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VidNet 2022: 'Over half of global online video services are subscription funded'

Omdia's Tim Wescott spoke about global OTT trends on Thursday.

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Mumbai: Over half of the online video services worldwide were subscription funded at the end of 2021, according to a study. The key findings of the study pointed out that while there are more subscription funded over-the-top (OTT) services worldwide, advertising is a much larger revenue stream for video-on-demand platforms. Advertising revenue will also outpace subscription revenue over the next five years nudging many global OTT players including Netflix to introduce an ad-supported plan on their platforms. These insights and more were revealed in the session ‘Trends in Global OTT’ presented by Omdia senior principal analyst - digital content and channels Tim Wescott at IndianTelevision.com’s VidNet 2022 Summit on Thursday. 

The two-day industry event was supported by technology partners Dell Technologies and Synamedia, summit partners Applause Entertainment and Viewlift, industry support partners Gupshup, Lionsgate Play and Pallycon, community partners Screenwriters Association and Indian Film and Television Producers Council and gifting partner The Ayurveda Co.

Omdia is a research firm that focuses on technology, media and telecommunications sector and connects the dots in the global media ecosystem. 

Wescott shared that there were 5671 online video services available at the end of 2021. This includes video sharing services like YouTube, subscription video-on-demand (SVOD) services like Amazon Prime Video, Netflix and transactional video services like Apple iTunes. “We have seen a plateau in terms of the number of online video services that peaked in 2019. New services are being launched all the time that are replacing old online video brands. Some services have been shuttered because they haven’t managed to turn a profit.”

There were slightly more OTT services in 2021 as compared to 2020. There are 2222 subscription funded online video services followed by just over 2000 AVOD platforms and 1362 transactional video-on-demand services. There were just over 1000 dedicated sports streaming services, 600 virtual pay TV operators and 463 free video-on-demand services. Free VOD services are either promotional channels or are public broadcaster funded services.

There are an estimated 127 online video services in Central and Southern Asia out of which 51 are AVOD services and 45 are SVOD services. “Despite the publicity of SVOD, advertising is the larger revenue stream and has been since 2010,” said Wescott. “It is going to outgrow subscription as a source of revenue for online video services over the next five years.”

The online video world is dominated by YouTube and Facebook. A lot of OTT streaming services have started offering advertising including HBO Max, Peacock, Hulu, Disney+ (later this year) and Amazon Prime Video. “We heard recently that Netflix is considering adding an advertising tier,” noted Wescott. “It comes as no surprise as advertising supported plans are already being rolled out by other OTT players. We forecast that online video advertising is going to outstrip linear advertising in 2022. It is a very strong source of financing that will continue to grow.”

The number of global online video subscriptions have seen dramatic growth since 2015 with the launch of more streaming platforms. Amazon Prime Video and Netflix launched globally in 2012 followed by Disney+ and Apple TV+ in 2019, HBOMax and Peacock in 2020 and Paramount+ in 2021. “We will continue to see subscription growth, especially with the advent of SVOD platforms of US studios. Earlier, these studios used to sell content directly to OTT players but now they view them as competitors.” 

Omdia also conducted a consumer study in eight countries including India to understand consumer preferences when it comes to OTT services. They found that in most countries the arrival of SVOD services had decimated pay TV subscriptions. For example, SVOD services in the US have undercut existing pay TV in terms of pricing and have led to dramatic decline in pay TV subscriptions. The opportunity to watch on demand and binge watch content is something consumers have enthusiastically embraced, according to Wescott. The picture is similar in other countries where pay TV hasn’t declined as much as in the US but there are more SVOD subscriptions in most cases.

India is slightly different from other markets because the pricing differential between SVOD and pay TV is not the same. In India, SVOD is a premium service whereas pay TV tends to be cheaper. There are also a lot more pay TV households than SVOD in India, though that is also because a lot of people get their television services via fraudulent operators.

“While there is an increasing array of SVOD services being launched every year, clearly not every household is going to subscribe to all these services,” observed Wescott. “Our research shows that people use free ad funded services the most. So, YouTube is the number one choice in many countries including India. Before 2021, YouTube was the biggest online video service followed by Facebook Watch and then the free ad-supported tier of Disney+ Hotstar. Amazon Prime Video and Netflix are in the middle of the rankings among top ten OTT services. “Netflix has famously said that they’re competing with sleep for the consumer’s time but in reality, all online video services, whether they are AVOD or SVOD are competing for the consumer’s attention,” said Wescott.

When Omdia asked consumers what they rated highly in a SVOD service, most respondents overwhelmingly said that original exclusive content i.e., content that is not available anywhere else was the most important aspect of any OTT. Consumers also wanted to watch the most talked about TV series that they had yet to catch up on. The depth of the content catalogue is rated as the next most important aspect for consumers of online video services. Advertising or lack of ad-supported content was also a big deal for some consumers but not as much as having original content.

Omdia’s Wescott also shared some exclusive data at VidNet Summit 2022. The data showed that the number of original productions that were transmitted in 2021 by streaming services including Amazon Prime Video and Netflix were less than the previous year. There were also fewer hours of original content last year. Netflix produced the most original content coming up at 1767 hours. “The main reason for the decline in original productions is due to the production hiatus that began in 2020 due to the pandemic. We see that disruption working into the delivery pipeline for players such as Netflix and Amazon Prime Video. However, if you compare what Netflix is putting versus a typical US linear TV service then it is still a considerable amount of original content.”

More global OTT platforms are commissioning originals locally. Netflix commissioned content in 47 countries in 2021 that were outside the US. Netflix’s most successful hits are being produced outside the US in languages other than English. In the last five years, Spain (Spanish shows) has been the biggest source of drama content for Netflix followed by India. “When Netflix came to India it wasn’t able to get as much local content as it would have liked and thus was obliged to originate content,” said Wescott. “Also, audiences in India prefer local content. While they will watch content from other countries, what they’re looking for is local content.”

Similarly, India ranked as an important market for Amazon Prime Video, as most of its original drama productions outside the US, have been made in India in the last few years. Many direct-to-consumer services are offering a broader range of content and not just original content, even though they are increasing their original productions. US studios are expecting their new films to be a very important part of their SVOD service. Studios like Disney, Paramount, Universal and Warner Bros are planning to release their films exclusively on their SVOD services after the theatrical release. They also have deep libraries of film and TV content. Recently, Amazon completed the acquisition of legacy movie studio MGM and has access to 50 per cent of all James Bond titles.

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