In recent years, a number of factors have shifted the video services landscape including the introduction and explosive growth of OTT services, the accelerated growth and adoption of connected entertainment devices, and new methods of distributing video content. Parks Associates research shows that:
- The overall growth of OTT service subscriptions has exploded over the last five years with the rate of services increasing 1.5 times during that time period.
- Thirty-nine percent of U.S. broadband households own a streaming media player, nearly double the adoption five years ago.
In the U.S. market, mergers among pay TV players has resulted in large, vertically integrated companies competing against small, regional service providers. In addition, dozens of new OTT video services have emerged including several content producers and cable networks offering direct-to-consumer services.
In response, pay TV providers and OTT services alike are forming unique and sustainable partnerships. These partnerships vary greatly, by type and business model, but each partnership is bonded by the same ultimate goal: to broaden the appeal and reach of content to capture the viewership of the ever-elusive video consumer.
Companies throughout the video services ecosystem consider and weigh a variety of factors to evaluate partners and define a successful partnership.
- Mutually beneficial relationships: The concept of a mutually beneficial relationship is at the core of any partnership including those in video services. If all parties involved do not see added-value benefits being delivered as a result of the partnership, then the relationship should not exist or evolve beyond a client-customer association.
- Strategic alignment: Partnerships of any kind, but especially those in video services, require strategic alignment including alignment of goals, core values, consumer bases, and content.
- Operational cost efficiencies: Potential partners weigh the hard costs that an individual company on its own will have to invest to reach its strategic objective versus the costs if they enter into a partnership to achieve those objectives.
As the video services landscape has evolved, a variety of consumer trends have emerged that are fueling partnerships in video services.
- Increased demand for OTT video services: Nearly three-quarters of U.S. broadband households subscribe to an OTT video service, up from fifty-two percent in 2014.
- Lack of awareness of individual service options: Because of the growing number of options available to video consumers and the lack of differentiation among them, awareness is lagging.
Interest in self-aggregation of video options: Forty-six percent of U.S. broadband households subscribe to two or more OTT services, up from 33% two years ago and 20% just five years ago.
In addition, there are a variety of industry trends shaping video services partnerships.
- High competition among video services: As a result of high competition, OTT and vMVPD services are aggressively seeking options to better compete with rivals including forming partnerships.
- Many small services have limited scale and revenue: Because of the lack of internal infrastructure and resources to sustain and grow on their own, smaller services are looking to outside partners such as aggregation platforms, content distribution partners, and cross-service bundling partners to achieve their longer-term strategic objectives.
- OTT services struggle with differentiation: Partnerships represent a cost-effective way for small or medium-sized players to leverage a larger brand to promote themselves.
The days of video services companies navigating their way to success alone are certainly over. Traditional pay TV providers, online pay TV providers and OTT services have to embrace unique partnerships of varying types inside and outside the video services ecosystem to survive and move forward. As part of their partnership strategy, they have to consider incorporating aggregation and bundling strategies into their forward-looking vision in order to sustain and grow in the future.
Steve is a senior analyst at Parks Associates, specializing in entertainment content and services. He brings more than 15 years experience in a variety of market research and marketing strategy roles including several in the emerging technology and media space.
Steve earned both his BS in Telecommunication with a concentration in Business and his MA in Mass Communications from the University of Florida.
Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceVideo staff. They do not represent the opinions of FierceVideo.