Speaking at Videoscape Europe in London last week, Matthew Bailey, Senior Analyst, Media and Entertainment at the research firm, predicted that globally, excluding China, broadcasters will see their revenue share of the AVOD OTT market fall from 33% in 2018 to 26% in 2023.

Over the same period he forecast that YouTube’s share of OTT AVOD revenue will dip slightly from 46% to 45% in 2023, Facebook’s will increase from 4% to 11%, while other AVOD platforms will increase their share from 17% to 19%.

“What we’re talking about here is TV-like online video advertising, delivered over the open internet in TV-like video environments,” said Bailey. “We expect broadcasters to drop their share of total OTT AVOD revenue by seven percentage points.

“That doesn’t mean that there’s not growth in that segment, but it means that increasing share of the new growth in the TV and video advertising is going to those digital incumbents – YouTube, Facebook and other AVOD platforms.”

In terms of consumer attention, Bailey said that broadcasters were also “not in such a great position” compared to the big digital players.

When Ovum surveyed internet users in Australia, Brazil, Germany, the UK and the US about 21 major broadcaster apps in December 2018, these online video services had a monthly active user rate of 35% on average, with 9% of these users active on a daily basis.

By comparison, YouTube’s monthly active users (MAUs) rate stood at 75% and daily active users (DAUs) were 40%; Facebook’s MAUs were 57% and DAUs 36%; while the figures for Instagram’s IGTV were MAUs 34% and DAUs 16%.

“Broadcasters are still seeing significant levels of success in driving viewing minutes on their linear environments,” said Bailey. “But the problem is the fact that this OTT segment is going to be accounting for a predominant part of the growth in TV and video advertising over the next few years.

“In order to capture more of that growth, broadcasters and other premium AVOD platforms are going to have to migrate themselves further up into that top-right corner [of the chart – denoting high reach and high engagement].”

In terms of device category, Ovum predicts that the smart TV will be ‘the next battleground’ with installed-base growth of smart TVs set to dwarf that of the already much bigger categories of mobile devices and ordinary TV sets in the coming years.

“When we look at broadcaster video-on-demand advertising revenue, we expect the connected TV is going to drive the most new growth in revenue between now and 2023,” said Bailey. “That’s going to come in spite of a number of challenges.”

These challenges include: reduced viewer tolerance of ads in OTT environments due to the success of ad-free services like Netflix; difficulties around targeting and measurements on cookieless TV environments; and a ‘tech tax’ in distributing via platforms owned by the likes of Roku, Google and Amazon, which are already looking to take a share of ad inventory and revenue.

Bailey concluded: “There’s definitely a case for hybrid monetisation strategies, but a nuanced approach is going to be essential in maintaining success in this environment.”

Speaking at Videoscape Europe in London last week, Channel 4’s outgoing head of its All 4 digital service outlined ten common mistakes made by companies working in this space and offered a number of ways to avoid them.

Over-confidence and impatience were two of the ten mistakes that he flagged. Taking attention away from problems that can’t be fixed quickly means businesses cannot focus on solving big, intractable problems.

Davidson-Houston argued that while content needs to be ‘king-like’, content alone is not enough. “If you work in an organisation where the religion is ‘content is king,’ that is a conceptual mistake”.

Another major point was that broadcasters should treat VOD as a fully-formed businesses in its own right, not as a tech project: “It’s a huge catastrophic mistake to see it as one and it will make your business less competitive.”

The discipline of curating large-scale VOD platforms, he argued, has more to do with experimentation and mastery than it does with innovation and bosses need to value the people who are mastering these skills.

In terms of organisational structure, Davidson-Houston said that research and product teams should not be separated as they’re inextricably linked. Similarly, companies should not choose between strategy and implementation.

The key to hiring new talent, he added, is to find people who can learn and are able to teach themselves.

Decision making was flagged as crucial, as bad decisions can usually be superseded by good decisions – the key is to make a distinction between those that are reversible and irreversible. “I’m paraphrasing Jeff Bezos but, generally speaking, the cost of not making a decision is likely to exceed the cost of making the wrong decision.”

