M+E Daily

M&E Journal: The Content Provider’s Guide to Success in the New Digital-First Era

By Mary Kay Evans, Chief Marketing Officer, Verizon Digital Media Services

The TV and movie viewing landscape is rapidly evolving, and content providers are working around the clock to meet viewers’ appetite for everything digital. A majority of millennials are consuming premium media on the go, on all their connected devices. Recent studies by ComScore and Experian show that nearly one in four millennials have cut their cable cords or never had cable at all. Instead, around 44 percent of millennials are watching movies and TV shows online.

They’re downloading, using video on demand (VOD) and subscribing to streaming services like Hulu Plus or Netflix. Today, 10 million American homes with Internet access have chosen to completely ditch cable. Surprisingly, inflated cable package costs were not the main reason viewers gave for cutting the cord. Viewers wanted more convenience. They wanted to watch anytime, anywhere, and they wanted fewer, more relevant commercials. There’s no excuse for today’s content providers to do business as usual. The world is changing, and that calls for some immediate action! For a start, providers need to adjust their workflows to accommodate over-the-top (OTT) content, and more of it. HBO is a good example to follow. For years, HBO fans with no cable access were forced to wait for the DVD or Blu-ray release of their favorite shows.

With the recent launch of HBO Now, cordless viewers can access online all 2,700 hours of original programming and back catalog content. They can even stream their favorite show at the same time it’s being aired. More and more streaming services are partnering with providers to stream original content and even live broadcasts. Soon, viewers won’t even need cable at all to watch live sports.

Here, we explain how OTT providers can successfully compete and even thrive in the rapidly approaching digital-first era.

Tip 1: Deliver more digital content, everywhere, every hour, every day
Traditionally, content providers have relied on cable packages and physical DVD and Blu-ray sales as sources of high-margin revenue. But as viewer demand grows for digital streaming and downloads, content providers need to integrate OTT content delivery into their existing workflows.

Then they must adapt their business models to properly monetize their content. A growing number of viewers want to play their favorite movies and shows everywhere, not on just one TV set. So, how do OTT providers ensure that viewers get what they want while minimizing risks to en-trenched revenue streams?

Providers used to play a guessing game to figure out what viewers wanted and how to grow their profits. Did viewers want to download, stream at whim or subscribe? Or did they like cable more? Were they still buying Blu-rays and DVDs? Past studies by DEG: The Digital Entertainment Group showed that viewers new to OTT content actually preferred VOD options.

But this alarmed providers who, after doing the math, realized that more VOD meant lower revenue for them.

Providers purposefully priced VOD afford-ably for viewers, but they didn’t yet know how to use digital advertising as a revenue stream. Now, providers understand that VOD represents a great opportunity for advertising dollars, especially because viewers can’t fast-forward through ads like they do with their DVRs. Recent studies also indicate a shift in viewer behavior.

Digital downloads currently account for more than 44 percent of 2014’s total digital revenue.

That’s about double what it was in 2010! What this boils down to is simple: Not only do viewers crave more digital content in all forms, they’re growing more comfortable without cable and maybe one day physical media. It’s just a matter of time. OTT providers have an exciting challenge on their hands to preserve their entire business: encourage more viewers to embrace more digital content.

Only recently, viewers gave up their VHS tapes; now they’re starting to give up their physical Blu-rays and DVDs. Providers can jump-start this reality by making more digital content available and on different platforms and services.

Tip 2: Deliver exclusive content
One way that providers can draw more OTT viewers is by providing exclusive content or content windows. For example, Hulu Plus, a joint venture between Fox, NBC and Disney, is popular for making hit TV shows available within 24 hours of airing. And rather than provide the same content that another service like Netflix offers, it provides content from its owners, as well as other networks. Hulu Plus knows that viewers want top-tier content offered on a variety of platforms, so this mode of thinking works with what viewers want.

