2020 was predicted to be the year of the OTT with new platform launches set to reignite the streaming wars. But did Coronavirus throw a spanner in the works?
At the start of the year, IBC365 and figures from across the industry hailed 2020 as the Year of the OTT. New launches, such as Disney+, HBO Mac and Peacock meant a significant increase in consumer choice for video on-demand (VOD) services. But that also potentially posed challenges for existing incumbents, such as Netflix, and linear broadcasters.
According to Sky Media’s Sarah Jones, “TV has changed more in the last 10 years than in the previous 50” but over the last ten months has placed the industry at a tipping point.
“The shift towards video on-demand (VoD) has seen the greatest acceleration during the lockdown period, with a noticeable rise in solus viewing,” Jones wrote in a piece for WARC.
“With more people confined to their houses comes either a compromise in content viewing or watching content on your own terms, on your own device. In 2020, we have seen the biggest growth on Sky Go across mobile phones – up 53%. Despite the flexibility to watch whenever and wherever, 82% of all Sky Go is watched at home. We will be watching this trend for further developments as lockdown measures ease again.”
According to the Ofcom Media Nations Report 2020, SVoD services such as Netflix, Amazon Prime Video and Disney Plus saw the greatest growth in consumption in the UK, with people viewing an average of 1 hour 11 minutes of content per day in April 2020 – 37 minutes higher than in 2019. While national lockdowns in response to Covid-19 certainly intensified our consumption of SVoD content, figures for June were still 11% higher than the same period last year.
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As in 2019, Netflix, Amazon Prime Video and Hulu lead in paid subscriptions, according to figures from Parks Associates. Those top three services are now followed by Disney+, ESPN+, HBO Max, Apple TV+, CBS All Access, Showtime and Starz.
Peacock is starting to make paid-subscription inroads, but its base currently comprises mainly users of its free ad-supported tier, notes Parks.
“For many years, the ‘Big 3’ in OTT — Netflix, Amazon Prime Video, and Hulu — have ruled the top of the subscription-based OTT service space,” said Parks Research Director Steve Nason.
“However, with newer entrants and expanded offerings, that trend may be about to change. The Big 3 and their main challengers have gone to market with varying content and distribution strategies, with the same goal in mind: Reach elusive consumers with a compelling content offering and user experience, to be a foundational essential service in an OTT subscriber’s service stack.”
The big winners
The big winner to emerge from the 2020 streaming wars is Disney. Disney+ launched in the US at the end of the 2019, but its international expansion began in March 2020 – right at the start of most global coronavirus lockdowns. In fact, within three months of its European launch, Disney had already amassed more than 50 million subscribers worldwide.
Just last week, Disney revealed its own predictions for its SVoD service, saying it forecasts between 230-260 million Disney+ subscribers by 2024 – way up from its own initial pre-launch estimates which predicted between 60-90 million subscribers by 2024. According to its last released results, its current subscriber base sits at around 74 million.
How does this compare to existing OTT players? Netflix, according to its third quarter results, has around 195 million subscribers worldwide. Amazon Prime Video’s numbers are slightly less clear. It topped 150 million worldwide at the start of the year, but it is unclear how many Prime users also use Prime Video given the other benefits of a Prime signup.
Let us compare Disney’s results to some of its competitors which launched earlier this year. WarnerMedia’s HBO Max went live in May, but has so far been limited to just the US. According to AT&T (WarnerMedia’s parent company) figures, HBO Max had activated 12.6 million subscribers by the start of December 2020.
Just last week, Disney revealed its own predictions for its SVoD service, saying it forecasts between 230-260 million Disney+ subscribers by 2024
This is likely to expand significantly in 2021, with HBO Max set to roll out across Latin America and parts of Europe, including Spain and the Nordics, by second half of 2021. Operations chief Andy Forssell has indicated that year that the company ultimately plans to have HBO Max active in 190 countries, but that a timeline for other countries had not been decided, with some challenges such as rights issues yet to be agreed.
NBCUniversal also launched an OTT service in the Spring, with Peacock taking flight in April. As of October, the service – which operates on a mixed revenue SVOD/AVOD model – had surpassed 22 million subscribers, according to NBCU-parent Comcast.
According to Digital TV Research, the big five US-based streamers – Netflix, Disney+, Amazon Prime Video, Apple TV+ and HBO Max – will have a collective total of 678 million subscribers by 2025.