Strategically, broadcasters should be “fishermen” not “shepherds”, he said. They should not merely be herding people from broadcast channels to on-demand services, as this audience is both reducing in size and getting older, thus becoming less valuable.

“The thing about fishermen is they acquire. Most broadcasters that I know, especially those high up the EPG, have a bit of an issue here, because they’ve never had to learn how to acquire a customer.”

Discussing how best to avoid these mistakes, Davidson-Houston said that you need power in four main areas: having financial power; having staff and being able to move them around without asking permission; being able to design processes yourself; and being able to sit everyone together.

However, with this power you should not lead a rebellion against your own company. “You may be right but you’ll be dead in the water, absolutely finished,” he said. “Lead, be luminous, be the hope, bring people with you, love the incumbent business – it’s probably paying your wages.”

When it comes to dealing with bosses, he encouraged people to engage them early. “Take your work to them before it’s finished. Don’t transact with them. Don’t tell them ‘here’s my work, please mark it’. Say here’s what my work is going to become. It’s not finished. Please, would you be involved?”

Last week’s keynote came after Davidson-Houston announced in May that he is stepping down from Channel 4 in the summer after 12 years at the UK broadcaster. “It’s time to get stuck in to something new,” he said in a statement at the time, without revealing what he plans to do next.

He joined Channel 4 from Microsoft in 2007, was Head of Channel 4 Online from 2010, and launched video-on-demand service All 4 as Head of All 4 in 2015.

Videoscape Europe is the strategy event for D2C, SVOD, AVOD and vPayTV, with a focus on delivering profitable growth in premium digital video. You can find more details here.

Davidson-Houston believes that ad-free viewing of box-sets could be one of the main incentives for people to pay for broadcaster content. “You might be very happy to watch yesterday’s episode of Gogglebox with advertising but perhaps not a whole box-set of Peep Show,” he said, referring to two of Channel 4’s most popular shows.

The Channel 4 executive, who leaves the broadcaster soon, pointed to the precedent set by ITV in the UK, with its ad-free subscription version of ITV Hub that launched in 2013 , and declared that the cost of taking such a service to market is relatively low. “As a broadcaster, you are in a reasonable place as long as your subscriber numbers are more than none. It is not a very high-risk play.” All 4+ will cost £3.99 per month – the same as ITV charges for its ITV Hub+ SVOD offer (a price that has not changed in four years).

Steve Forde, Director of Digital Products and Online Marketing at ITV, who is responsible for ITV Hub, ITV Hub+ and his company’s programme apps and websites, told the London conference that Hub+ was a fairly niche offering for the first four years of its life but grew rapidly from 2017 and today has 265,000 subscribers – a figure boosted again this summer by the popularity of Love Island.

With Jon Watts, Co-Founder and Managing Partner at the strategy consultancy MTM, leading a discussion about the opportunities for channel owners and broadcast groups using hybrid ‘advertising + subscription’ models, Forde made it clear that advertising remains central to ITV economics. “We need to pay for the content in some way and advertising is not the enemy. People are used to the trade-off between free content and advertising – but the user experience must be good.”

He noted that the ITV Hub+ subscriber count represents a very small proportion of the number of engaged users on the free, ad-supported ITV Hub streaming service, but that does not diminish its value – least of all to the people who use it.

“The advertising model remains robust but we see a change in viewer behaviours, driven by Netflix and Amazon, and a propensity for people to pay a monthly fee. They are learning the behaviour of watching programming without advertising. We have to strike a balance, to keep the significant number of viewers who are willing to watch with advertising but offer a genuine alternative if you want to watch without.”

ITV has seen an increase in brand positivity among people who transfer from the AVOD offer to the SVOD service, especially for those in the 16-24 age group. “They also increase the frequency of their viewing on the service,” Forde reported. ITV Hub has a younger and more female audience than the broadcast TV channels and Hub+ skews even more heavily to young and female – with the differences especially exaggerated currently, while Love Island is on air.

