6 trends in online video and VOD you need to know for 2017

According to some studies, online video will represent 80% of the total Internet traffic in 2019. No need to say that we can’t miss this. Starting a fresh year, we were thinking that some of you would enjoy a summary of trends observed in online video market (Season 2016), as well as some of our predictions for the coming months on this disrupted market (Season 2017).

And of course, because it is our passion, we will end with a focused analysis of video on demand (VOD): market trends, usages and success factors!

 

# Advertising: the fragile economy of ad-supported services (AVOD)

Despite a general increase in the online advertising market, ad-supported model encounters some difficulties:

  • Individual incomes per creator decrease, on Youtube it becomes more and more difficult to earn a living;
  • Ad blocks weaken the economy which is becoming less and less profitable;
  • Effectiveness of advertisements seems to decline years after years;
  • And more and more actors and intermediaries have to share the same advertising cake.

As a result, some historical services, such as Hulu, have abandoned their historical advertising model to offer only a premium offer. Also, Youtube launched a Premium service “Youtube Red” to diversify and increase its revenues (Youtube was still getting no profits end of 2015), and even Pure Players, news websites, and online magazines get their own paywall or premium subscription offer (Slate with their  “Slate Plus” offer).

Of course, advertising model is still a must have for some video offers and can be a powerful promotional offer for paid models (Freemium). But in terms of revenues, transactional (TVOD) or subscription (SVOD) models remains the most profitable for video content providers.

To follow closely in 2017 in adverstising model: chat-based marketings (chatbots) and also personalized/hyper-targeted campaign thanks to big data.

 

# Television: OTT SERVICES to LOWER TV VIEWING drop

The television market is eroding. Cord cutting affects everyone: cable TV but also telecommunications operators who see some of their subscribers leaving TV services. Thus, there has been a concentration of some actors seeking to control the whole value chain: from production to distribution including owning all components of the telecommunication system. It’s not surprising that AT&T giant bought Time Warner, and Verizon bought Yahoo, in order to offer exclusive (premium) contents to their subscribers.

On the other hand, networks launch their own OTT service, such as Starz or Showtime, which they distribute directly to their audience or via services such as Amazon or Apple TV.

Several factors can explain this gradual decrease in TV audiences:

  • The rise of connected devices: before people were spending their free time watching television, now Internet and social networks compete with it. Besides, big live events that made the success of the television thanks to their potential to gather, are increasingly exporting on OTT streaming platforms or social networks (see our “live stream” focus below );
  • New generations coming into the market and the evolution of uses: we watch videos everywhere and all the time, on all media. Millenials in particular do not understand why they should follow a fixed schedule on a TV programming grid. For them, content must be available when they are, not the other way around. This can explain why they are gradually turning away from the rigidity of traditional medias.

Future of television will certainly be a smart mix between offering very high quality, exclusive content which suits a wider audience, while developing the most personalized offer to adapt to all disparate tastes and usages of each of its users: on the intrinsic characteristic (offering a topic that interests a user based on his tastes and his past consumption) as much as on the format (suggesting short contents to snacking for an under 25 years user which connects via its mobile, and offer long-form content in HD or 4K for a user who connects via his TV set).

And this can only be done via an OTT service, which has an interface built to get the most of all these insights (consumptions and usages) offering a custom navigation that constantly evolves.

 

#MOBILES: A BOOM IN VIDEO VIEWING

In 2016, mobile becomes the main screen for watching videos online (more than half of the videos consumed online have been on mobile!). No wonder why Vivendi announced the launch of Studio +, an SVOD service for mobiles.

In terms of content production, we see the following trends developing:

  • Vertical format will grow more and more in the coming months, as usage shows that consumption of vertical videos is rising sharply (from 5% in 2010 to more than 30% in 2016);
  • User generated contents (UGC) will continue to multiply as confirmed by the success of Youtube but also mobile tools like “Stories” launched on Instagram & Snapchat;
  • The length of contents: on mobile 70% of the contents viewed are less than 20 minutes. But keep in mind that overall trend is to consume more and more long-form videos on mobile (allowed by bigger screens size and better battery performance).

In short, launching a video service in 2017 can not be done without being sure that it is mobile friendly (responsive with a proper navigation), and that it offers contents adapted to mobile (short formats, vertical…) ideally downloadable in an offline mode!

 

#VIDEO LIVE: RISE OF LIVE STREAMING

Live streaming was very quickly adopted, as shown by Periscope or Facebook live success, not only by traditional users, but also by influencers or artists. Obviously, media also used these tools to create a “new live TV”, whether they are initially producers of video content … or not (pure players and information websites liked it too).

