Better together: What traditional media companies and OTT platforms can learn from each other

With a third of the global population on COVID-19 lockdown, the continued popularity of on-demand media content showed no signs of slowing with audiences worldwide. OTT platforms and mobile device usage exploded in the last couple of years, supported by the success of streaming giants such as Netflix and Amazon Prime who moved from distributors to producers by the end of the decade.

Both platforms have increased content spending year on year and this only looks set to continue. Amazon upped their production budgets 13% year on year, reaching $7 billion in 2019 whilst Netflix bumped its annual spend by 35%, closing 2019 with 85% of their total $15 billion budget earmarked for original content.

With this in mind it could be easy to assume that the original OTT platform pioneers are enjoying the firm upper hand in the streaming wars. However, such rapid budget increases are efforts to counter stiff competition from a host of new streaming services and traditional media firms upping their game. In fact, TV ownership in the US peaked at 120 million at the end of 2019  and we saw a number of new tech solutions hit the market, such as Smart and 3D TVs, painting a more complex picture. 

Whilst there’s no doubt traditional media has had to adopt new ways of working to stay competitive in light of changing consumer demands, there’s a great deal that both traditional media and OTT platforms can learn from each other. In addition, some of the most exciting business opportunities for the decade ahead suggest that the two sides could be better together. 

Quality content still dominates

Whether viewed on screen, streamed via laptop or downloaded to tablet, the media consumers of 2020 are discerning beasts. With so much choice and variety - all available on demand - content has to stand out from the crowd. 

OTT platform pioneers Netflix was one of the first platforms to add self-produced content (under Netflix Originals) into their mix of hosted content. In addition to its already considerable production budget, the platform opened a further $2 billion of debt to fund further content spending.

Newer streaming contender Disney+ has also shown its ability to hit the mark with their content. Runaway hit The Mandalorian boasts a highly impressive 95% popularity rate on Rotten Tomatoes and the show entered the cultural zeitgeist almost instantly. 

However, traditional media outlets aren’t ready to give up the fight for content just yet. The BBC were able to secure the highest festive rating of the decade in the UK by reviving fan-favourite Gavin and Stacey for a one-off special, showing there’s still room for legacy series to bring in significant ROI. NBC has also entered the streaming platform fray with the launch of Peacock TV, focused on content that will stimulate the ‘water-cooler’ conversations that came with landmark sitcoms of the past decade.

That said, Game of Thrones created a legion of fans during its 9-year broadcast run, suggesting each series would be a surefire hit. Yet the final installment in 2019 was widely slated by audiences and critics alike, to the point where future spin-offs are under question.

Producing quality content across genres requires large budgets, yet gambling on shows that don’t hit the mark is a costly mistake for any media provider. Looking forward, audience trends will be key to inform decision making, and data from both sides of the media spectrum will be crucial to gain this understanding.

Mega partnerships will continue to blossom

Towards the end of the last decade the lines between traditional media and OTT platforms blurred considerably, with both sides moving into each others territory. 

For example, we’ve seen a significant trend towards audiences streaming their content of choice through their traditional TV set with the advent of Smart TVs and other hardware integrations such as Apple TV and Amazon Fire.

On the flipside, traditional media moves further into the world of on-demand with the launch of own-brand streaming platforms, such as HBO Go and Disney+. Even so, many of these same brands still license many of their most popular shows to the streaming giants. For example, Amazon’s Prime Video features content from HBO, Cinemax, and Showtime. 

This shift has largely been down the competitive media landscape. Media companies must partner and share resources to maintain strong ratings and cater to the diverse tastes and viewing habits of their audiences. And, if the ViacomCBS merger is anything to go by, we’re likely to see more mega partnerships ahead. 

Monetization of content can’t be ignored

It’s easy to get carried away by the impressive streaming figures that are used to signify the popularity of new shows, and therefore their success. 

Whilst there’s no doubt ratings that reach into the tens-of-millions is a key indicator performance, it’s no guarantee that it equates to a higher profit for the media. This can be particularly true for the subscription only platforms, such as Netflix. High streaming figures don’t necessarily equal new subscribers, and without new sign-ups this business model could be under serious jeopardy. 

Traditional media has historically relied on prime advertising to turn a profit, yet the viewer shift to on-demand steaming has hit their ability to guarantee income from this model. This is further compounded by the fragmentation of viewers across the wide range of new streaming options. 

Whilst piracy and illegal streaming will continue to pose a challenge, the attraction of high-resolution, virus-free viewing holds. Metered paywalls offer the promise of enticing new customers. In addition, live events such as sports broadcasts, music concerts and award ceremonies will continue to offer solid ROI for broadcasters 

We’re also expecting to see platforms support their business models through other income streams. For instance, Amazon added 10 million Fire TV users in 2019, supported through the sales of its Fire TV devices. 

Whether taking lessons from the most popular content, joining forces to create combinator platforms that offer the best selection of shows, or creating new revenue streams, traditional media and OTT platforms will need to consider their relationships closely to decide the best routes ahead for 2020.

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