2. Digital Video has Reached Maturity
Pay TV
201.8 million US adult
viewers
Digital Video
175.4 million US adult
viewers
3. Broadband-only Homes Growing and
Adopting OTT Services
Growth of broadband only homes
◦ 9% of U.S. population in 2013
◦ 15% of U.S. population in 2017
◦ Approximately 17 million broadband-only homes
63% of U.S. broadband households subscribe to at least one OTT service
31% of U.S. broadband homes have multiple OTT service subscriptions
4. ‘Practical’ Factors Driving Growth of OTT
Market
Growth in smartphone users and mobile internet
usage
Increase in broadband penetration
Growth of broadband only homes
Increase in digital ad spend
Consumer perception that content libraries are
expanding and affordability versus Pay TV
subscription
OTT is now being considered as a more ‘practical’
choice. This practicality can fuel the need for
supplementary AVOD services that offer content
that SVOD services don’t
5. OTT Market Landscape Germinating
Multiple Business Models
OTT market is growing 20% annually
Pay TV revenues only growing 2% annually
AVOD
◦ Free to air, advertiser supported
◦ Premium video content
◦ Digital content created by digital creators
TVOD
◦ Digital rentals and purchases
◦ Apple iTunes’ store
SVOD
◦ Monthly fee for access to content library
◦ Netflix, Amazon Prime Video
DVMPD
◦ Subscription services that replicate traditional
cable bundle in a digital context
◦ Sling TV, Playstation Vue, DirecTV Now
6. Growth being Captured by AVOD and
SVOD
AVOD and SVOD have disrupted the
industry
◦ New content models (short form + long
form original content)
◦ New windowing models
◦ Innovative pricing models
◦ Have captured 80% of global OTT
revenues
DMVPD and TVOD have had a muted
impact
7. SVOD Services Growth Projection
Netflix: 120 million users
Amazon Prime: 76.2 million users
Hulu: 30 million users
Crowded space with well-entrenched competitors
Have cash flow to invest heavily in original programming
that gives them a competitive advantage
8. Original Content Driving OTT Growth
Primary growth driver for Netflix, Amazon & Hulu
Has allowed HBO and Showtime to also make a mark in the OTT market
Critical to demonstrate value to the consumer to continue paying monthly subscription fee
Netflix subscriber trends (churn and additions) correlate with shows getting phased
out/launched
9. AVOD Riding on Growth of Online Video
Advertising
Boston Consulting Group projects that global online
advertising expenditures are expected to increase 34.5%
from $15.3 billion in 2015 to $34.5 billion in 2018
Lack of premium video inventory for advertisers
◦ YouTube still dominated by creator content
◦ Hulu has pivoted away from AVOD
Digital video ad spend share of total digital ad spend is
growing
◦ 14.3% of total digital spend in 2016
◦ 15.1% in 2017
Ad revenues for AVOD market growing impressively
◦ $1.1 billion in 2010
◦ $5.65 billion in 2015
10. Advertising Buying Trends: Programmatic
Growing but Direct Sales Dominant
Programmatic growing but still a very small share
◦ Automated Transaction Models grew (+64% YOY)
◦ Low percentage of overall premium video ad sales in the U.S. (11.4%)
Factors behind this: -
◦ Strong direct sales across the premium video economy
◦ Restrictions on targeting and tracking in certain environments like OTT
◦ Risk factors related to managing user experience from Automated Transaction Models
Long form content dominant driver of ad views
◦ 41% share of ad views (FreeWheel report Q3 2016)
11. Advertising Consumer Receptiveness:
Differs from Display Digital Advertising
Online video viewers less receptive than live TV viewers
◦ 19% of online video viewers responded favourably to ads compared to 27% for live TV viewers
◦ Probably biased by the fact that online video was on-demand while TV is more linear, lean-back
More open to interest-based ads as opposed to re-targeting
◦ 41%of people responded favorably to ads tailored to their interests
◦ Only 25% liked ads that tracked their browsing history like a retargeted promo
Stats based on study by Millward Brown
12. Facebook’s Shift from Live Video to Long-
form Video Content
