In the second part of the series looking at the trending OTT landscape, Alana Foster deep dives into the challenges of UX and the future of the streaming wars with industry experts. 

Earlier this week Disney announced it had stacked up 28.6 million subscribers in its short lifespan, having launched less than three months ago.

Disney+ credit Ivan Marc shutterstock

Disney+ has bagged over 28m subscribers within months of launch

Source: Ivan Marc / Shutterstock

Bob Iger, Disney’s chief executive told analysts during a conference call that the response to its Disney+ service has “exceeded even our greatest expectations.”

The service has found immediate success with its hero content including Star Wars live action The Mandalorian, film and legacy content from its library including The Simpsons and Hannah Montana drawing in record number of viewers.

Iger added: “It’s often challenging for a company to pivot in a new strategic direction, particularly when it involved navigating between established and emerging business models.

“We have made an extraordinary amount of progress.”

There is no doubt Disney has succeeded in launching its new offering into what is an already crowded and competitive market, however it did so with technical glitches.

On your marks
In part one IBC365 examined how success will be crowned, asking experts if content or technology will prevail.

The established players including Netflix and Amazon are chugging along better than some analysts expected with new entrants vying for viewers, consumers are remaining loyal.

In its most recent earnings report from January this year, Netflix announced it now has 167 million subscribers in 190 countries, while Amazon disclosed its number of Prime subscribers has grown from 100 million in 2018 to 150 million people accessing Prime Video.

Apple TV+, Disney+, Peacock, HBO Max and Quibi are among those disrupting – or on the verge of disrupting - the current plating field and, with a lot at stake, consumers will be unforgiving for anything but the best user experience (UX).

Speaking to IBC365, Ampere Analysis analyst Tingting Li explains: “UX is certainly a key factor for service providers in helping to make the most of their content investments.

Apple The Morning Show Premiere Jennifer Aniston-Tim-Cook-Reese-Whiterspoon_102819

Apple TV+ is already winning plaudits for The Morning Show feat. Jennifer Aniston and Reese-Witherspoon

“If the content providers have a great content library but bad UX, the result would be an audience unable to find the content they want to watch.

“However, effective UX must be paired with a solid content library to improve the overall consumer experience. Content providers need all elements to be working well in order to offer a compelling and engaging product.”

Apple’s TV service is certainly betting on this, already boasting award wins for it’s The Morning Show starring Jennifer Aniston and Reese Witherspoon.

As an aggregated user of streaming services, the difference in user interfaces (UI) are notable with personalisation, promotional content and ease of navigation variable.

Futuresource associate director consumer media and technology Carl Hibbert adds: “UXs have improved considerably in recent years, it could be argued that the next step is super aggregators platforms creating a pan service UX, to provide this seamless experience to aid engagement, search, navigation and discovery.”

The likelihood of the streaming services hype to plateau will only be a matter of mind with “many consumers starting to look at service hopping, so services will need to be ready to counter this.” Hibbert explains: “Super aggregation will become a target strategy for big platforms and tech companies.”

Engaging experiences

netflix menu screen

UX will play a vital role in OTTs trying to stand out from the crowd

Source: Netflix

Critical, fundamental, seamless and effective are often key words thrown around when exploring the importance of UIs and necessary for new services to compete with the US major players.

Ovum principal analyst OTT video Tony Gunnarsson explains what providers can do to engage audiences to reduce churn.

He says: “Any local, national or regional streaming service that has not yet recognised this – and put strategies in place to improve UX - will find that the next few years will be very difficult indeed.

“There are multiple things that providers can do to engage subscribers – and there are today a series of tools that can help services do this – but ultimately SVOD is a very difficult market to compete, and if the service does not have competitive content that can stand up against Netflix and others, your UX won’t matter much to consumers.”

Whether or not the algorithms are up to scratch is debatable, fragmentation of the market has transferred power to the consumer as streaming video-on-demand (SVoD) platforms must provide the most competitive content to remain relevant.

Li explains: “The companies best placed to succeed are those with existing high-value IP, low reliance on third parties for content licensing or the financial capability to mitigate short term losses through other profitable arms of the business.

“The risks are when the extended free trials and the eye-catching welcome offers come to an end.”

Will the perceived value of SVoDs be indefinitely inflated by consumers high expectations?

Future profitability will need to be driven from subscriber growth or price increase - the latter less desirable for those consumers with multiple subscriptions and, given the fragmented landscape, both scenarios are harder to justify.

However, according to Gunnarsson the market is not fragmenting but consolidating, acknowledging the power shift from traditional media to online natives which is causing widespread conflict and privacy concerns.

He says: “Now I feel we’re entering a period when traditional media is starting to fight back against the FAANGs. Look at a traditional media company like Disney, who have used their financial might to restructure their entire organisation for an online future, having gone through a period of aggressive M&A activity.”

Forecasting the future of entertainment

What the streaming landscape will look like in 10 years’ time is anyone’s guess. According to Goteborg’s Nostradamus seventh report that was released earlier this week, the SVoD service market in five years’ time will have shrank with no single service fully dominating the landscape.

The study was presented by its author, Johanna Koljonen, during the Nordic Film Market at the Göteborg Film Festival last Friday and based on collected data and media analysis built around a wide range of interviews with industry experts.

In a report from Variety, the research forecasts Apple and Google to be the dominate devices on the Operating System level; while, Amazon will join them as a marketplace.

Disney+ is expected to do well because of its content catalogue, while Netflix is expected to remain strong but will face pressure for one more year due to its large debt.

Content is King

“The strength of the content will remain paramount, but visibility of this content is more important than ever,” adds Hibbert, who explains the scale content providers will become more powerful in some ways is likely, however, adds: “Will still require platforms with strong customer bases to help drive and maintain subscriber base.”

The movement towards a mixture of pay and free VoD services echoes the mix of business models present in the broadcast TV market.

Game of Thrones Tyrion credit HBO

Game of Thrones will be available on HBO Max

Source: HBO

According to Ampere data, the average number of SVoD services taken by an SVoD home in the US is 2.4 (at the end of 2019).

Li explains: “We predict this to continue to rise steadily over the coming years. Apple and Amazon have already made plays to become super-aggregators, with Apple TV and Amazon Channels. Similarly, local pay TV operators will also be aiming to on-board VoD services in the hope to keep up with the changing market and ensure that consumers continue to use their products, even as the end-market for content exploration and viewing becomes increasingly complex.”

US giant HBO is known for some of the best and critically acclaimed TV series in the world, including Game of Thrones and Sex and the City yet its first generation direct-to-consumer (D2C) service, HBO Go available in Eastern Europe suffers from a widely criticised UX that Gunnarsson says is “lagging far behind what you would receive via Netflix or Amazon.”

Hibbert points to D2C experiences that are never truly D2C, explaining that the required hardware, platforms and OS to reach and enable a strong UX often doesn’t match up.

With more streaming services starting to adopt advertising supported tiers and business models including Hulu and the NBCUniversal’s upcoming Peacock service, the next-generation UX will be driven by Disney+ and HBO Max.

Gunnarsson adds: “The expectation is that more SVoD subscribers will buy more than one concurrent subscription at the same time – typically on the Netflix+1 or Netflix+2 model.”

For now, a large proportion of pay-TV households will simply add an SVoD service on top.

“I think however this quasi-harmonic relationship between TV and SVoD will be strained over the next few years, with more people deciding to cancel pay-TV in favour of a self-bundle of SVoD services.

“At the same time, of course, pay-TV operators are getting creative in bundling its services with one or more SVOD services – such as the Sky and Disney+ agreement.”