This is the first in a three-part series looking at critical trends emerging from IBC.
If IBC 2016 showed anything, it’s that too many broadcasters, operators and content owners still have their heads stuck in the sand when it comes to consumer needs, desires and demands. Much of the industry — especially pay-TV operators — maintain an unrealistic hope that consumers will “come to their senses,” return to the fold and that they’ll essentially step back in time. In discussions at IBC, it was painfully obvious that as the industry’s disruption demanding more collaboration to keep pace with accelerating change, too many companies are looking to maintain the status quo.
I’ve long said that content’s reign as king of the industry’s food chain is over, that the consumer has taken control, prompting major changes in how content is distributed, monetized and consumed. Nothing proves that point more than the rush by major media companies in the past 18-months into the highly lucrative — for those companies that find the right balance between content and consumers — SVOD space, even as it looks for ways to evolve its traditional ad-based online model (more on that later).
As NBCUniversal CEO Stephen Burke has said, “Our relationship with Netflix has never been better. They’re a huge purchaser of our content (and) we talk to them all the time. (SVOD) is a good thing for Comcast Cable and it’ll be a good thing for NBCUniversal.”
MAINTAINING HEALTH AMID DISRUPTION IN THE INDUSTRY
Global media properties remain profitable, but increasingly are accepting — after initial reluctance — that the industry is undergoing a seismic shift that already is generating a new landscape. Among the biggest players, EBITDA margins remain high, with companies like Liberty Global, Scripps Networks, Discovery Communications, Televisa, TVB, Comcast, Disney and SBG all reporting percentages in the 30-44% range. To maintain that earnings health, more media companies — from broadcasters to publishers to brands — are experimenting with how they connect with consumers and are looking for opportunities to expand their footprint to a more global one, rather than a regional one.
Many have aggressively moved toward direct delivery in an effort to disintermediate much of the traditional supply chain. Numerous panels and presentations talked about direct-to-consumer options that focused on the public’s increased predilection toward mobile screens, both smartphones and tablets, especially among today’s primary audience (Millennials) and tomorrow’s (Gen Edge).
Short-form content, live news, sports and music, more originals from new content producers like Netflix, Hulu and Amazon Prime and other non-traditional content suppliers also had significant roles in the show. Augmented and virtual reality, the benefits of ultra-high definition content versus the less costly (in terms of production and bandwidth needs) high-dynamic range content and, of course, the increasing demand for accurate measurement on all platforms were high-volume issues.
There were nearly 56,000 visitors to IBC this year, the largest number the show has seen. Here’s a look at some of the trends they were most interested in and what that means for the future.
OVER THE TOP IS NOW MAINSTREAM, FOR THE MOST PART
Over the top is no longer an “us and them” theme, but, rather a confluence of interests among broadcasters, operators and content owners. After all, much of the traditional audience has gone over the top — it’s estimated nearly three-quarters of U.S. TV homes, for example, subscribe to at least one video on-demand service. The industry has no choice but to follow. As Ricky Sutton, CEO of Oovvuu, an ad-funded video on-demand and ad tech company, said, the majority of broadcasters have accepted — and even embraced — digital disruption.
Increasingly, subscription-based services, ad-based services and transaction-based services have gone from money-losing experiments to businesses that generate substantial revenue streams.
But Dominique Delport, MD Havas Media/Chairman of Vivendi Content, warns that while he is certain OTT will become ubiquitous, he estimates it could be a $15 billion global business by 2018, some media companies will face significant travails as the transformation occurs.
“SVOD and OTT is the equation but you need to be backed by pay TV and you need to leverage content production and ad deals,” he said. “Mass marketing has been a winning formula for 50 years — but the party’s over.
In the advertising and retail world we are moving to a direct to consumer model and this is exactly what the media and technology world is facing — go direct or trust the middle man.”
Delport predicts that familiar media brands will disappear — as many as 75% of them — in coming years as larger companies scoop up smaller ones.
“It is winner takes all. You can’t win alone,” he said. “There is a revolution in media. Everyone will buy everyone else. It will be ugly and only the giants will survive.”
SOFTWARE AS A SERVICE
Evident in the various halls at IBC this year was an increasing focus on software supported networks and SaaS models, which vendors are rapidly introducing as they move away from more traditional hardware solutions.
Vendors like Cisco, Ericsson, Imagine Communications and others are moving full speed into offering software supported networks, promoting the flexibility that comes from not having to manage multiple racks of hardware.
Imagine Communications CEO Charlie Vogt said the industry is rapidly transforming into one based on “defined by software and one that’s defined by IP,” something he calls the “next phase of this industry.”
The reason? As companies virtualize some part or all of their network functions, change becomes easier.
The conference saw far less hype related to the technology than in years past, with more vendors able to highlight implementations and share demonstrations about what’s available.
Change in the media industry, Vogt said, “is being driven by the Internet.” It’s changing business models, the go-to market models for companies and allowed OTT platforms to be huge disruptors in the space. “It’s changing the way our traditional (broadcast and operator) customers think about going to market.”
At NAB, Vogt said he thought “customers are terrified” at how they would monetize their business in the future. “They are looking out two, three, four, five years and they are looking at companies who have taken advantage of the Internet… (It’s) changing and the underlying technology that’s required for them to participate is going to change.”
It’s a familiar theme.
Three years ago, during a panel at IBC that maintained that content owners would never want to — or be able to easily and economically — go directly to consumers, Vogt asked “Why not?”
“Today, they’re all going direct to consumer because today the consumer is — for the first time — the ones that are really driving the consumption of the content and in control of how they want to consume it.”
That’s produced a major change in itself. Content owners are changing the game because they can be in direct competition with traditional delivery systems by going direct to consumers.
That’s also creating more opportunities for video platforms. Where media companies in the past sometimes had been reluctant to move to software-based delivery partners, they are more frequently looking to the cloud, and the companies that live there, as they try to innovate in the space, launching new business models and iterations of their content play quickly. Being able to offer rapid time-to-market quickly is becoming a killer app in the video delivery segment.
In Part 2, tomorrow, we look at how the user interface and user experience is changing, and how augmented reality and virtual reality will impact the space.
JIM O’NEILL is Principal Analyst at Ooyala and Editor of Videomind.