28 Jan NPD Group: A TV Utopia
Content, bundling and UI will define success
This perspective appears in the 2020 edition of the DEG Q Member Magazine
January 27, 2020| With the streaming wars upon us, the dream of a-la-carte TV is becoming a reality. But this newfound freedom, which allows viewers to select only the channels they want, comes with drawbacks. Indeed, utopia could be characterized as an unrealizable ideal. And that truth will in turn become understood in the world of streaming video. Yet in pursuit of the ideal, video distributors will be presented with numerous opportunities to shine above competitors as the changing landscape offers a chance to build a best-in-class TV experience. The timeline to do so is compressed, in that viewers will determine their future habits in the coming years. Content, (re)bundling, and user interface (UI) will define success.
From no choice to option overload
Merely ten years ago, options for watching TV were largely limited to cable or satellite TV providers. Mobile video was, at best, nascent and streaming had just surfaced. Cable TV delivered a high quality of service and value through channel bundling that remains a mainstay for a majority of today’s consumers. But required channel bundling, incremental UI enhancements and rising cable bills drove an appetite for innovation. As such, the advent of streaming was enabled by consumer readiness, a proliferation of in-home broadband internet, mobile device ubiquity and 4G networks. As viewers, we’ve found ourselves with more choices than ever before. There’s EST, SVOD, DTC, AVOD, MVPDs, vMVPDs, and a revival of OTA broadcasts providing an overwhelming amount of options. This is where the need to solve for the challenges of a fragmented and disparate distribution environment offers an opportunity to shine above the competition.
Content is king
From the idea of a TV utopia, with the ability to pay for only the content you want, the prowess of a Machiavellian world surfaced. Recent mergers and acquisitions focused on developing vertically integrated, content heavy media enterprises. Just consider – Disney owns BAMTech’s streaming video infrastructure, Disney, FOX and Pixar studios, ABC and ESPN networks, as well as its own distribution through Disney+ and Hulu. It is these media, and now distribution, conglomerates such as Disney, WarnerMedia, ViacomCBS, and NBC Universal, that are looking to capitalize on the streaming environment pioneered by Netflix. From a viewer perspective there hasn’t been a point-in-time with a greater ability to pay for only desired content. Indeed, around one-quarter (23 percent) of direct-to-consumer video channel users cite that as a reason they subscribed. Further, the uptake of Disney+ suggests a strong market for future services like Peacock, HBO Max and Quibi. Content that is delivered in a consumer-friendly manner is truly king.
The “Great Re-bundling”
Let’s remember how we landed here. Enabled by new distribution options, consumers were drawn to providers such as Netflix that removed the frustrations of existing offerings. It solved for bloated TV channel bundles, high cable bills and lack of innovation in programming delivery. But a-la-carte brings with it a new set of consumer frustrations. Consumers now have multiple video provider bills, an array of disparate UIs to navigate and mounting costs to add streaming services in order to get access to each media company’s content. We foresee a rebundling, yet one that will show advancements learned from the follies of the past. The distributors, be it Amazon channels, Roku, or Disney, have already begun re-bundling, offering a more unified UI and single billing relationship. Will this simply enable different distributors, ones that in turn construct their own walled gardens? Will this result in the loss of the utopian TV dream?
Search, discovery and ease of use will reign supreme
Consumers now have more control than ever. They choose where to focus their viewing attention, placing a large burden on video distributors to solve for the new challenge, one of overwhelming choice. Strong programming, ubiquitous access, intuitive UI, and streamlined billing will be among the facets that drive viewer’s decisions. To that end, it will be of tantamount importance to enable best in class content discovery features and determine how to re-capture a cable TV staple, destination viewing, in order to maximize engagement and minimize churn. One thing is clear, the future of TV will remain fragmented for years to come and with that consumers will continue to have more control than ever.
with NPD’s Connected Intelligence Group.