The World Of OTT (Content Pt5) - How Devices Drive D2C Streaming

One of the biggest challenges facing D2C streamers is the plethora of devices used for streaming content. These devices have an impact on content production, content delivery, content monetization, and customer management.

Because of device variety, device compatibility, screen formats, screen resolutions and the ongoing shift in device mix throughout the population, D2C Streamers have fundamental commercial and technical decisions to make as devices and consumer expectations evolve.

From a traditional broadcaster perspective, the device is the delivery point for the content; the last piece of glass that we talk about in the phrase “glass to glass”. From a D2C streamer perspective the device is the singular go-to-place where customers consume content and engage with the streamer’s brand. Both perspectives are valid, but they result in different mindsets about devices within the two different video service ecosystems.

D2C streaming creates the responsibility for the content provider to manage every aspect of their customer’s experience. It is like linear channel branding on steroids – a beefed up, expanded, more intense brand experience. It is a shop for the customer and could become even more like a real shop if merchandising becomes a bigger part of the D2C experience. The D2C App is an all-encompassing experience that is under the D2C streamer’s control, and centres around ease of use and reliability of content navigation and consumption, account management, and more. The device the customer uses is central to this activity. The workflows, displays, legibility, and navigation will be different on an Android smartphone world vs. an Apple tablet vs. a Samsung TV. And yet the D2C streamer’s brand and customer experience need to be consistent and compelling.

So how do leading D2C streamers manage this environment today, and what is coming in future?

Device Types And Volumes

Let’s first consider some facts and figures from leading industry analysts, Cisco and Strategy Analytics.

In 2018 there were 3.9 billion internet users in the world (source: Cisco), forecast to reach 5.3 billion in 2023 (i.e., 66% of the global population). The most developed regions of the world are forecast above this figure at 72% (APAC), 78% (Central & Eastern Europe), 87% (Western Europe) and 92% (North America). It is no surprise these regions also lead the way for OTT video services.

In 2018 there were also 18 billion devices connected to the internet (source: Cisco), forecast to almost double to 29 billion in 2023. M2M (machine to machine) devices are expected to represent half of the total in 2023. There will be 11.9 billion video streaming consumer devices like smartphones, tablets, PCs, and Connected TVs. The table below shows the breakdown by device type.

Figure 1 – Global volume of internet connected devices for streaming video, source Cisco.

Figure 1 – Global volume of internet connected devices for streaming video, source Cisco.

Breaking down the Connected TV category to focus on Smart TVs, Strategy Analytics report that 665 million households (i.e., 34% of the global total) owned a Smart TV at the end of 2020. By 2026 this is expected to reach 1.1 billion households (i.e., 51% of households). The graph below shows the breakdown by region for Smart TVs.

Figure 2 – Smart TV market penetration by region, source Strategy Analytics.

Figure 2 – Smart TV market penetration by region, source Strategy Analytics.

The popularity of major OTT services like Netflix and Amazon Prime, the growth of audiences on national broadcaster OTT services like iPlayer, Peacock and RAIPlay, and the increasing success of pureplay OTT broadcasters for major sports-rights like DAZN all point in the same direction. As the streaming technology becomes more prevalent, then D2C streaming content production and delivery also becomes more prevalent, and we all move together towards a world of OTT. The writing on the wall is becoming clearer.

The Substitution Phase

Strategy Analytics highlight evidence from the most advanced streaming markets that suggests we are now moving into the substitution phase from traditional linear broadcasting to D2C streaming. There are 4 reasons: 1) streaming is becoming a viewing preference for more people, 2) connected TVs are rapidly being deployed, 3) broadband services are capable of handling the demand, and 4) more content strategies are directed towards streaming.

The tipping point is here today in the most advanced markets because the technology is capable and consumers are ready – so now we see traditional media companies really ramping up their D2C Streaming plans.

As those plans are considered, the conversation gets very real about how to scale an OTT service to bigger audiences (especially live audiences), and how to deliver next-gen viewing experiences like 4K, HDR and more.

