The Future Of Streaming Video Has Opportunities -- And Warning Signs

In the not-too-distant future, almost all video consumption will be streamed, but what the video marketplace looks like for consumers, media companies and marketers, remains up in the air.

A number of speakers and attendees at Future plc’s Next TV Summit last week highlighted the incredible opportunity this shift to internet-delivered video presents, as well as some of the problems that could arise as companies jockey for consumer market share and advertising revenue.

At the heart of streaming’s future is the question of commercials.

Netflix dominates the long-form video space and it has no ads. CBS All Access and Hulu both offer tiers with almost no advertising. What does that bode for the space?

“It feels like consumers have gotten so used to not having commercials, not watching ads, watching what they want when they want, but someone still has to foot the bill,” said Bank of America analyst Jessica Reif. “If you are not paying for the content directly, advertising has to be a part of that.”



One possible solution: unique advertising and sponsorship propositions.

“The big challenge is how do you incorporate advertising and sponsorship into services where people don’t want to watch commercials?” asked Clint Stinchcomb, president and CEO of the streaming video service CuriosityStream. “You will never see a program [on our service] broken up by commercials,” he added. His company has signed sponsors that are exclusive to their verticals, with pre-rolls before shows start, but none during the program itself.

In addition, more advanced targeting could raise CPMs on streaming services, potentially building on existing ad revenue streams.

Of course, in order to have a real ad business, you need to have consumers watching the content. That in itself poses a problem, as just a few streaming video services can raise the monthly cost of entertainment quite high.

“There’s a danger of this marketplace becoming proliferated with a whole bunch of software chiclets that you have to buy 40 of at $10 to $20 a piece to assemble something that looks like what you used to have [with a cable subscription],” said NCTA CEO Michael Powell.

Virtual multichannel video providers (vMVPDs) are trying to mitigate sticker shock from their existing subscribers and potential new customers.

“We, just like others in the vMVPD category, have to toe the line against offering a sustainable business and being up against rate increases and the cost of running a service like this. We have the same sort of pressures as others do in the space,” said Michael Keyserling, COO of the vMVPD Philo.

“We are fans of the bundle. In some cases, the idea that the bundle is dead is overblown. What people are frustrated with is paying $150 for TV, the steadily rising rates,” he added.

One solution is to build a better product. Content may be king, but traditional bundles were simply not the most efficient way to deliver that content.

“What we will witness over the next 10 years is the slow and steady, but unstoppable, migration from channels to menus,” said CuriosityStream founder John Hendricks.” We are going to shift to this more superior way to watch TV.”

“At the end of the day, what is going to win in this space -- people really want a better TV product. The ones that do that will lead the way forward,” Keyserling said.

3 comments about "The Future Of Streaming Video Has Opportunities -- And Warning Signs".
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  1. Douglas Ferguson from College of Charleston, November 6, 2018 at 9:54 a.m.

    Reif misses the point saying “If you are not paying for the content directly, advertising has to be a part of that.” The point is that people ARE willing to pay directly, so advertising (like it or not) is simply no longer welcome. The "has to" part of her response is nonsense.

    I get it; why can big media not see it? Too accustomed to old ways?

  2. John Grono from GAP Research, November 6, 2018 at 3:16 p.m.

    Douglas, some rough round figures.

    US population 325m.   US advertising spend annually $220b.  US households 126m

    That equates to $700 per annum per person to be paid per person.   With an average household size of 2.54 people per household, that equates to just over $1,750 per annum per household, or around $5 per day per household.   Sounds a bit steep to me compared to say a monthly TV subscription cost.   Sure some people are prepared to pay some of the time at the micro level, but at the macro level I can't see the numbers stacking up just yet.

  3. Ron Stitt from Digitec Global Advisors replied, November 9, 2018 at 7:34 a.m.

    See Michael Powell quote above for answer as to why it is not so simple.  Churn is already a huge problem as people juggle free trials, sign up/cancel, etc as they try to maintain access to the premium content they want to watch.  At the end of the day, the total amount consumers will be willing to pay does not equal the quantity of premium content they wish to consume, and FAANG companies will eventually have to turn focus to growing margins (ie raise prices).  There is also a serious socio-political inequality issue looming with the paid access model, especially sports.  A have/have-nots premium content scenario will be hard to sustain.

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