This report claims Netflix will retain its position as the leading streaming service, adding another 75 million subscribers by 2025 for a total of around 275 million subscribers. Digital TV Research has lower estimates for Disney than the Mouse House’s own predictions, with Disney+ predicted to have around 194 million subscribers by 2025. This will take it above Prime Video which is expected to hit around 167 million subscribers.
One OTT we have yet to discuss is Apple TV+ which launched at the end of 2019. The iPhone-maker’s first foray into OTT video has posted strong numbers, according to analysts, although this in part ties into the fact that Apple offers a free year of its service for anyone who purchases a new iPhone.
Apple does not share a breakdown of its figures, but Ampere Analysis has previously estimated it could have as many as 33.6 million signups. This is based on phone sales – but Digital TV Research estimates Apple’s OTT numbers at far lower – around the 2 million mark. The discrepancy could be down to users as opposed to sign ups, but Apple refused to disclose its figures.
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Youth of the nation
One of the interesting impacts of Covid is on the way people consume content. Linear TV viewing is up – according to Ofcom, linear channels in the UK had their best year in a long time.
OTT was long seen as the best way to capture younger audiences, but research from Ampere also highlights how VOD services are becoming the norm for older viewers as well.
In the US and EU big 5 markets, Ampere’s Consumer survey data suggests that over 36% of SVoD subscribers are in the 45-64 age bracket.
“We’re seeing more older consumers start to recognise the value of an on-demand subscription service,” explains Ampere analyst Daniel Harraghy.
“Once they’ve subscribed, our data suggests that these older viewers shift their viewing patterns and start to consume content in the same way as younger viewers, watching more on-demand content and less linear broadcast TV.
“As a result, once a service starts to hit saturation point with its younger viewers, it may want to think about catering to the older demographic. This can be done in a variety of ways, from tailoring the catalogue of the service to appeal to the older demographic, to a shift in the marketing strategy.”
One of the long-predicted consequences of more OTT services is furthering the decline of linear TV viewing. According to Omdia, linear TV accounted for 63% of TV viewing in the US in 2019, with similar trends occurring in the countries covered by the report including Spain, the UK, Italy, Germany and France.
While dominant, this is a decline from 67% in 2018, indicating that while linear TV is still the mainstream way of watching, an increasing number of viewers are making on demand their preferred way of watching.
With the pandemic forcing more people to stay indoors, 2020 has actually bucked that trend. The TV narrative has changed from assumptions around an ageing audience to younger audience viewing rising again. In fact, 2020 has the highest total TV set viewing levels on record for 16–34-year olds.
The coronavirus has left the media and entertainment industry on a tipping point for consumer television viewing habits. According to a recent panel from The Drum, consumer TV has grown by 35% year-on-year, but the fastest growth has been in OTT. ITV, for example, has seen growth of over 500% on its ITV Hub OTT service, which now has over 32 million registered users.
But challenges remain. According to a report from subscriber intelligence specialist Singula Decisions, “subscriber guilt” and subscription fatigue remains a threat to the VOD market hitting those lofty predictions mentioned above.
The report claims costs associated with maintaining multiple subscriptions often leave consumers feeling “powerless” or guilty, resulting in brand discontent or disconnection with the services.
Amid a global recession and a power struggle between the big players, will consumers want to keep paying more for access to multiple services? Especially when prices are changing – Disney just announced plans to raise the monthly cost of Disney+ across several key markets. Netflix has raised its price several times too over recent years.
Jennifer Whittaker, author of the report and director of QualiProjects, explains: “It’s important to consider the impact of the Covid-19 lockdown, where subscribers began seeing OTT TV as a necessity rather than a luxury, as subscriptions were fundamental to experiencing positive feelings in the midst of negativity and uncertainty,” she said.
“How brands behave moving forward will determine whether these new attributes stay, and the extent to which the OTT subscription monthly bill will be considered in the same class as the electricity bill. Brands must tune in to what subscribers truly want – financial transparency, better customer experience, more freedom and choice – if they are to support this change in the long-term.”
With the coronavirus pandemic, 2020 may not have been the “year of the OTT” in the way many predicted. But as new VOD services find their feet and expand into new markets, the threat posed by streamers will continue to loom over linear broadcasting in 2021 and beyond.
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