Change in algorithm to give preference to long-form videos with higher completion rate
Testing mid-roll ads
Testing new video-only tab
Rumored to be in talks with studios and producers about licensing exclusive shows to Facebook
Connected TV apps for Apple TV and Chromecast
Facebook is more interested in the YouTube model of collecting tons of quick video clips than
investing in long-form shows or films like Netflix
Looking to build a wide range of content by paying content creators and sharing revenue
Ultimate aim to attract ‘episodic content’ similar to YouTube where creators regularly post
videos
13. DirecTV Now more of a DMVPD
To stem subscriber losses for DirecTV pay TV service
Added 200,000 subscribers in first month of operations
Buoyed by introductory price offer of $35 per month
Unlikely to cannibalize growth of SVOD or AVOD services given the differing value propositions
◦ DirecTV Now: cheaper alternative to Pay TV
◦ SVOD: Access to exclusive content for low prices
◦ AVOD: Access to wide content library for no cost, supplementary to SVOD
15. Connected TV Devices Growth
Projections
Chromecast is dominant: 30.6 million users
Amazon Fire TV is the fastest growing device
Apple TV: 20.5 million users
◦ Low predicted growth due to
◦ High device cost
◦ Lack of original programming
16. Connected TV Usage Growth Driven by
Younger Homes
Millennials form a
dominant part of
broadband only homes
This trend of heavy usage
of streaming devices will
likely increase
17. Roku and Fire TV Ideal Platforms to Focus
On
Despite its lead in terms of number of users, Chromecast usage pales in comparison to Roku
Roku along with the Amazon Fire TV seem to be the connected TV devices to focus on in 2017
given their usage and growth respectively
18. Streaming Activity Pattern on Connected
TV Mirrors Linear TV Watching
Peaks during primetime
Indicative that connected TV user is strikingly similar to linear Pay TV user in terms of
consumption patterns
19. OTT Consumption Increasingly Driven by
Connected TV Devices
“We are clearly seeing OTT video moving to the
television… OTT users watch OTT services on their TV
screens between 17-20 days per month, much more
than platforms such as a PC, smartphone, or tablet.”
◦ Snappington of Parks Associates
20. Widening Gap in TV Consumption
Amongst Age Groups
Deloitte forecasts that 18-24 year
olds in the US will be watching less
than 2 hours of traditional TV by
2020
Continuing decrease in TV
consumption amongst 18-24 year
olds:
◦ Watched 58% as much live and time-
shifted TV as those over 65 years of
age in 2008
◦ Down to 36% in 2015
21. Future Growth in Multiple SVOD
Subscriptions
Digital TV Research has forecasted that the average U.S. SVOD user will pay for 1.33
subscriptions
◦ Implies multiple SVOD subscription
12 % of broadband-only households subscribe to Netflix and Amazon Prime
22. SVOD Broadband-only Homes Consume
More Devices, Platforms
More affluent customers
◦ Nearly half of homes with SVOD access have a yearly household income of more than $75,000
Heavier users of technology
◦ U.S. households with SVOD subscriptions spend nearly 50 minutes more per day using TV-connected
technology than does the typical U.S. household
◦ Average 10 more minutes daily watching time-shifted TV and double that in terms of time spent using a
multimedia device (such as Apple TV and Roku) than a typical TV home
Clearly they have an appetite to consumer more content, devices and platforms
23. Key Takeout
Two key growth drivers
◦ Original content
◦ Free access to content library that supplements SVOD services
Connected TV devices growing particularly in millennial homes, mirror behavior of traditional TV
viewer
Relative dearth of premium video inventory for advertisers
YouTube and Facebook video platforms increasingly embracing long-form video content to capture
these ad dollars
◦ Facebook live broadcasts
◦ YouTube skinny bundle
Emerging picture of broadband-only homes depicts multiple subscriptions, devices, platforms
Opportunity for a service that is free and provides access to TV content and a wide content library
