Digital media streaming is a revolution enabled by the rapid advancement of communications technology. High-speed Internet at home, on the go and even in the skies is enabling consumers to enjoy their favourite media content on demand, wherever they roam and on any screen they choose.
But what does this mean for businesses? Traditional media providers in the television, music and gaming industries are facing unprecedented challenges from fresh-faced tech innovators and, while innovative new solutions are resonating with them, decadesold business models are also altering rapidly.
In TV land streaming services have offered viewers a tantalising glimpse at democratised, à la carte original content available to watch on their schedule. Increasingly, in 2015, they’re getting it directly from content creators like HBO, Showtime, WWE, Amazon and Netflix.
“Thanks to streaming solutions, we’re witnessing a great unbundling of programming and the idea of traditional television is fading,” says Brian Solis, the author and Principal Analyst at The Altimeter Group.
“The increasing number of devices carried and available internet bandwidth has led to a great disruption in consumer expectations.”
BskyB in the UK is one of many companies adapting the business model to meet the demands of the streaming era.Consider this, new customers had traditionally been locked into pricey 12-month accords, requiring a home dish and set-top box installation. Such has Sky now offers day-by-day streaming deals through Now TV, on almost any device.
For Sky, a consistent innovator, the rapid development of streaming technology has presented an opportunity to reach a new customer base.
Now TV’s director of strategy James Alexander tells Observe: “Now the technology is in place, the whole OTT [over the top streaming] sector is exploding in the UK.
“There are so many things happening to eliminate barriers for people who have long wanted access to pay TV content, but have taken themselves out of consideration.
“Now TV is a way to go after that part of the market, to take advantage of Sky’s assets and to repackage them in a way, which plays to the consumer demand.It taps into a different type of customer and this is why we experience such little cannibalisation and why the two brands are still experiencing growth.
“The economics of over the top delivery means it makes sense to serve these customers day by day.”
In the US, traditional content providers are also changing tack. Crown jewel networks HBO and Showtime have in mid-2015 gone directly to customers with standalone streaming services that do not require a cable TV subscription; a huge watershed moment and a hallmark of the unbundling Solis speaks of.
“Consumers are now in control of their own ecosystems. Rather than 100s of channels they never watch, the mantra of connected customers is now ‘all you need is… less.’”
These affordable monthly, no-commitment platforms seek to address three issues for the show-makers like HBO and Showtime: The rampant piracy of their content (the June finale of Game of Thrones was illegally downloaded 2.2 million times in 10 hours, while some used a new live streaming app called Periscope to beam a feed of the show to Twitter in real-time!) the dramatic rise of Netflix as an original content competitor, and the rise of the binge-viewing, cord cutter.
Vince McMahon’s World Wrestling Entertainment (WWE) pioneered and rode the pay-per-view distribution model for 30 years. Now it is selling direct to customers via the WWE Network – the first ever 24/7 over-thetop TV network.
Instead of consumers paying $55 a month for monthly PPV events via a cable provider, Network subscribers get those same events, stacks of original programming and the vast library of archive content available for US$10/£10 a month.
WWE Chief Revenue & Marketing Officer Michelle Wilson explained the decision to tear up the tried and trusted business model.
She told us: “We spent three and a half years looking at all options available and saw the consumer adoption of direct to consumer subscriptions grow dramatically.
“Combining that with the fact that WWE fans consume five times the amount of digital content than the average consumer and are two times more likely to order Netflix or Hulu, we realised going direct to consumer was a very viable option.
“It provides us with a tremendous global opportunity to have a one-on-one relationship with our fans and access to critical data that we didn’t have in the past.”
However, before conquering TV, Apple has work to do in other streaming sectors. It’s already playing catch-up in the digital music arena it had previously dominated.
For years Apple watched streaming services like Spotify tear chunks out of its iTunes Music Store revenue. It’s easy to see why. A monthly subscription offers access to 30 million tracks for the same price as a single album download.
However, on June 30 2015 Apple fought back. Apple Music matches Spotify’s proposition and price point, while offering the advantage of built-in access to hundreds of millions of customers already carrying iPhones and iPads.
It’s a big shift for Apple’s business model, but a necessary and overdue one. Warner Music Group announced in May it had made more money from streaming than digital downloads for the first time.
The tide has turned.
“The rate of this growth has made it abundantly clear to us than in years to come, streaming will be the way, that most people enjoy music”, Warner CEO Stephen Cooper said during the earnings call.
During this transitional period, the economics of streaming are the subject of great debate, but little clarity. Royalties for per stream over sales are inherently lower, but companies like Spotify, by far the most dominant player, are persisting with ad-funded options that give music away for free, as well as the £10 monthly Premium tier.
Apple and another streaming newcomer Tidal (fronted by hip-hop mogul Jay-Z) offer paid-only tiers. As a result, influential artists like Taylor Swift are siding with Apple and Tidal and withholding music from Spotify, who suddenly seem old guard.
“Tidal believes in valuing music,” said Pål Bråtelund, the company’s Strategic Partnership Manager. “That is a model that wants to deliver value to fans but compensate artists at the same time. To us it’s important that the money comes back into music creation.
“This market is experiencing big movement and we’ll continue to see that for the next five to 10 years as the world transitions to streaming. “We are a market with 40-50 million paying customers right now, but I think it will grow to a billion. In between there’ll be a healthy business.”
One industry that does not require re-growth is gaming. However, streaming is still having a huge impact; not so much in how games are played, but how they’re watched.
Twitch.tv, a four-year-old start-up was recently sold to Amazon for a staggering US$1 billion. Here’s why: Half of its userbase spends more than 20 hours a week watching other people play video games. It’s a staggering level of engagement and has catapulted the company to the fourth most popular website (during peak traffic times) in the US.
Its 100 million unique viewers a month are turning into 1.5 million individual broadcasters and spending a long time watching. Some of the 11,000 partner channels get so many followers they’re able to make a living from the shared subscription proceeds.
Matthew DiPietro the company’s SVP of marketing tells Observe: “It was the ubiquity of broadband that made Twitch and its live high definition video content available on a global scale possible and revived the appeal of watching games.
“To understand the phenomenon in simple terms, people enjoy watching others who are the best at what they do when it involves a shared interest.”
With that said, are streaming services like Twitch.tv, about to surpass the act of actually playing? Are gamers prepared to drop their controllers, sit back and watch the elite?
“Viewers eclipsing players is a tough thing to gauge,” DiPietro muses, “but it’s safe to say both playing and watching games are continually on the rise.”
Speaking of on the rise, there are few sectors immune from the streaming revolution, including air travel. Both JetBlue and Virgin America are utilising new satellite broadband technology to bring an end to those in-flight ‘this connection does not support streaming services’ blues.
JetBlue has partnered with Amazon to offer Prime Instant Video access to the entire library via its free Fly-Fi broadband service on flights in the US using their own devices or the seatback console. That’s a big deal.
The technology is there and the appetite for on-demand content in any setting on any device is higher – quite literally – than ever.
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