Forde made it clear that avoiding advertising is not the sole attraction of ITV Hub+. This is where you go for other advanced features, notably downloads of ITV content and the right to watch the broadcaster’s programming overseas. “We have addressed different viewer pain points in this service.” The download feature is especially popular in the south east of England due to long commute times there (largely in and out of London).

Gary Woolf, EVP Strategic Development at all3media International, one of the largest production companies in the UK, outlined the increasingly diverse windowing opportunities for a company that makes and licenses content, and also the need to be more flexible about rights as the broadcasters adopt different monetisation and window combinations.

There is also the direct-to-consumer opportunity to consider, as well, and all3media has its own SVOD service in the U.S., which was launched nearly two years ago and offers 10,000 hours of content for $5.99 per month. This is a place where all3media can monetise assets that have already been exploited in early windows, only under its own roof, and the service makes a profit.

Woolf pointed out that if a company already owns the content rights, this strips out much of the cost base from a streaming service. Content owners can buy off-the-shelf technology to run their platform and, as he declared, “marketing is then your biggest job”. However, marketing can be expensive. “We market to specific audiences so the amount we spend [on marketing] per subscriber is quite high.”

Addressing the main panel theme, he wondered whether a hybrid model [inferring a lower priced tier with some advertising] would get more consumers to sign-up who are currently baulking. And by reducing the number of what could be near misses, this would bring down the cost of marketing per subscriber, he acknowledged.

At Videoscape Europe, both ITV and Channel 4 agreed that there is no particular viewing pattern or content genre that determines whether you remain an AVOD user or move to SVOD. Forde revealed that ITV Hub+ and ITV Hub both see viewing across the full range of the broadcaster’s content offer and he concluded that there is no ‘one-size-fits-all’ answer to what content you put in front of or behind a pay wall.

Davidson-Houston confirmed this, adding that for Channel 4 viewers, “You are just paying for the removal of advertising or the ability to download to mobile.”

While Love Island is drawing a seasonal crowd for ITV Hub+, it is soap opera and drama fans who will deliver the greatest lifetime subscriber value on the service, Forde believes. Love Island is a powerful driver for sign-ups to the paid service, but fans of the show may only stick around for a couple of months, whereas the soap/drama lovers are expected to subscribe for 12-24 months, on average. Not surprisingly, there is now a marketing focus on this group.

Within the SVOD services themselves, the UK broadcasters are thinking about payment/packaging innovations. Davidson-Houston believes there is scope for more flexibility and likes the idea of a box-set pass that would give you access to the Peep Show library collection, as an example. Some users already have a season pass mindset, he reckons, coming into an SVOD service for a few weeks in order to watch one show or a box-set, and then unsubscribing.

Earlier in this conference, the proposition that ‘churn is good’ was thrown into the mix by an audience member, themselves quoting another executive. Referring to this, Davidson-Houston acknowledged that it sounded like a mad comment but on closer inspection has some merit – if you take the view that people taking SVOD are not subscribing but are transacting. They are deciding to subscribe in order to see a show like Love Island [on ITV], then quit the service, then effectively buy it again (in ad-free mode) the following year.

Forde is open to the idea of show-themed annual passes for ITV Hub+, which would open the market for gifting (thus, you could give someone a year’s access to Coronation Street ad-free). A Love Island pass is not on the horizon, however, and the broadcaster would need more time to analyse the subscribe and unsubscribe dynamics of the programme, anyway.

Whatever payment options unfold, Forde gave some advice to the London audience, based on six years of ITV Hub+ experience: ensure you create lots of upsell paths into the paid service. This means regularly telling people that they can get some content they are watching in an ad-free environment.

Panel chair Jon Watts wanted to know whether the $6.99 price that Disney has announced for its Disney+ direct-to-consumer offering in the US has lowered the price ceiling for SVOD in general. Woolfe at all3Media International reckons it could influence consumer perceptions but suggested that “what matters is your offer in terms of curation; whether you have something that people need enough”. Forde concurred, saying viewers will pay more if they value the content.

