The media world is fragmented and has become increasingly so over recent years. With so many OTT services available, consumers have more choice than ever before but at the same time, gaining access to the right mix of content generally means subscribing to multiple video services. We are beginning to see some convergence among the global media brands. Will this pave the way to consolidation and a less fragmented market?
Convergence to Divergence
Some of the large global media groups are consolidating their OTT services into one flagship offering. WarnerMedia recently launched HBO Max, which is delivering a host of high value content from Warner Bros, New Line Cinema, DC, and others, all in one service. Disney is another example of a media group moving down the same route with its Disney Plus offering. Both have been met with great enthusiasm from consumers who see value in getting more content packaged into one service.
It is likely that other large media corporations will follow the same pattern. As many of these groups have a range of sub brands, either as TV channels or other media entities, this will, at least initially, lead to some level of convergence. Despite this, there is nothing which really points to true consolidation over the coming couple of years. This initial consolidation will be followed quickly by a divergence in the media industry, driven by a need to effectively reach different target audiences and maximize monetization opportunities.
It is clear that it will be extremely difficult to create one service that suits all target groups and markets. It is also not the most efficient way of monetizing content if everything is bundled into one service for one subscription price. These large media groups will likely begin to create numerous spin-off services, allowing them to reach niche audiences with more tailored content and monetize content in more ways.
Growth of OTT Video Services
According to Research and Markets, the global market for OTT video is set to reach US$133.7 billion by 2026, growing at 18.7% CAGR. This is mainly fuelled by a rise in video consumption, which is also giving way to a rise in the number of video services entering the market. Parks Associates estimates there to be nearly 300 OTT services in the US alone.
We are also seeing a plethora of new entrants penetrating what has become a more open and accessible market. It used to be very expensive to deliver video services. Today, a selection of new tools means that it’s much easier to deploy a new offering and companies can be up and running within a matter of days (as long as they have access to the right content).
It also used to be difficult to reach a niche target audience but new and more targeted marketing methods are now empowering media companies to deliver highly relevant services to a very specific set of users. All this means that the economics for a niche service are much better than they were years ago. With the cost for a wider distribution marginal, this creates a lot of experimentation and innovation, ultimately driving a fragmentation of new services.
Given the ease of launch and targeting and the vast consumer appetite, it is unlikely that we will stem the flow of new service launches from niche providers anytime soon, even if we end up with some consolidation from the large media players.
Finding the Future in a Fragmented Media World
It is widely established that most consumers are happy to subscribe to multiple OTT services. The main challenge we are seeing from this fragmented market is that of content discovery.
Users are getting increasingly frustrated with subscribing to multiple services since it means that they will have to navigate between them to find the content they want to watch. The companies that are successful in solving this challenge, enabling a better cross-service experience, are very likely to both attract and retain consumers.
A recent market survey commissioned by Accedo showed that 44.4% of global OTT providers are very much seeing the possibility of expanding their content catalogs by including content from other providers. Another 47.8% say that they would consider doing this, at least to some extent. We believe that many new partnerships between various video service providers will emerge, creating both business challenges and new opportunities.
The challenge of content discovery is something which operators can play a massive role in solving. Similar to 20 years ago, they can be the trusted entry point by serving as natural curator of various video services when mass market consumers want better discoverability—an interesting possibility, but with significant business and technical challenges, is a seamless experience for consumers where they sign in once and access all the content across multiple providers in one central experience. While this presents considerable challenges, with both parties clearly benefiting from a partnership, we’re convinced that there are ways forward for pragmatic and business oriented operators and video services.
Over the coming few months and years, we will see new business models created between the parties which will bring mutual benefit for providers and a better experience for consumers. While the media landscape will continue to be fragmented, this will make it simpler for consumers to navigate that and get to the content they want to watch.
