Was 2015 The Tipping Point For Digital Video Distribution?

Comprimido

http://www.comprimido.pt

Was 2015 The Tipping Point For Digital Video Distribution?

Nelson Granados ,

Contributor

I cover digital trends in travel, media and entertainment.

Follow on Forbes

Opinions expressed by Forbes Contributors are their own.

I would like to declare 2015 as the tipping point for digital distribution of film and TV. Internet-based video services proliferated in 2015, and the majority of consumers have adopted them. The evidence is overwhelming from both a supply and demand perspective. We should expect heavy competition in 2016 as distributors and content creators engage in a fierce battle against frontrunners like iTunes and Netflix NFLX +0.00%. It will be a bloodbath, where eventually only a few will emerge as clear winners.

Supply-Side Facts

Take the distribution of movies by major studios, for example. Three years ago, a consumer had to wait about six months after theater release to download a movie. Fast forward to 2014, when digital releases converged with DVD releases: Summer 2014 movies were released for digital download at the same time as DVDs, about 3½ months after theater release (see dotted lines converging in the graph below). The latest update to this study shows that, from a sample of 44 movies released in theaters in 2015, 70% were released for digital download three weeks (on average) earlier than in DVD. So in a span of just three years, digital distribution has taken over from DVDs to become the secondary channel for movie distribution.
Source: Granados (2015). Analysis of release dates for a sample of 160 movies released by major studios in 2012-2015.

Source: Granados (2015). Analysis of release dates for a sample of 160 movies released by major studios in 2012-2015.

Then, there is the proliferation of Internet-based and mobile video services. It turns out pretty much all mainstream distributors and content owners now offer an online video service. Major U.S. pay-TV providers like Comcast CMCSA +0.00%, AT&T T +0.00%, and DirecTV offer TV Everywhere services over the Internet to complement their cable or satellite subscriptions. But the highlight in 2015 was that most major distributors and content owners introduced over-the-top (OTT) video services, which are not tied to a pay-TV subscription. For example, satellite provider Dish introduced its skinny bundle Sling TV, and HBO introduced its direct-to-consumer OTT service, HBO Now. Since then, it’s been announcement after announcement, to get to the long list in the table below.

With supply developments in 2015 alone, it’s hard to argue against this year being the tipping point for digital distribution of film and TV. But to top it off, there are compelling facts on the demand side.
List of Internet-based video services from major U.S. distributors and content owners. Pay TV Everywhere services are tied to cable or satellite subscriptions, but Over-the-Top (OTT) services are not. This list is not exhaustive.

List of Internet-based video services from major U.S. distributors and content owners. Pay TV Everywhere services are tied to cable or satellite subscriptions, but Over-the-Top (OTT) services are not. This list is not exhaustive.
Recommended by Forbes

Demand-Side Facts

Multiple studies are reporting that the majority of households and consumers now watch online video. A study by Limelight Networks released today reports that 83% of consumers in the U.S., U.K., Canada, and Australia watch online video, and 2015 was the first year when the majority of consumers (54%) watched two or more hours of online video per week.

Today, 94% of the U.S. population still has a pay-TV subscription as they venture into online video subscriptions. But the Limelight study found that if cable and satellite prices continue to increase, close to one-third of consumers will suspend pay-TV or “cut the cord”, and another 16% will do so too if their favorite TV channels become available online.

What This Means for 2016 And Beyond

Digital transformations transpire in an industry when the main competitors move to digital products or services, or when a large proportion of customers adopt them. Jason Thibeault, Senior Director of Marketing Strategy at Limelight Networks, says “the fact that so far only 6% of households are cord-cutters doesn’t take away from the fact that online video has penetrated the market significantly. Millennials are leading the way, with 31% subscribing to two or more streaming services.” In fact, 35% of millennials have either cut the cord or never had cable (“cord-nevers”) in the first place. So from a perspective of market penetration, it is indisputable that digital distribution of film and TV has reached a tipping point, whether it replaces or complements other forms of distribution.

The reason it matters to identify the tipping point is that when it occurs and everybody realizes it, severe competition ensues. Established players who entered the race early enough go full force by enhancing their current offerings, hurting any players with an emerging but still weak position. Companies like Disney, Comcast NBC, and Fox , who entered the streaming space early with a stake in Hulu, are likely to play this role. Early disruptors who are now well established in the digital space will fight hard to maintain their competitive position, again displacing weaker players. Companies like Amazon, Netflix, Google GOOGL +0.78% (YouTube), and Apple (iTunes) will play this role.

Those who waited for the tipping point to occur or who entered digital distribution timidly are likely to be the first victims, unless they react strategically and swiftly, albeit with little room for error and with significant investments to catch up. The problem for them is that consumers value one-stop shops that facilitate search for content, so there will only be room for a few major players. Joint-owned video-on-demand services like Hulu will expand, and multi-media platforms like DisneyLife will emerge to offer not just video, but other content like music or books. Consumers will win, but many online video distributors will lose.

As a faculty member of the Graziadio School of Business at Pepperdine University, Nelson researches digital trends in travel, media, and entertainment. Follow him on Twitter, Tumblr, Forbes.

Comprimido

http://www.comprimido.pt

Powered by WP Bannerize

None found.

Deixe uma resposta

O seu endereço de email não será publicado. Campos obrigatórios marcados com *

You might also likeclose