OTT and the realities of FAST channels
The recent surge in FAST channels is having a significant impact on the OTT industry. Few predicted their sudden rise over the past 18 months, which has left many wondering what they’ve missed. In this blog, we explore what FAST channels are, why they are growing in popularity, and how they affect the OTT industry.
What are FAST Channels?
FAST (Free Ad-supported Streaming TV) channels are a type of OTT content that allows users to stream high-quality linear content with no additional fees or subscriptions required. Simply put, FAST channels are an extended version of traditional TV streamed over internet-connected devices.
FAST vs AVOD
FAST channels operate in much the same way as traditional linear TV, with a programme schedule and ad breaks. AVOD (Advertising Video-On-Demand), on the other hand, is a streaming service business model that enables viewers to watch Video-On-Demand content in exchange for watching ads.
The positives and pitfalls for viewers
FAST channels replicate the traditional ‘free’ TV experience as they are supported by ads, which has led to significant gains in viewership over the last few months for these online-only services. While seemingly advantageous to viewers on the surface, there are drawbacks to consider, including:
- Due to their relatively new nature, some channels may have yet to be adequately tested or optimised for all types of devices, leading to viewers having potential issues with compatibility or performance.
- FAST channels may not be able to offer the same level of content selection as larger subscription services either. This could limit their appeal to viewers who are looking for a specific film, TV show, or other types of program.
- FAST channels can be resource-intensive, which may result in users experiencing buffering or other issues during peak viewing times.
What impact are FAST channels having on the OTT industry?
If you have attended a conference within the broadcast sector in the last two years, you will have heard all about FAST channels. The acronym has created a brand in itself and as ever, companies are jumping on the bandwagon for this ‘new’ business vertical. However, essentially this is merely the move from traditional linear TV via cable and satellite channels, to the future of OTT delivery. The good news is that it is now much easier to ‘spin up’ 24/7/365 linear channels through strong technology provisions, the bad news is that the fight for viewership remains exceptionally competitive, so as before the 80/20 rule will apply. If you are not in the top channels on Samsung, LG, or other, then the viewers will not find you, not watch your content and therefore your share of the advertising revenues will be significantly lower than those at the top.
However, the news isn’t all bad, all the data we see here at Magine Pro speaks to ‘lazy’ weekday viewing, that is to say after a hard day at work the average consumer will switch on linear channels and settle for something, rather than spending the time and effort to choose something from a vast array of VOD catalogues. (This behaviour switches entirely from Friday night to Sunday night). So if you have your own OTT platform, have plenty of content, and work with a good advertising platform, then it is definitely worth providing channels to enable an easier and quicker choice for your viewers.
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Want to discuss the pros and cons of FAST channels further? Get in touch with the Magine Pro team.
You can also head over to our homepage to find out more about our flexible OTT platform. Discover how we enable our partners to monetize their Live Events, Linear Channels, and VOD content with a customisable video streaming service.
BVOD & OTT: What you need to know
As more viewers have signed up for on-demand services since the pandemic, it’s no surprise that a recent report by research firm Roy Morgan also highlights a growing increase in BVOD viewership over the past 12 months.
What is BVOD?
The acronym BVOD stands for Broadcasting Video-On-Demand. BVOD refers to high-quality content created by conventional broadcasters and made available online through their on-demand streaming service.
Examples of broadcasting video-on-demand services from around the world include All 4, ITV Hub, CBC Gem, SBS On Demand, ABC iView etc.
How does it compare to AVOD?
Broadcasting video-on-demand services rely on ad revenue to cover content and service running costs over a subscription model. It sounds a lot like AVOD, right? You’re not wrong. BVOD is a subset of AVOD; the difference is more to do with ad/service perception and the quality of content available on an exclusively BVOD service.
Essentially, BVOD services are operated by respected broadcasters, which suggests brand safety to viewers; This means audiences are more likely to sign up and trust the ads they are served. It’s this perception of trust that makes BVOD an increasingly attractive model for big-named advertisers and brands. AND not forgetting the ability to access more refined data on demographics to improve ad targeting that’s only possible via online video services.
