Thursday, June 13, 2024

    Segmentation & Net Neutrality: Who’s paying the price for OTT?

    OTT services have grown exponentially over the past few years. In 2018, spend on OTT media tripled in two years and it continues to rise, with 46% of adults now using OTT services in the UK. On the surface, pay OTT is a booming industry to be in. New services from BritBox, Disney, NBCUniversal, Time Warner and possibly even Apple are expected in 2019 or early 2020, and as of late 2018, Ofcom reported that the number of UK subscriptions to television streaming services like Netflix, has overtaken those to traditional pay television for the first time. There’s no doubt about it: The way we choose to view content is changing dramatically.

    John Griffiths, VP Marketing, Spicy Mango, explores the impact of service segmentation, net neutrality and how consumers can be kept engaged with multiple platforms and justify the costs.

    Easy as OTT?

    The barrier to creating new OTT platforms has never been lower; you don’t need to be producing content, own the software or own a network. Being technically savvy is no longer a requirement either, with ‘off the shelf’ models providing most of the features and functionalities needed to build a solid platform on an economical pay-as-you-go model.

    But with new services popping up all the time from household names, plus the more niche platforms, the list of services that customers are subscribing to is only rising. With basic services like Sky and Virgin coming in at about £80 per month, any extra subscriptions to those such as Netflix, or Spotify could see some finding themselves paying above £100 to get their monthly entertainment fix. With this in mind, there is a real risk that consumers are going to look at their bank statement and reel in horror at the amount of money they are spending on subscription services and TV channels.

    It’s not just the financial implications that could cause consumers to shy away from extra subscriptions, it’s also the psychological cost. An over-saturation of platforms is likely to result in customer fatigue, and content that was once exclusive to one platform could end up being licensed across a few in order to tempt customers to use another service, and vice versa with widely available content suddenly only available on an exclusive basis. While brands do have a great opportunity to own their own platform and capture subscribers, there is a risk that with too many content cooks in the kitchen consumers will burn out and unsubscribe from extra services altogether.

    So how can providers make their service the one that keeps the viewers interest? Firstly it’s all about keeping things simple. Nothing is more frustrating than a convoluted user experience. Viewers want to be able to find and consume content in as few clicks as possible while still have something visually pleasing to look at. Secondly, but perhaps most importantly, any content needs to play smoothly. If a platform consistently crashes, no matter how good the content is or how big the name, the user will lose patience. In order to keep subscribers easy and reliable content access is vital.

    Fighting Net Neutrality

    More OTT services means an inevitable increase in discussions around net neutrality. With the FCC in the US sadly repealing the net neutrality rules, internet providers can now restrict access to their network based on who pays what. What should be a symbiotic relationship between content owners or producers and telecoms providers has become an antagonistic one.

    The main issue is that streaming services and broadcasters cannot distribute their content without telco providers. Equally, without offering additional services, consumers would not be looking at any broadband services other than at the lowest possible price. The reality is that they need each other, but a balance needs to be struck otherwise one will die and the other will swiftly follow. But who pays? In reality, it always comes down to the end subscriber. If content platforms like Netflix don’t want to pay broadband providers to prioritise their traffic, the end consumer receives a poor service.

    If broadband providers are going to start restricting access and charging a fee for using their connection, the impacts will be greater on the smaller vendors and end subscribers. On one hand, if the company is below a certain size, the packets might be ignored anyway. However, if the packets are identified as video, they will be throttled back until the content provider pays a fee resulting in high subscription costs and lost subscribers. The only way around this, therefore, is paying, which increases costs for subscribers. And the chances of being successful are always lower if there are high costs to work around.

    That said, to date the UK and indeed the EU as a whole is not in favour of reducing net neutrality, allowing all to compete fairly, so it looks hopeful that subscribers at least won’t be handcuffed by this extra charge and service providers will continue to have a level playing field.

    Who really pays the price?

    Service segmentation is always going to put costs up for the end user, whether it’s through an increase in services or rise in subscription costs. There’s also a cost to providers, the marketing spend needed to compete in a crowded market will be significant alone. The content war could also prove costly, with viewers expecting both quantity and quality.

    There is no avoiding it: Pay OTT services are going nowhere. But what is clear, is that content providers need to continue to put the customer first and realise that there will come a point where they aren’t happy paying the price for OTT.

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