Azuki Systems is now part of Ericsson
Read more >

Monetizing OTT Multi-Screen Video

April 18, 2012 \\ Wireless Week

For many years, TV service providers and content owners have co-existed in a mature, stable and predictable ecosystem. This status-quo was, for the first time, challenged by first-generation Internet/over-the-top (OTT) providers, such as Netflix and Hulu, which not only offer lower-cost alternatives, but have started to change consumers’ viewing habits. Here’s what today’s OTT environment looks like:

  • Consumers are demanding to watch what they want, when they want it, on their devices of choice.
  • TV service providers are recognizing that OTT is not an enemy, but a business opportunity that enables them to augment their existing video infrastructure and expand TV-quality content services to devices beyond home TV.  
  • Content owners see OTT video delivery as a new (additional) channel for content distribution and are trying to figure out how to get paid for content delivered to multi-screens inside and outside of the home.

To co-exist and thrive in the TV Everywhere (TVE) ecosystem of the future, service providers must work hand-in-hand with content owners to satisfy consumers’ expectations and build a differentiated service model based on the demand for access to content on any device and at any time. 

Building Customer Loyalty

In today’s OTT delivery world, content owners are cautiously approaching the idea of TVE. Even with the option to deliver directly to consumers, content owners do not want to disrupt the lucrative revenue streams that come from service providers. Instead, content owners are pushing the predictable “authentication” model, which bundles the ability to watch subscription TV content on the Web, tablet or smartphone inside the home. 

However, authentication services do nothing to drive revenue for service providers. To go beyond authentication and fully monetize multi-screen, service providers must replicate the quality and reliability of “living room” TV in consumer-owned devices. This means conquering an array of operating systems and devices including smartphones and tablets, desktops/laptops, connected TVs, gaming consoles and set-top-boxes. Content owners also demand strict levels of content protection to be applied consistently across all devices. 

Monetization Models

With service providers and content owners both seeking ways to profit from their multi-screen video offerings, there are several business models to consider:

Advertising:

This will ultimately become the most critical monetization business model. Mobile ads are especially intriguing to advertisers because mobile devices are tied to personal users instead of households that own TVs, which will allow providers to insert targeted advertising pre and mid- video roll. This requires consistent analytics and reporting on viewers and what they are watching. 

Freemium to Premium Conversion:

Service providers and content owners bait the hook by giving a portion of their shows for free, and then give consumers the option to upgrade. This works well as an opportunity to increase subscription revenue. 

Subscription:

Subscription works well for monetizing a large library of older movies and shows where consumers pay for a wide selection, rather than its freshness. The challenge is in the start-up, which requires big investment to get to a critical mass of content and subscribers.

Pay-Per-View:

Primarily used by service providers and iTunes, PPV allows monetization on newer movie and TV releases for which consumers are willing to pay on an incremental basis. The downside? It’s a less-predictable source of revenue.

Purchase:

Popularized by physical media (i.e. DVDs, Blu-ray Discs), this is employed by content owners for the most recent hit movies and shows, charging consumers a premium while demand is still hot. 

Striking the Right Monetization Balance

One size fits all is not an effective strategy for monetizing multi-screen offerings. Determining the right monetization model is about striking the right balance of consumer-paid and advertiser-paid for the audience. Once that is determined, there’s a need to balance recurring subscriptions with enough options for those users who want to pay for more, or higher-quality, content on usage basis. Taking all these factors into account means that monetization models will vary significantly from one provider to another. The model for the South Park, for example, will look vastly different than that of the Food Network. 

With OTT video consumption playing a major role in the next generation TVE ecosystem, content owners and service providers have a huge opportunity in front of them. To take advantage of this opportunity and monetize on multi-screen delivery, they must determine their optimal strategy now, work through the technical challenges and fine-tune their business model as they go.

John Clancy
President and CEO of Azuki Systems
Click to view original article