OTT, short for “over-the-top-television” is an up-and-coming acronym that we are all likely going to become familiar with in the near future, provided someone doesn’t come up with a different marketing name. The concept is simple – it’s TV that comes “over the top” of traditional channels on a cable system via the Internet delivered in digital packets. It can either be live streaming video, on-demand streaming video, or in the form of a pre-recorded on-demand podcast.
There are many aspects of over-the-top TV that have yet to be shaken out. Specifically, here in the early stages there are some still-murky areas when it comes to details of how advertising is going to work.
Things that we know about how OTT works successfully so far:
People are willing to pay for bundled on-demand professionally created OTT content in the form of Netflix on-demand streaming of movies, TV shows, and other content. The bundled Netflix price for all-you-can-eat on-demand streaming OTT offers the consumer a real value. In most cases, a great deal of marketing money and effort has been spent promoting the majority of individual movies and other content that are available on Netflix, so the consumer has a fairly high degree of familiarity with much of the on-demand streaming content they offer. These are essentially repurposed movies that are already on the shelf.
People are willing to watch on-demand streaming OTT of professionally-created content with embedded ads as demonstrated by the ongoing success of Hulu.Com. The consumer is likely already familiar with a portion of the content, but Hulu also allows the consumer to discover and explore previously unknown TV show content in an on-demand stream with embedded ads. These are essentially repurposed TV shows, some movies, and other content.
Live streaming OTT of live content is still catching on. The most successful live OTT content as typified by what Leo Laporte and company are generating still offers an on-demand podcast version that can be downloaded later. Currently, on-demand, after-the-fact podcast versions of live OTT generated content end up with many more downloads than people watching via live streams. Both live streaming OTT and the on-demand podcast versions can contain ads. For the ads to be effective in this format, they need to be relevant to the audience’s needs and desires. The old “shotgun” advertising approach does not work in this format. This specific type of content is closely associated with word-of-mouth promotion.
There are a few questions that remain to be answered. Will consumers pay for on-demand streaming of TV drama-type content they are unfamiliar with — in other words, will consumers pay to watch an on-demand stream of a new TV show drama, documentary or reality show? Using myself as a gage, I wouldn’t pay for individual on-demand episodes of a TV show or movie I wasn’t fairly familiar with. Promotion and word-of-mouth still has to take place.
If consumers will pay-per-view for an unfamiliar on-demand TV show, can the content still contain ads? I think the answer to this depends on the content and its perceived value – i.e., how well it is promoted, and the resulting perceived value that is generated in the potential consumer.
Once “Lost” was a hit TV show, would the fanatic fans have paid for on-demand streams of new episodes? Probably they would have, if they could have gotten them, say a week or so in advance of the actual broadcasts. “Lost” fans would have also put up with ads in the advance on-demand stream. They might have grumbled about it, but if that were the only way it was available in advance, many of them would have opened-up their wallets and paid the price monetarily and with their attention to the embedded ads in order to satisfy their “Lost” habit. Clearly, the producers of “Lost” – ahem – “lost out” on a time-sensitive revenue stream opportunity.
Bottom line, I believe it all revolves around the content and the real and perceived values that the content delivers.
I liked last season’s remake of the old “V” television series. If I could be assured the production values remained just as high, I might pay to subscribe in some manner. If the “V” series is picked up again by ABC next season, I would also pay to subscribe if I could get episodes via on-demand streaming before they were broadcast.
In the meantime, we are still dealing with the death-throws of the old broadcast model with its old appointment based viewing schedule combined with the old shotgun advertising approach. ABC broadcast TV affiliates would have had a cow if “Lost” episodes had been made available as a paid on-demand OTT stream before the episodes were actually broadcast via the network.
The final destination of OTT and when it ends up at that destination depends on what is right for the time. Both delivery infrastructure capabilities and consumer demand will make that determination.