NBCUniversal is launching a streaming service as it looks to remain competitive. Netflix is raising subscription prices in the US. Sinclair has thrown its hat into the OTT ring, too.
Consumers have an increasing number of TV options at their fingertips, but not all services are alike. NBCU is set to launch a free, ad-supported service by 2020 to anyone in the US who subscribes to a pay-TV service; for other viewers, it will make its online catalog of NBC shows and Universal movies available for $12 a month.
Sinclair has introduced ‘STIRR,’ which provides 20 national networks and local with programming such as news based on a user’s location.
Netflix is upping prices by one or two dollars depending on an individual’s plan. Andrew Frank, research vice president and analyst for Gartner, said Netflix has yet to start advertising because it hasn’t “tested the limits” on subscription rates, and will only start allowing ads once it encounters consumer resistance.
As millennials and Generation Z keep cutting the cord, and as ad dollars start flying into the OTT space, new players will keep surfacing and jockey for position. Eventually, consumer viewing habits will have to catch up.
When will the lightbulb switch?
Consumers have options. A 2017 study from IBB Consulting found that 51% of OTT subscribers in the US used two or more streaming services. The question isn’t what streaming service will win out, but rather how viewers will choose to navigate through them.
Jim Nail, principal analyst at Forrester, said the OTT boxes and smart TVs are best positioned for the future once “the lightbulb goes on in consumers’ heads” that managing the disparate streaming experience is like managing apps on a smartphone.
“If this world is going to start splintering where there is [content all over the place], it's like managing apps on your smartphone, which people do all the time. But I don't think consumers have made that connection and applied that way of thinking to television yet,” said Nail. “That [OTT] device then gives them the ability to pick and choose among the content they really want, but have it readily accessible the minute they turn on their TV.”
Although viewers will need to organize their services, they likely won’t have to worry about overly curated content. While Disney is slowly pulling its content from rival services as it prepares to launch its own streaming site, Disney+, later this year, NBCU has no plans of removing its content from competitor platforms.
Nail said that as big as the catalogs are for outlets such as NBCU and Disney, they’ll be in for a “rude surprise” if they pull content from aggregators such as Netflix and Hulu. Consumers may grow frustrated with the media companies for not making their content conveniently available.
Nail added that Disney could differentiate itself as a “narrow streaming service” by offering kids' content along with its deep library, a more focused approach to Netflix and Hulu’s model of varied original content plus an extensive catalog.
What about local?
Sinclair’s STIRR aims to address what’s missing among all the other streaming options: local programming.
STIRR’s general manager, Adam Ware, said that despite the rise in OTT, local programming, especially local news, is still in high demand.
"By creating the STIRR CITY channel format, local TV stations can now extend their programming strength to OTT. STIRR will offer viewers both a new local channel and an extensive local on-demand library relevant to the place they call home."
NBCU will offer news on its platform. CNN, CBS, and Fox already make news available on their streaming services. However, for the affiliate model to be affected in the OTT world — for local news coverage to be readily available — the spectrum strategy needs to change, Frank said.
“One of the big bottlenecks is that a lot of the spectrum, [which] we could use to lower the price of streaming delivery by making it wireless as much as possible, is currently allocated to legacy TV stations, which are just sitting on most of it and not using it at all.
“I'd love to see a complete reconfiguration of the spectrum allocation scheme so we can have local news delivered as a stream, on-demand using local spectrum, which is a public resource, so people can get the information they need that's most relevant to them without having to subscribe to a national service,” said Frank.
Ads aren’t going away
Nielsen’s most recent Local Watch Report showed that 14% of American households (16m) are over-the-air, or broadcast only, and 6.6m of those households don’t have a subscription video-on-demand (SVOD) service.
The median income in non-SVOD households is $21,000, and only 10% of those households own smart TVs.
“The reality is that a world of pure paid content would give people less access and be more discriminatory than a world of commercially-subsidized content, or at least partially subsidized,” said Frank.
Aman Sareen, chief executive officer of local digital and OTT advertising platform ZypMedia, said advertising in OTT is still in its nascency.
“There's a lot of heavy lifting on platforms like ours to create a uniform data layer so we can speak the same language when we talk to advertisers, because they don't care how we are transacting for them. But it's a challenge for companies like ours: How do we now go into these platforms and have a level of comfort with the data they provide to us, and then how do we normalize that data across all the ecosystems that exist?”
Ads on connected TVs do perform well, however. A report from Extreme Reach showed that CTV ads captured more impressions and saw higher video completion rates than ads on other devices.