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There has long been a sleeping giant in the OTT industry, and it might finally be waking up
Thanks to the growth of companies like iflix, Viu and HOOQ (and competition from Netflix) the Over-The-Top (OTT) video streaming industry in Southeast Asia has become competitive and dynamic — qualities leaders in the industry have welcomed.
A report from Juniper Research, a UK-based market intelligence company, released on July 19, explained how the industry has fundamentally changed how people watch television and movies. But, OTT companies face unique consumer challenges, and a looming clash with a video giant not named Netflix.
It needs to be briefly noted that the report analysed the major American players like Netflix and HBO Now and did not touch upon Southeast Asia. That being said, it does provide insight into the direction the industry as a whole, and what challenges the players in our region might face.
Also Read: iflix, Netflix have new OTT competition in Indonesia as Viu enters country
A major OTT-driven trend cited by Juniper is ‘cord cutting’ and ‘cord shaving’; two lifestyle shifts that have disrupted an entire industry, but may also have empowered a major competitor — YouTube.
Cord cutting is a term referring to the trend of users cancelling expensive cable packages in favor of a network’s on-demand content. The best current example is HBO. Rather than spend money on an expensive cable package that happens to include HBO, fans of the network can pay about US$15 a month for HBO-only content.
Cord shaving is the trend of people seeking out ‘skinny bundles’ for cable subscriptions to target the content they want. In the US, one company that has felt the brunt of cord shaving is ESPN. Rather than pay for a massive bundle that happens to include ESPN, American consumers are starting to target packages that just include their favorite sports, like NBA League Pass (basketball) or MLB.tv (baseball).
These two trends are heralded as a positive for OTT networks, but may actually have an unintended negative impact.
Here’s why.
Juniper points out that companies like ESPN adapt to the problems of cord shaving and try to launch their own OTT channel. However, starting a stand-alone platform is expensive, time consuming and not guaranteed to work.
Instead, major networks will approach a third-party video company to host ‘Premium’ content and presumably offer a percentage of the subscription revenue to the platform.
Enter YouTube, not only the world’s dominant online video streaming business, but also a platform that boasts a core audience in the all-important demographic of teenagers.
In May, Bloomberg reported the company is working towards building a subscription service called ‘Unplugged’, in which users could pay for access to specific cable packages. According to the article, YouTube is already in talks with entertainment giants like Comcast, NBC Universal and Viacom.
YouTube Unplugged could be launched in early 2017, and if so would completely disrupt the OTT industry. Netflix is big, but YouTube is far more important.
According to company statistics, over a billion people watch YouTube videos, and the company can claim a crazy statistic that it reaches more people on mobile than any traditional network in total.
For the last three years, the amount of time people have spent on YouTube has increased by 50 per cent every year and on mobile the average viewing session is over 40 minutes.
The final stat to have OTT networks quaking in their boots is that 80 per cent of users are outside of the US.
While licensing issues may be the short-term savior for OTT networks in Southeast Asia, if Unplugged takes off, there is no reason to think YouTube could not strike similar deals internationally. The company does have a localised product in 88 countries.
Also Read: Hey Philippines! A new video streaming network is heading your way
The international rollout of Netflix to start 2016 was a major event, but it has largely been an underperforming launch as weak content in many countries is failing to entice new users (Q2 revenue and growth rate fell below market expectations).
So far, the OTT industry has been able to find success working around Netflix and Amazon Prime, but YouTube is an entirely different beast and it will be fascinating to see how the startup from another era disrupts the disrupters.
Cord cutters and cord shavers may finally be able to have their cake and eat it too.
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