The first consideration when scaling is the cost and quality of delivery as more demand is placed on the streaming systems and infrastructure. With more traffic comes higher costs, so how do we pay for it? If we offer 4K services to customers, what will happen to our delivery costs? Will customers pay for this higher-grade format? Does our audience have sufficient data plans at home and on their mobiles that allow them to consume this content? So far, the evidence suggests that if the technology enables access at the right price and quality level, then people will use the service. Countries with more advanced broadband and mobile services will therefore automatically drive more consumption of OTT video services.

The second key consideration is about customer expectations of the viewing experience as the big-screen Smart TVs become the norm in people’s homes. Will people expect 4K, HDR, and 8K content when their devices support it? Will they consume content in this format as soon as it is offered? Will people pay for advanced and innovative forms of content delivery, and if so, then how much? We are very much in the infancy stage of viewing experiences that are any different from a single flat-screen experience, but as technology leaps forwards we will be given the opportunity to change our viewing behaviours, which will bring new challenges to the cost and quality of content delivery to the wide range of devices.

D2C Streamer Perspective

Many of the world’s leading D2C streamers deliver large-scale live events on a regular basis to demanding audiences. Because these live events accommodate customers from all age groups, all technology experiences, all device types, all locations, all network types, and all bandwidth capabilities, these D2C streamers see every possible video delivery situation. And because live content has traditionally been exclusive to national broadcasters, it is expected that any pureplay D2C streamer now taking over this responsibility must operate to the same levels as the decades-old national broadcasters, protecting high-value content to which they hold the rights.

The first priority for D2C streamers is to deliver the right quality of content based on the right cost to access that content. When considering exclusive content, or content with very high production values such as 4K and HDR, an OTT-only model allows pricing and delivery on a per-customer, per-event and per-stream basis. This flexibility saves a D2C streamer from an expensive fixed cost model that would normally be required for delivering advanced video formats, while selectively monetizing content in smaller packages that consumers can more easily digest.

Device Compatibility And Manufacturer Flexibility

The varied device landscape makes managing Device-to-App compatibility a continuous challenge for D2C streamers. Browser level support and device certification processes are available, and the most advanced D2C streamers have sophisticated debugging tools to ensure streaming applications are ready for the devices they are deployed on. But devices become obsolete and go out of support, so the D2C Streamer must help their customers to migrate. When a D2C streamer ends its support for a particular device type, like a 10-year-old TV, it is important to follow best practice (and any consumer laws) to notify the customer and advise them of their options. Given the number of options today for customers to choose from, this job is easier than it used to be.

D2C streamers work with many TV manufacturers like Samsung, LG, Sony and Panasonic. Android TV is quickly moving to a common framework across many TV brands and for set-top box environments, which means it is winning market share in the Cable TV / IPTV market as well. Anecdotally, Android are providing the most flexible platform of all operating platforms, leveraging Google’s natural affinity for software development and agile development processes.

This is a key point for D2C streamers. They see that TV manufacturers are still in the annual business cycle to sell TVs. To be fair, this is a natural state for an electronics mass manufacturer, which is very different from developing software where software updates and long-term compatibility are the normal mindset. What this means is that TV manufacturers are not building (as effectively) an ecosystem that evolves easily. For a D2C Streamer that needs to support legacy devices in people’s homes, this creates a challenge. Often a 7-year-old television will be completely out of support and the manufacturer has moved on by 5-7 platform generations, but the end customer still expects to be able to access mainstream sports content on the latest App.

Some device environments are concentrated into a few businesses that dominate a market. PCs are dominated by Microsoft, Apple and Android. Smartphones are dominated by Android and Apple. Connected TVs are more diverse– Samsung is the major player, with LG, Google, Sony and more all competing for market share. It is possible that more consolidation will follow with TVs as it has with other screen devices.

Figure 3 – Global Streaming Platforms, source Strategy Analytics.

Figure 3 – Global Streaming Platforms, source Strategy Analytics.

Connected TVs are rapidly asserting their place in the world of OTT. Internet-connected devices proliferate as the world develops, but Connected TVs create the big shift to more prime-time live content on OTT services. This shift is the key trend to watch in the years ahead.

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