Acquisitions, AVOD, and the Next Big Thing on OTT
OTT has undoubtedly arrived and it is not going anywhere but up. The scales are tipping and it won’t be long before the vast majority of video consumption occurs via streaming rather than broadcast. Over the last decade plus, consumers have voted with their time and money for the convenience, content and business models of OTT over outdated alternatives.
Many consumers were first introduced to OTT content by subscription services. The original drivers for viewership on platforms such as Roku, iOS and Apple TV were the Netflix’s, Hulu’s and MLB TV’s of the world. The top SVOD streaming services offer extremely premium content, some of which has made its way into society’s collective consciousness. It is can’t miss TV that consumers can watch on more than just their TV’s.
These premium subscription services have driven adoption of OTT platforms and helped to kick off the cord cutting revolution; teaching consumers the behaviors that eventually led to the recent explosion of advertising based streaming services. In the early days of OTT, there was not yet a sufficient volume of users, nor in many cases the infrastructure necessary to support AVOD models. As a new marketing channel, advertisers were hesitant to jump in with both feet and make major bets on OTT. However, once audiences on OTT expanded, thanks to SVOD streaming services’ popularity, and the value of advertising on OTT became better understood by marketers, the unit economics suddenly made sense for AVOD streaming services to scale.
Today, ads represent bluer water for streaming services, mitigating competition with the major subscription players (soon to include Disney and Apple). They go head-to-head only for consumer’s time – not their subscription dollars. With a lower barrier of entry to try and less commitment to use, audiences are easier to acquire and retain on ad-based streaming services, fueling the rapid growth for AVOD that we are currently immersed in.
AVOD’s ascent as an equal to SVOD is reflected by several recent high profile acquisitions, including the purchase of free TV streaming service Pluto TV by Viacom for 400 Million, and Future Today’s network of AVOD services by Cinedigm for 60 million.
In Viacom’s case, they are taking control of a vMVPD platform that has a built-in captivated audience and proven monetization model. With the addition of Viacom’s marketing might and premium channels and content, Pluto will afford Viacom protection against the decline of cable; serving as their flagship OTT destination to retain their fans as they continue to migrate away from cable and towards streaming. Viacom can also use Pluto TV as the top of their OTT user acquisition funnel; a generalized aggregator to capture a wide audience that can then be targeted and driven to niche’ branded streaming services owned by Viacom.
For Cinedigm purchasing Future Today landed them a stuffed portfolio of hundreds of small to mid-sized streaming services as well as a platform that specializes in cheaply launching new AVOD apps. This will enable Cinedigm with instant monetization and marketing opportunities timed perfectly with the increase in ad spend expected on OTT. The brands Cinedigm works with can now quickly and inexpensively release their own streaming service on the platforms supported by Future Today’s tech.
Other major media brands are also making their big play onto OTT an ad-based one. In February NBC Universal announced their plans to launch a new streaming service uniting their multiple channels under one umbrella. Unlike CBS, whose same strategy born half a decade ago centered around subscription-based CBS all-access, NBC plans for their service to be AVOD. Backed with new technology to turn the viewers of their streaming service into highly coveted addressable audiences that can be targeted with dynamic ads, NBC’s new service will be able to extract huge value from users, and experience easier growth as opposed to SVOD rivals.
Clearly, advertising on OTT is soaring and may benefit from sustained growth for decades. However, in the same manner that SVOD was begrudgingly forced to make room for AVOD as the streaming world’s fasting growing segment, whoever innovates new monetization models for content could be the next big thing on OTT. OTT video streaming is still a juvenile industry ripe for disruption. The level of competition impossibly seems to increase year-over-year, with dozens of streaming services failing to survive. Content may always be king, however, finding innovative improvements to the experience for viewers, is the sort of differentiator that can provide major competitive advantages in the expanding world of OTT.