Entertainment Before Yesterday (Part 2)
If you missed Part 1, you can read it here.
Since some OTT streaming companies (Amazon, Hulu, Netflix, etc.) are rapidly becoming film/TV studios – and major distributors in their own right – what should visual entertainment companies, artists, and service providers know about this new world of content distribution? Here are some observations, followed by some insights:
- The visual entertainment distribution industry was previously controlled by movie studios and TV networks.
- Their hegemony is crumbling – increasingly wounded by surging home viewing of online video and OTT streaming companies.
- In 2017, digital entertainment comes to a home viewer in one of two ways: broadcast or OTT.
- In industry parlance, “broadcast” means “central point origination,” and includes transmission by traditional over-the-air, cable (wired) and satellite (wireless).
- OTT stands for “over-the-top” and means transmission over the “open Internet” and uses the same client-server model that delivers your email, websites, online ads and other services.
- In the OTT model, a viewer requests and receives content via Internet protocols. For film/TV, it’s a download-and-play model. Since OTT content comes over the Internet, a viewer/listener needs an Internet-connected device like a Smart TV or a Roku. Other access points are computers, smartphones, or game consoles.
- Broadcast typically transmits content in real-time, on a schedule, whereas OTT stores content on servers and delivers it (in discreet, serial, digital packets) as video-on-demand, subscription video-on-demand, ad-supported video-on-demand, or prospectively, as premium video-on-demand (usually abbreviated as VOD/SVOD/AVOD/PVOD).
- Broadcast used to be king and the king still survives – but the broadcast industry is in great flux.
- Content providers are also scrambling to provide “bundled services” that blur the lines between OTT and broadcast. For example, some broadcast purveyors (e.g., Dish Network) also distribute OTT content (e.g., via SlingTV, owned by Dish Network) and some services styled as OTT (like Amazon Channels) also offer cable-type programming which include subscription offerings like HBO, Cinemax, Showtime, etc.
- The FCC seems to feel that business models are more important than technology in differentiating distributors. As such, the FCC defines content distributors as either multichannel video programming distributors (“MVPDs” – e.g., Time-Warner Cable or Direct TV) or online video distributors (“OVDs” – e.g., Netflix). A hybrid term also becoming popular is “Virtual MVPD” which is being applied to “hybrid” distributors like Hulu, SlingTV, and YouTube TV.
- Most simply, MVPDs own/control their distribution pathways – e.g., Charter-Spectrum owns its cables and Dish Network owns its satellites. All major MVPDs are either cable companies, satellite companies, or telecoms (e.g., Verizon).
- OVDs (e.g., Netflix) and Virtual MVPDs (e.g., SlingTV) do not own/control the distribution pathway.
- As of May 2017, 61% of US homes used an MVPD and 67% accessed content by streaming.
So what are some key insights regarding the shifting landscape?
- Companies with enormous market caps are moving fast to dominate Internet-based entertainment distribution. That is not necessarily a problem. New buyers are coming into the marketplace, which creates new opportunities for work, revenue, profits, and growth in enterprise value.
- One problem in this new structure for many content owners is that – like the studios and networks of the past few decades – the new OTT distributors like Netflix are tending to align with major, established talent with a volume of content, rather than with an indie newcomer with a single film.
- While there are numerous small OTT distributors accessible by smaller content owners, rising out of the “noise” is problematic. As such, access to marketing funds will loom large as a key ingredient in success.
Stay tuned. I’ll be sharing more insights into the new media & entertainment landscape in Part 3 in a few weeks.