the 2.4 Million viewers currently on Cinedigm's 2.4 Million. Following the trend set by Disney of buying into other streaming companies (Sprangler, 2019).

Conclusion

In summary, the individual companies in the OTT industry both, small and big, are pooling their resources and setting up platforms and original content in a bid to maximize on the ever-expanding market. As such, the streaming war can only get fiercer in the future.

References

Brodkin, J. (2019). Cable and satellite TV sinks again as online streaming soars. [online] Arstechnica. Available at: https://arstechnica.com/information-technology/2019/03/cable-and-satellite-tv-sinks-again-as-online-streaming-soars/ [Accessed 4 Apr. 2019].

CNBC. (2019).The future of cable may be no TV at all, as one small company from Arizona shows. [Online] Available at: https://www.cnbc.com/2019/03/03/cable-future-may-not-include-tv-as-cable-one-shows.html [Accessed 4 Apr. 2019].

Yahoofinance. (2019). Ruko is an attractive acquisition. [Online] Available at: https://finance.yahoo.com/news/roku-attractive-acquisition-target-in-tv-streaming-wars-202417999.html [Accessed 4 Apr. 2019]

Meza, E. and Meza, E. (2019). Europe's RTL Group to invest $400 Million in Expanding Its Streaming Services. [Online] Variety. Available at: https://variety.com/2019/tv/news/rtl-group-invest-400-million-streaming-services-1203164281/ [Accessed 4 Apr. 2019].

NBCNews. (2019). Netflix is sitting on a data goldmine - and it's starting to give us a peek. [Online] Available at: https://www.nbcnews.com/news/all/netflix-s-private-viewership-data-has-fueled-its-growth-spending-n983356 [Accessed 4 Apr. 2019].

Shaw, L. and Gurman, M. (2019). Bloomberg. [Online] Bloomberg.com. Available at: https://www.bloomberg.com/news/articles/2019-03-13/apple-races-to-get-studios-signed-up-for-new-streaming-service [Accessed 4 Apr. 2019].

Spangler, T. (2019). Cinedigm to Acquire Future Today, Ad-Supported VOD Channel Network, in $60 Million Deal. [online] Variety. Available at: https://variety.com/2019/digital/news/cinedigm-acquires-future-today-avod-channel-network-1203163890/ [Accessed 4 Apr. 2019].

TheVerge. (2019). Disney is ending its vault program, giving Disney+ a huge boost in the streaming wars. [Online] Available at: https://www.theverge.com/2019/3/7/18254942/disney-vault-streaming-service-plus-animated-live-action [Accessed 4 Apr. 2019].

Zanoni, D. (2019). Netflix: Is Disney A Threat? [Online] Seeking Alpha. Available at: https://seekingalpha.com/article/4249085-netflix-disney-threat [Accessed 4 Apr. 2019].