Live stream has an obvious potential for:

  • Sports business: live sport continues to gather crowds but its consumption is changing, it migrates from TV to streaming platform or social networks (not a coincidence that Twitter bought some NFL rights and Facebook broadcasts US National Basketball Team games before the Olympics);
  • Information or infotainment: American presidential debates broadcast live on ABC’s Facebook to reach more than 28 million views;
  • Celebrities / Artists: as fans spend more and more time on social networks, they feel more connected with their favorite star. Many artists and YouTubers use live stream to interact directly with their fans. This trend seems to be strengthening for 2017;
  • Games videos and e-sports: in the United States teens spend an average 1 hour per week watching a video game in live stream on apps like Twitch. And Youtube has launched Youtube Gaming in several countries …

The live stream has a real potential in usages and therefore also a potential for monetization. Whether you are a concerts / shows / events producer, a TV channel, a digital media or any creator of premium content, lives and non-linear contents have a rightful place behind a paywall.

 

#VR: VIRTUAL REALITY MIGHT BE BIG SOON

Uses around virtual reality will increase, VR headsets become more and more affordable and new types of contents, adapted to this consumption of videos, will appear. 4K becoming more democratic, VR will gain in quality. Besides, Youtube already allows to stream 360 content in 4K.

VR is definitely to follow in 2017, we do think that this kind of premium contents offers good opportunities for content monetization in VOD (purchase, rental, subscription).

 

#VOD: TV OF TOMORROW?

Video on Demand consumption reached new records in 2016. It is safe to bet that this is only the beginning and the best will come in 2017. Let us try to decrypt market trends, impact on contents and of course factors of success for VOD platforms:

 

MARKET AND USES

OTT services disrupted the market: we saw an explosion in SVOD services. More and more services are emerging and are distributing on an impressive number of platforms (Apple TV, Amazon etc …). And there is room for everyone: number of SVOD homes is forecast to reach 428 million across 200 countries by 2021, and in the United States 75% of the young people between 26 and 32 subscribe to 3 services of streaming. Cord cutting leads to an increasing demand for direct-to-fans video services. Collaborative economy and “uberization” of society push consumers to favor services without intermediaries, which reward directly creators / producers.

 

CONTENTS

  • Niche contents get more and more success because they find a captive and engaged audience. Thematic segmentation which happened a few years ago for cable television and newspapers is being repeated here for VOD. And success of services such as Mubi or Afrostream confirm it;
  • Increased appetite for local or regional content vs. global content. For international services, it is therefore important to include a notion of proximity, specific for each territory. For example, Mubi has a different offer for each country in which the user is located, taking into consideration cultural differences;
  • Exclusive content: producing its own content, such as Amazon, Hulu or Netflix seems to be one of the best weapons to attract new subscribers;
  • Quality: it’s not a scoop: “Content is King”. But the notion of quality need to be specified here: it is above all an adequacy between a promise and an offer. Youtube, for example, seems to modify its algorithm in this way by rewarding videos that are viewed entirely. Facebook hunt for click bait is another example. Then, factors of success for a VOD service: offer contents that correspond to the promise and in connection with users demand. This confirms the success of niche video platforms, whose content will be more likely to satisfy passionate and enthusiast consumers.

 

USER EXPERIENCE

  • Interface: best services according to users are those which are ads free, with clean design and the simplest and most intuitive navigation;
  • Editorialization / curation: access to a bottomless catalog no longer seems to be a key factor for a successful VOD service. Ability to editorialize, to find content, to discover talent is an asset for some platforms. SVOD services like MUBI offer only 30 films per month, and their audience is growing;
  • Community building: creation of a strong relationship with a community of fans ensures their fidelity (churn reduction) but also an exceptional publicity around them (unconditional fans recruit other fans);
  • Personalization: this privileged relationship with a community involves knowing deeply its audience: who are my fans? What are micro-segments inside them? What do they watch? On what devices? When? How long time? Etc … It is only by having a clear insight of these elements that we can offer a custom and optimized experience to each of our users.

 

To summarize, in a rapidly changing audiovisual ecosystem, we believe that what will make the difference will be:

1/ Possibility to offer a solid OTT video service, available on different services and devices (Mobiles, TV apps, Game Consoles etc…).

2/ From a remuneration perspective, favoring premium models remains most profitable, assuming contents offer (live or on demand) is qualitative and respond to a concrete demand.

3/ Choosing a direct-to-consumer model, with a special effort in the community management of fans.

4/ Ability to target precisely an eligible and captive audience (today drowned in an ocean of contents and information) to optimize conversion on a paid model.

5/ Capacity for a video creator to know deeply his audience, in all its disparity. Offering users the most personalized experience will keep them active, happy and will retain them within a subscription service.
Whether it is to find a qualified audience for your video content or to personalize, editorialize, activate and retain your subscribers/customers, big data is the only tool to process and deal with all these information and make the most of it.

Yes, data is the new eldorado of the media …

… and speaking about it keep connected because we are preparing something that goes some way in this direction!

 

The OKAST Team

 

PS: We design OKAST to fit all these evolutions and help you grow your revenues from online videos. If you have a VOD project, or a live streaming service in progress, contact us or sign up, you can launch your offer in a few clicks, with all our expertise!