It’s a new gold rush. The pace of change in TV and premium video consumption has created massive disruption in the media and entertainment industries—and new opportunities. By now, marketers have become familiar with the key facts:
“Traditional” TV viewership is in decline. According to Parks Associates’ 2018 white paper, seventy-seven percent of US broadband households subscribe to pay-TV, a drop from 87% in 2014. And 5% have never subscribed to pay TV.
Meanwhile, consumers are increasingly choosing OTT for premium video content. Over half of US broadband households have a subscription to both a pay-tv service and one or more OTT video services, according to Parks Associates. And, 38% currently subscribe to two or more OTT video services, up from 21% in mid-2015.
In the face of a shifting landscape, entertainment and media marketers have awakened to the need and reality of establishing a direct relationship with viewers. But to enter or operate in the OTT marketplace, content providers need to be prepared for a highly dynamic and competitive environment This year, the marketplace will continue expanding.including services from recognized brands such as Disney and WarnerMedia.
Such rapid change is forcing many companies to question whether their current methods of marketing are adequate. The need for speed-to-market and personalization at scale is driving a shift from a conventional, campaign-driven marketing approach to always-on people-based marketing.
So where do OTT marketers begin?
Companies must first define a clear and focused business model to guide decisions about the people-based capabilities required to support marketing. Choice of business model depends upon the type of content offered, the target audience, and revenue goals. Three dominant business models have emerged: subscription, advertising, and transactional.
OTT subscription models are the most clear-cut monetization opportunity for streaming media, and the most popular. In the U.S. market, over 80% of available OTT video services, and 90% of those introduced since 2015 offer some type of subscription option. (Parks Associates)
Ad-based models, either combined with subscription or fully ad-supported, have the advantage of scaling revenues with viewership. In-depth, person-level data on users and their preferences allows services to enjoy the higher ad rates that come with targeted advertising. The addition of a third-party data partner can increase ad revenue opportunities.
The transactional business model relies on selling digital media, physical media, live events, or content-related merchandise.
We may soon see a shift from subscription-supported business models to ad-supported business models, considering the saturation we are seeing in the OTT marketplace, Netflix’s dominance, and consumers’ price sensitivity to increasing subscription costs (or adding more OTTs than they already have.)
Want to learn more? Check out Merkle and Park Associates’ white paper on the new approach to OTT.