Here’s a scenario: Hulu Plus is airing the new episode of Shark Tank today. But your viewer also desperately wants to watch today’s big game. He could play the game on his iPad via ESPN’s Sling TV streaming service and watch Shark Tank at the same time without leaving his downstairs couch. He chooses to watch both just because he can. Upstairs, his wife watches a Parks and Recreation marathon on demand via the master bedroom TV’s Xbox One. And just a few doors away from her, the kids are watching a new cartoon show on their tablet.

As an OTT service operator, there are limitless content creation and partnership opportunities available. Operators need to choose what, when and where they make content available, and leave it to the viewers to decide the rest. Then they can adjust their offerings and pricing based on what the viewers want.

Tip 3: Bring viewers the best digital picture quality available
Another challenge for providers is keeping up with advanced picture-quality standards, more specifically 4K. Everyone is racing to bring 4K content closer to viewers: TV manufacturers are pushing new 4K models out every day; the Blu-ray Disc Association is publishing its 4K format extension later this year, and Samsung is going to provide an ultra high-definition (UHD) video pack – a physical drive for downloadable content to reside in.

OTT providers and streaming services like Hulu Plus and Netflix will need to make sure their digital picture quality looks as good as 4K. Viewers expect picture that’s larger, brighter, more colorful and with higher resolution. They want that flawless picture quality both on their TV and on their connected devices. Providers will need a solution/partner that displays OTT content beautifully, on all devices.

Tip 4: Defend digital content against piracy to protect revenue streams
Monitoring and enforcing digital piracy, also known as “digital infringement of copyright”, is a top concern for OTT providers who are expanding their online offerings. Digital piracy is a unique market as many digital sup-pliers steal content without any profit intentions.

This makes detection and enforcement very difficult and sometimes more costly than the efforts are worth. Providers need to be hyper-vigilant to protect against any potential revenue loss. A stolen live broadcast of a highly anticipated boxing match could mean a huge loss of revenue and potential viewers. Providers must implement standards-based digital rights management (DRM) schemes that protect their content to reduce digital piracy occurrences.

And because copy protection schemes may seem onerous to some viewers, consumer education and awareness from providers are key to ensure viewer satisfaction. Failure to do so will only lead to viewer flight and even more lost earnings.

Tip 5: Choose one solution to easily and instantly deliver digital content to viewers
Finding a faster, better way to deliver broad-cast-quality digital content is the biggest problem for all OTT providers. We’re talking about high-definition content that plays instantly and optimally across all connected devices.

Some providers are choosing to build the infrastructure in-house, but this is often a time-consuming and costly endeavor. The other option is to piece together multiple products from multiple vendors, which is not only expensive, but complicated and inefficient. That’s why OTT providers need a simplified solution/partner that can encode video into multiple formats to simultaneously reach different devices, platforms and services.

Imagine one video encoded for an Apple TV, Roku, Xbox One – all at once! This same solution needs to accelerate the content delivery process, streamline the digital advertising process and provide the right analytics and insights to understand and predict viewer behavior and content performance.

Verizon Digital Media Services has developed its next-generation platform to simplify the entire digital content distribution process from preparation, delivery and display.

Verizon’s Video Lifecycle Solution supports all leading consumer devices, reducing complexity for content distribution, DRM, analytics, playback, advertising and a host of other workflow components that are points of failure for other providers, and even some competitors. Linear ads from broadcast content can be replaced with digitally targeted ads inserted server-side. Server-side ad insertion is more effective in increasing viewer awareness and response, and it also provides a seamless, TV-like experience.

“The future of digital content preparation, delivery, monetization and display lives within our next-generation platform,” said Ted Middleton, chief product officer at Verizon Digital Media Services. Overall, it’s an exciting time for both viewers and OTT providers as they all move full speed into the digital future. With viewers demanding everything digital, providers should expect to deal with even more new technologies, more evolving viewer habits and more undiscovered opportunities.

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Mary Kay Evans is Chief Marketing Officer for Verizon Digital Media Services. She has spent the last two decades representing companies focused on technology, specializing in the Internet, media and entertainment, and business. Evans owned Radi8 Creative in Salt Lake City, a new breed of agency offering public relations, marketing and advertising services to companies that were changing the face of media, and worked at Ancestry.com.