Online video monetization
The BVOD model is typically ad focused; however, a flexible OTT platform will enable broadcasters to expand monetization options. Daniele Veronese, Sales Director at Magine Pro says, “Today we’re seeing user consumption behaviours drift further toward online streaming platforms than ever before. Now is the time for traditional broadcasters to react; as ad spend on OTT platforms increases.
BVOD offers an excellent opportunity to monetize through targeted advertisements, but broadcasters can also do this in parallel with SVOD and/or TVOD as a hybrid model. Hybrid models enable broadcasters to maximise monetization of their content and potentially see a quicker return on investment.“
Magine Pro’s flexible OTT platform supports SVOD, TVOD, and AVOD business models, either separately or combined, enabling our partners to create a streaming service best suited to their content and customers. For example, broadcasters can choose to operate an ad-focused BVOD model or select a hybrid combination. To find out more about Magine Pro’s OTT services and monetization models get in touch.
OTT Industry predictions for 2019
2018 was an exciting year for the OTT industry. We saw a lot of positive developments, most of which we encountered firsthand at IBC2018 in September. Check out our post where we summarised our findings and reflected on the event, here. Now that we’re heading into the second full working week of January, we’re all starting to wonder what could be on the horizon.
In this post, we’re laying it out there and sharing our top OTT industry predictions 2019 (with a few expected additions of course). Reach out and let us know your thoughts and whether you think we’ve missed something vital.
Service shut downs and consolidations
In 2018 we started to see more OTT services consolidate or shut down entirely. This was largely due to market saturation, as the OTT industry grew so rapidly in the early days. Over the next year though, it’s likely we will see more of this affecting both smaller niche players and big incumbents, as the pressure to maintain sustainable and competitive OTT businesses increases.
In fact in 2018, WarnerMedia, for example, shut down its two-year-old indie and classic cinema streaming service FilmStruck not long after closing its Korean streaming service, DramaFever. WarnerMedia’s CEO John Stankey had announced only a few months prior to the closures though that the WarnerMedia division of AT&T has plans to launch a new ad-supported video streaming service by the end of 2019. We’re expecting the new service to launch in the fourth quarter and combine HBO (which AT&T picked up in its takeover of Time Warner in 2018) with other WarnerMedia brands including, Warner Bros, Turner, Cartoon Network and more.
New players from the big brands
We are also expecting to see Disney launch their much-hyped direct-to-consumer service later this year (the result of their acquisition of BamTech). It will certainly be interesting to see how well it’s received and the market uptake. We’re already wondering whether there’s going to be a Disney OR Netflix scenario. Or if subscribers will be willing to opt-in and subscribe to both.
It’s also not too far fetched to expect Apple to launch their secretive yet expected streaming service later this year. We’re curious to see if they’ve managed to secure content partnerships that to date others haven’t been able to. It’s also going to be interesting to see Apple’s interpretation of the best UI/UX and find out whether they are able to truly revolutionize the TV experience. Stay tuned!
Partnerships with Telcos & Operators
This year, we think we’re also likely to see more Telcos and Operators move out of the own-operated OTT space and begin partnering with existing and better established OTT players. In the last year, the increased customer value propositions enabled through partnerships have become more apparent, so it’s likely Telcos and Operators will be less inclined to view OTT Players as a threat going forward. Our former Head of Commercial Operations, Fredrik Engdahl spoke on the subject at IBC 2018. Check out the video of his talk here.
AVOD to mature
Advertising (AVOD) models for OTT are also likely to mature this year and become much more feasible for new and existing OTT Players. John Stankey, CEO of WarnerMedia, said himself at their November investor event, “Consumers clearly like the breadth of content that is available today. They like the choice. And a lot of that choice comes on the back of ad-supported models,” But added, “Things have to change [with ad models]” and suggested that less intrusive and more targeted ads are the way forward if AVOD is to really become a serious standalone model for OTT players in future. We couldn’t agree more.
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It’s certainly going to be an exciting year full of developments. To keep up-to-date on the latest, sign up to our monthly e-newsletter and check back in to the Magine Pro blog.
