The current TV landscape has transformed as viewing habits have changed, streaming giants battle it out for subscriptions and new players and emerging direct-to-consumer offerings enter the fray, shaking up the status quo.
In an always-connected era, consumers are tech-savvy and demand round-the-clock entertainment at the touch of a button—anytime, anywhere. And they want it at the best value for money possible. Since the turn of the century, we have seen the dramatic rise of on-demand content services and major changes in the way consumers want to access content across multiple devices—place and time shifting.
Moreover, the way in which audiences are willing to pay for this content is also evolving.
Traditional TV advertising remains the principal revenue source for content owners and service providers, totaling $166 billion in 2019. But revenues are declining—in 2020, there was a 12% year-over-year fall, due partly to the impact of Covid-19. Although starting from a lower base, OTT video ad spend is on a healthy growth curve.
On the subscription side, traditional cable and satellite pay-TV revenues are also declining, with subscriptions set to fall to just a 40% share of TV services in 2026, compared to 81% in 2016. In contrast, spend on OTT subscriptions rose 34% in 2020—in the U.S. market, consumer spend is set to reach $76 billion by 2024.
Although the various forecasts differ by a few percentage points, a likely picture is that OTT subscription and ad revenue will eventually eclipse all other sources of income—with some estimates suggesting $221 billion by 2025.
THE RISE OF DIRECT-TO-CONSUMER
On the production side, content costs are increasing as new media players enter the bidding for key producers, brands and sports rights. In response, traditional media is consolidating to secure intellectual property, reduce overhead cost and pool technology investments.
However, further back in the content supply chain, rights owners and content creators are bypassing incumbent distributors and creating direct-to-consumer OTT offerings. Sports TV is a key battleground with players like Formula One, MLB and NHL all creating domestic and global offerings that remove a layer of distribution and capture a greater share of revenue directly from consumers.
These early pioneers are not alone. Individual and small-scale content creators are growing, enabled by low-entry barriers for semi-professional production and low-cost distribution models that utilize platforms including YouTube, Twitch and Patreon.
It is a complex and fast-evolving landscape—difficult to navigate for traditional broadcasters that have to fend off rivals from the world of telecommunication that see “content” as an opportunity to create stickier broadband and 4G/5G bundles. At the same time, broadcasters are up against internet rivals who are jostling for the number one spot with different goals such as supporting retail sales via “Prime-Style” subscriptions or tying users into walled garden ecosystems like Apple or Google.
Broadcasters, caught between a rock and a hard place, are trying to attract and retain eyeballs to support advertising revenue and ultimately create innovative, unique content that not only consolidates traditional viewership but engages new audiences. In short, the market is in a state of flux. Over the course of the next few years, we will see who comes out on top—and those who struggle to adapt to this changing landscape.
NEWS VIEWERSHIP HOLDS STEADY
However, several interesting trends are worth further investigation. One of the areas where traditional broadcasters have retained a consistent viewership is within the news.
The three main news networks in the U.S. have experienced only a mild decline in viewership over the past three years, primarily due to the rise of alternative news sources such as Facebook, Twitter and Instagram. What is more interesting is at the local level. The Pew Research Centre for Journalism and Media showed that local TV news is still more popular than national news networks, and the hours-per-day of local TV news consumption has grown by 62% between 2013 and 2018.
Although traditional local TV advertising revenues have declined over the last few years, digital advertising around news content has seen strong double-digit growth leading to only a marginal overall shortfall.
These data points suggest an overall positive growth trend for local TV news and point to an optimistic future. Local news can harness opportunities in new technology and innovative Electronic News Gathering (ENG) methods to power more news quantity, quality and diversity, while internet networks can provide a greater reach for localized news and enhance cost-efficiencies.
HOME ADVANTAGE
The localization trend also plays into the other big success story for traditional TV—live sports. Although the world’s two most popular sports leagues, the NFL and English Premier League, have seen a multi-year decline within their home nations, audiences have increasingly tuned in from around the globe.
For example, the 2019 ICC Cricket World Cup was the most watched sporting event of that year, with the tournament achieving a cumulative live audience of 1.6 billion viewers. And in esports, international viewership is surging—live streaming audiences are set to hit 920 million by 2024, growing approximately 10% year-on-year.
Sports that may have been too niche for traditional TV in the past—such as formula E, MMA, darts, rowing and competitive cycling—have found audiences on DTT, cable and increasingly OTT services where they can support an FTA (free-to-air) model that is backed up by digital advertising. Local sports—as grassroots as a town’s football, cricket or rugby club—may well tie into the desire for local news delivered via OTT, as long as production costs can be kept low and the production quality can remain acceptable to viewers.
GETTING AHEAD OF THE CURVE
The current TV landscape is exciting—success is up for grabs for those who are willing to innovate. Increased localization opportunities and future-proofed distribution models present just some of the promising avenues for growth. The digital revolution has ushered in a consumer shift that is forcing many to reevaluate their business structure, and media players now face more competition than ever before.
For more than a year, our industry has witnessed the economic impact of the global pandemic, and in that time, data points and longer-term trajectories may have been skewed. The status quo between content producers, distributors and consumers has irreversibly changed, while innovation in future-ready production and distribution models has accelerated. Right now, media players need to be bold to stay ahead of the curve—and to shape a successful roadmap for the future.
Neil Maycock is CMO and general manager, playout for Grass Valley.