Videoscape Europe is the strategy event for D2C, SVOD, AVOD and vPayTV, with a focus on delivering profitable growth in premium digital video. You can find more details here.

Speaking at Videoscape Europe yesterday, Simon Walker, Marquee.TV’s CEO and Co-Founder, announced the move during a keynote talk about how to ‘super-serve underserved audiences and focus on global passion niches’.

Outlining a number of ‘rules of the game’ for launching niche SVOD services, Walker said you need to “genuinely identify an underserved market,” claiming that fans of topics like history or football are already well catered for.

Often niche areas of interest come with under-exploited content rights, making it relatively straightforward to pick up IP, and come with ‘pre-aggregated’ consumers. However, another area to think about is whether a niche links to in-person activity, he suggested.

Finally, Walker said that the final test for a niche service is whether it could exist without the video content: “I could imagine providing an app for arts and culture users that aggregates together their tickets, their memberships of organisations, it could have a loyalty scheme in it. If you then layer content on top, it can become really powerful and interesting economic models and business models.”

Launched last July, Marquee TV is a subscription service focused on dance, opera and theatre performances from across the globe. In the UK, where it is based, the service costs £8.99 per-month or £89.99 per-year.

The company also launched a country music SVOD service late last year, taking a similar approach to Marquee.TV but applying it to country music – which is a mainstream genre in the US but has narrower appeal internationally.

As Walker explained: “We can take stuff that is mainstream in the US and repackage it for international audiences and create a really efficient way to build a niche brand and a subscription brand.”

Marquee.TV is currently available on Apple, Android and Amazon Fire TV devices. CountryLine is available on Apple and Android phones with launches planned for iPad, Android tablets, Roku, Apple TV and Fire Sticks.

This is according to IHS Markit research director, Ted Hall, who told attendees of the Videoscape Europe conference in London yesterday that the next generation of “streaming heavyweights” are tracking to increase US online video subscriptions by 15% above IHS’s baseline forecast.

“Although Netflix and Amazon will remain the single most popular online channels, the new entrants’ broader offerings will boost their overall market power,” said Hall.

“At Disney, if we stack up all of its online subscription services across Hulu, Hulu Live TV, ESPN+ and Disney+, its total subscriptions will actually, in this context, rival Netflix’s subscriptions total by 2023.”

Hall described Disney+ as “arguably the most highly-anticipated of the new direct-to-consumer services” and predicted that it has a “good chance” of achieving up to 20 million subscriptions by 2023.

Due to launch in November, Disney+ will draw from a strong catalogue of Disney, Pixar, Marvel, Star Wars, National Geographic and Fox content and at price of US$6.99 per-month will also undercut Netflix.

WarnerMedia’s forthcoming SVOD offering, on the other hand, was characterised as a service that “seems to be in the process of finding its identity,” with Hall pointing to recent executive comments suggesting it will be a single-tier offering that won’t undercut WarerMedia’s existing HBO Now service.

“We may be looking at a price-point for this service of somewhere between US$16 and US$18 per-month, so a fair bit above the services that we thought it would be competing with. There’s also talk that it’s leaning more towards having virtual pay TV ambitions,” said Hall.

He claimed that a “fatter bundle” approach makes sense for WarnerMedia’s parent company, AT&T, which has more to lose from pay TV’s decline than Disney does. However, it does also have a large mobile base that it could leverage as part of a future bundling strategy.

Apple TV+, which is due to launch this autumn but still hasn’t had pricing confirmed, is “trending towards our least aggressive forecast scenario,” said Hall. “Were it to be bundled with Apple Music, this would change the outlook significantly.”

“For Apple TV+ it will be brand equity and bankable talent that are the key weapons for attracting subscribers to its long-awaited TV content offering.”

Summing up, Hall predicted that varying levels of aggression will yield mixed results for these new streaming players in what is becoming an “exceptionally competitive online channels market”.

“High-quality content won’t be enough to guarantee success – the number of players that have it is increasing, forcing consumers to make tough choices. Bundling and hybrid models give the major players an edge, whether it’s aggregating online channels or aggregating a wider range of content and services.”