Show me the money – SVOD or AVOD for monetising OTT?
Digital TV Europe’s recent survey found Subscription video-on-demand (SVOD) came out as the top choice of business model for OTT services. No surprise there, given that SVOD is indeed a great monetization model and often the go to-monetization model for any new OTT venture as it ensures a steady recurring revenue and lock-in effect on users. And you can’t complain about market forecasts either, as by 2022 the European SVOD market is expected to nearly double, and more than 450 million global SVOD subscriptions are expected.
In addition, SVOD makes it possible to receive parts of your monthly revenue with no relating costs. Data collected from our partner SVOD services show that only 60 to 70% of paying subscribers are active monthly users, meaning that four out of ten paying subscribers never accessed or used the OTT service in a given month. This means users are paying a subscription fee without actually using the service, a scenario all too familiar to anyone with a rolling gym subscription. Although short-term this could be considered free revenue, the long-term risk is that those non-active users will eventually churn and opt-out of the service altogether. The premise of getting revenue with no associated support or streaming costs might sound alluring but to achieve real long-term success, the objective should always be to strive for engaged rather than inactive subscribers.
Make sure no money is left on the table
In the same OTT survey, advertising-supported video-on-demand (AVOD) was considered a less promising business model for OTT services in terms of its potential to deliver value to the service provider. Understandable, as sustaining revenue through advertising only can be complex and challenging, but it doesn’t need to be. Today, AVOD should be considered a complementary strategy to an SVOD or Transaction-supported video-on-demand (TVOD) business model.
Incorporating an AVOD-model ensures you leave no money on the table. Monetizing through ads means you can offer limited free content to users that are hesitant to pay a subscription or transaction fee upfront. The strategy then would be to push to convert these free users to paying subscribers through upsell activities, increasing your average revenue per user (ARPU) and the customer lifetime value. In an ever more competitive market, using an ad-supported freemium model will also help with marketing efforts as you’ll be able to attract and onboard new users who want to try the service for free first. You can still monetize through ads as you convert them to paying users.
Even though AVOD doesn’t offer the same steady revenue stream or the same level of ARPU as SVOD, you shouldn’t overlook the revenue opportunities from video ads. Case in point, according to research by MonetizePros.com, YouTube’s cost per thousand impressions (CPM) range from $18 to $24 depending on the type of ad shown and Hulu’s average CPM can be as high as $28. Looking at connected Smart TVs, a rough average is around $25 per video ad CPM. You can’t ignore these CPM levels and sources of revenue.
The increasing interest from marketers for OTT as an ad channel is also easy to understand. Viewers are spending more and more of their time watching OTT video compared to traditional TV media. According to eMarketer, 7 in 10 Americans are now consuming ad-supported OTT videos regularly, and this is expected to grow considerably in the coming years.
Another advantage of using OTT as a platform for video advertising is that it enables you to capture rich viewer data, resulting in much better targeting of relevant video ads. CBS All Access, in fact, reduced their video ad inventory (and cost) for OTT content by 25% as they were able to target audiences much more efficiently based on the detailed viewing data collected.
AVOD, coming to an OTT screen near you
We’re still only in the early phase of the shift and uptake of video ad spending for OTT video. Research by MTM and SpotX showed that at the end of 2017, 30% of all video advertising was spent on OTT services. And it’s projected that video advertising delivered over the internet to TV screens will be worth more than €825 million by 2020, with compound aggregate growth rates (CAGR) between 20 to 80% in European countries.
At Magine Pro, we believe the secret to a successful OTT business lies in a business model that combines SVOD, TVOD, and AVOD whenever possible. As part of our video solutions, we offer SVOD, TVOD, and AVOD business models, either separately or combined in an OTT service. The Magine Pro platform is also pre-integrated to SpotX ad server, enabling our partners to generate ad revenue by direct deal and programmatic advertising, and extensive ad campaign management. Essentially making it extremely easy for new OTT services to start monetizing through AVOD from launch as efficiently as possible.
You can find out more about Magine Pro’s video solutions and monetization models here. If you would like to speak with us directly via phone or email, please contact us.