Commentary

Netflix Rules, Aim For The Niches, Execs Say In A New Report

If a new study commissioned by Ooyala, Vindicia and London research firm MTM is right, OTT revenues will double to $8 billion by 2018, and could go as high as $12 billion.  

Amid all that growth the report says that Netflix, instead of owning 80% of the market will own about half instead. But that will still be bigger than everybody else, with 15 to 20 smaller players with more niche offerings.

 The report, “Prospects for Premium OTT in the USA” is based on interviews held in Los Angeles and New York with a total of 45 “key executives” from studios, broadcast networks, MVPDs, producers, investors, OTT providers and rights holders. The results, it looks to me, pretty much says the OTT business in 2018 will look a lot like it does now, only bigger. That's possibly accurate but not very daring. Maybe that’s as it should be.

The respondents are confident the infrastructure is there, in the cloud and elsewhere, to handle the demand. The big issues are filling the demand, fighting for rights and keeping customers satisfied. 

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New, or expanded areas for OTT growth include sports, kids fare,, foreign language content, specialty film channels (like anime), and platforms for the politically-bent or comedians (though those two should merge, pronto).

 Over 40% of the U.S. market subscribed to some OTT service by the end of last year, and the execs give a survey-like tip of the hat to Netflix for that figure being what it is. 

It "has played an important role in stimulating interest and investment into the premium OTT market,” this report says. And it goes on to say that because of Netflix other content creators have had to  “defend their existing businesses”  and meet the demand. Netflix also gets respect from this bunch for selling the public on the idea that it really has everything anybody would want to see.

The problem, if there is one, is that these panels believe there are only so many OTT services Americans will subscribe to. And since Netflix has grown to be the 800 pound gorilla, with others like Hulu and Amazon taking good size chunks of the market too, all that seems to be left is that market for fans of niches. 

There are less of them, of course, and less content, so both are challenges. But it’s not all that bad. Said one participant (they were all kept anonymous):  “You don’t need millions of subscribers to make a profit – services like Crunchyroll, Drama Fever and Acorn.tv are all doing well – you just need to find your niche and proposition and to execute really

well.”

Maybe it’s just me, but I wish they’d have a conference where the question is: What the heck were you waiting for? This report seems to say, in a nutshell, here’s a great market, able to technically handle more customers, we pretty much missed it and if we’re lucky, some of us will pick up some crumbs Netflix leaves behind. Maybe I read too much about this industry but it’s been called disruptive for several years now. How come so many of the big guys didn’t catch on?

(And the answer, I’d say, is this: However big Netflix gets, it and every OTT content provider eventually has to pay up to a handful of studios owned by the big owners of media. So while NBC, ABC, CBS and Fox all missed the boat, they still do own the ocean.)

But this report says, more or less, that incumbent media have lost young audiences--millennnials don’t want bundles, it says--and now established media  are losing everybody else. As one participant noted, “We’re in the middle of a very fundamental shift. For years, we’ve talked about the emergence of new platforms and disruption to the pay-TV market, but last year, it became real. Viewing is really shifting and pay-TV is having reinvent itself…” No kidding.

pj@mediapost.com

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