The Keys to Winning the Future of Entertainment
Despite the shifting market landscape over the next five years, one thing remains clear: customer experience is essential
It's not enough to provide a good product today—consumers demand a great experience. And capitalizing on experience is vitally important for entertainment success in the years to come, especially as choice increases (Disney and Warner Media will both launch new streaming services in 2019) and brand loyalty decreases (according to an Accenture report, 53 percent of US consumers switched entertainment service providers in 2017).
"Consumers want a good, quality product that's reliable. The provider matters little as long as needs are met."Dan Rayburn
Streaming Media Expert and Analyst
In many areas, over-the-top (OTT) service providers seem to be the customer experience frontrunners for video entertainment. Over 60 percent of consumers report watching OTT content as much as, if not more than, traditional linear TV (where programs follow a specific schedule). Streaming video on demand (SVOD) services like Netflix and Hulu offer easily-searchable interfaces and growing libraries of exclusive, high-quality content. Virtual multichannel video programming distributors (vMVPD) like Sling, PS Vue, DirectTV Now, and YouTube TV offer cable-like TV experiences—complete with channels and live programming—in a consumer-friendly format at a lower cost than cable services.
Still, in an environment where change is the only constant, no one entertainment platform is an obvious winner. Cable still owns a majority of the market share and performs at a high level across a variety of consumer drivers, including video quality and ease of use. With more shifts in technology and consumer behavior on the horizon, all entertainment providers must find their competitive advantage in customer experience by embracing delivery quality and innovative content.
Get Clear on Quality
As the way we consume entertainment ultimately moves towards OTT, delivery quality will be a critical marker of success. For the most part, on-demand quality tends to satisfy viewers thanks to increasing bandwidth and cloud storage capabilities, but so far, most attempts by vMVPDs to tackle live television on the internet have faltered.
"People talk about streaming as if it's this quality service that scales, and in most cases it doesn't," says Rayburn. "People know when they turn on the TV it works, and they know it will be in HD because it's an agreed upon definition on broadcast. HD is not a standard on internet. You get different quality."
Both Hulu and YouTube launched live services in 2017 and neither met Wall Street subscribership expectations in large part because the quality couldn't meet that of traditional TV, says Rayburn. What's more, annual churn rates remain high for U.S. OTT subscriptions (19%).
Ever-elusive 5G technology could help make vMVPDs more successful in providing a quality experience at scale, but reports waver on when the technology will be ubiquitous or if it will be cost-efficient for consumers. Until then, viewers will stick with the live experience they know works or make trade-offs in quality for a reduce price.
Control the Content, Control the Market
One area that's oft-forgotten in the race to win the future of TV is the ownership of content (either original or syndicated). It's a game of economics that includes licensing fees and production costs, but, ultimately, content ownership provides a layer of experience that consumers want: exclusivity.
"The content owners are the ones who control the market. The only way you make money in this business is if you have a niche service where people are willing to pay a premium because it's content others don't have."Dan Rayburn
Legacy service providers have jumped on the exclusive content trend in recent years—as evidenced by the string of major acquisitions, including AT&T and Time Warner (parent company of CNN, HBO, Warner Brothers Studio and other television networks).
"It makes a lot of sense," says Rayburn of the acquisitions. "[Legacy providers] are realizing that they have to provide an end-to-end solution to customers. Consumers want to go to a place where they can get a lot of aggregated content, and if you control the delivery of the content and you can control the network, you have a huge advantage."
This is a big bet. By streamlining the content catalog and putting more effort behind original content, OTTs (and SVODs in particular) hope to shift consumer behavior, assuming they'll embrace a "less is more" mantra in years to come.
"In the coming years I think Amazon, Netflix, and Hulu will create more original content," Rayburn posits (and it's already happening: in 2015 Netflix premiered 30 original programs, in 2018, 161). "Their focus will be to cut costs on licensing and to put that money into creating original content that they actually control with the hope consumers still stay even though they have less content to pick from."
While the reality is that traditional cable and satellite entertainment providers are losing market share, there are still opportunities to win and retain viewers. At the root of this new world of television is a viewer who wants a stellar experience. The providers that can harness this, whether OTT or cable, will begin to move ahead of a growing (and stalwart) pack.