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Why Haven’t OTT Services Solved the Monetization Problem?

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It’s no secret that TV by appointment is giving way to over-the-top (OTT)-centric preferences. Frost & Sullivan’s research numbers corroborate this trend on many fronts, and we also see continued expansion of online video offerings from websites and via apps, both by pay TV service providers and directly by broadcasters.

Against this backdrop, we see recent service offerings available in the market, such as Hulu Live, YouTube Live, and Fox making all of their primetime programming available live to all U.S. markets. Hulu is now nearly a decade old, and broadcasters like CBS, NBC, and ABC have offered OTT streaming for some time now, as have HBO and ESPN. Content is often free for pay TV subscribers after user name and password authentication; monthly fees for stand-alone consumption are nominal. And still, no OTT provider has yet to figure out how to achieve service and monetization parity across traditional broadcasts.

Fox has found some success because it allows local affiliates to control advertising and branding of channels. All of Fox’s primetime entertainment, rather than select shows, is streamed live. Two hundred and ten regional U.S. markets are covered, as opposed to more select coverage with other broadcasters. Consequently, Fox boasts that nearly all pay TV households in the U.S. can now view Fox channels online via their streaming media devices, smart TVs, and tablets.

This is in stark contrast to the ongoing trend of disintermediation, in which broadcasters seek to go directly to end consumers, bypassing the pay TV service providers. This second difference, in terms of monetization and branding, holds the promise of solving one of the most vexing challenges with OTT today, which is monetization. Targeted ads and usage fees have thus far fallen short of their promise. Programmers, service providers, and broadcasters have all been challenged to maintain their business brands in a market where consumers often confer loyalty to specific shows, specific talent, or select social media destinations more than channels or service providers. By managing to cooperatively partner with affiliates on advertising and branding and thereby avoiding conflict and competition, Fox may perhaps have found a win-win middle ground.

This is, of course, easier said than done, and much will depend on the quality of experience and inventory of ads that will be delivered. The third difference appears to be that this will truly be live-streamed content, in contrast to other offerings in which episodes are made available for on-demand viewing concurrently with or at a short delay after the conventional broadcast goes live. While this technological difference is significant and noteworthy to infrastructure vendors, I’m also of the opinion that everyday users should neither care about this distinction nor become aware of it.

Which brings us to the flip side of these services, a view that sheds light on the many shortcomings of the OTT ecosystem today. Fox is not currently providing sports content through this framework. Sports continues to be provided through a separate app and presumably a separate set of agreements. Viewers, even pay TV subscribers, continue to be subject to the disparity and lack of consistency in content access across types of content, channels, resolutions, regions, and, in some cases, device support. Service levels can vary dramatically by location, even for the same user. Service provider apps and destinations offer overlapping content with broadcaster apps and destinations, with online video services often joining in the same fray. Users are left to figure out the nuances of true live streaming, catch-up TV, cloud DVR, and video on demand, all of which should ideally simply be “TV on any screen.”

Even a decade after Netflix and Hulu first began to stream content, no one has fully figured out how to achieve service and monetization parity across traditional and online broadcasts. Until they make things less confusing to users, monetization will still be a long ways off.

[This article appears in the November/December 2017 issue of Streaming Media Magazine as "Why Haven’t OTT Services Solved the Monetization Problem?"]

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