Our visionary leader, John Kotsaftis, discusses the evolution of TV.
Television has changed a lot over the last ten years, as user-interaction has become essential to live events and reality TV shows.
SMS Voting now plays a key role in making shows more compelling, leading to higher viewer ratings. There has been a shift away from the passive viewing experience, to a more engaging/active participation. Viewers now have the power to directly influence the outcome of a show (Such as Big Brother or Idols), which was a paradigm shift when compared to the previous 30 years of TV consumption.
South Africa has unfortunately been slow in following the high-levels of broadband growth when compared to other markets. In markets with high-broadband penetration however, internet video is beginning to shift the consumer experience in a much more fundamental way than just a one-way interaction using SMS.
Users now have supreme choice, with the ability to communicate not only with the show, but also their social network around the video content. In other words… true interactivity.
The advent of broadband video delivery, means that traditional television will evolve from the linear model (of sitting behind the ‘telly’ and waiting for your show to come on), to an experience that is on-demand, fully interactive, highly convenient and truly shared.
At DStv Online, our goal is to expand our traditional DSTV customer experiences into new areas and to create new patterns of video consumption over the coming years. We have mapped the evolutionary forces changing the consumption of video in high broadband markets, in order to factor them into our strategy going forward as our market adopts broadband. This article deals with those forces in some detail.
Video is increasingly being consumed online
The explosion of broadband in many markets, has given rise to a new video delivery mechanism that is able to deliver video at acceptable quality levels over a myriad electronic devices.
A recent study by Nielsen’s, shows that that teens’ TV time has risen 6 percent over the past five years, mirroring increases seen for adults. Although the study found that teens TV viewing habits are pretty “normal,” the introduction of new media into their lives has expanded their media clock, as it has for everyone.
Most teenagers watch television, but usually there are points in the year where they watch more than average. This is due to programs coming on in seasons, so they will watch a particular show at a certain time for a number of weeks (as long as it lasts) but then they may watch no television for weeks after the program has ended, and then they would rather consume other forms of digital media aside from the TV (e.g. online video and music).
Teenagers are also watching less traditional television because of services such as BBC iPlayer in the UK, which allows them to watch shows when they want online.
‘Free’ is the new price of choice
An overwhelming amount online video is available for free to the consumer. This ranges from user-generated content and some pirated content found on YouTube, to professional content sites such as Hulu in the United States (a joint venture by Fox, Disney and NBC).
Hulu is the first serious attempt for professional content producers to cannibalise their business.
They have done this, in order to circumvent video piracy and gain additional revenues from the content that they produce. Notably, they earn this revenue after the content has been sold through to the cinema/TV companies, as per their traditional model of doing business.
Advertisers are reluctant to advertise alongside YouTube content, which is largely user contributed and therefore unpredictable (which they do not like), so Hulu’s strategy has been to reduce the consumers effort required to obtain their professional content (through pirated online channels), in exchange for premium advertising. The advantage to the consumer is that the site is very easy to use, the content quality is always guaranteed (which is not always the case with pirated content) and it is immediately available for free.
The costs of delivering the video are still exponential however (even though the marginal cost of delivering video keeps dropping over time) and the advertising revenue has been linear, so is not viable for them to delivering this content for free as their service grows exponentially. Consequently content producers such as Hulu are considering charging for the content using a Transaction Video-on-Demand pay model (TVOD) to cover their costs and make a bigger margin for their online video.
The Content Schedule has been disrupted
Traditional video content is packaged and moved around in a controlled fashion. The TV Schedule is the best example of this, in that the control of viewership is centralised and scheduled by the TV operator.
The Internet has disrupted the content windowing model to a certain extent, as it has enabled the consumption of content outside of the controlled environment of the TV companies (even illegally).
It is now clearly understood that the delivery of on-demand broadband content and personal video recorders (PVR’s) enables the user to move away from the linear to a non-linear experience, at a much faster rate, as people demand more choice around their viewing time frame.
Recommendations are important
Users are becoming aware of content on the web via their streams of friends or followers on social networking sites.
With sites such as Facebook, users are becoming aware of content through their social graph (i.e. their friends and “friends of friends”). As users post video’s and links to video content in Facebook their network then becomes aware of it, can write comments and indicate what content they like or dislike. This immediately gets broadcast to their network, and consequently the recommendation of content “goes viral”.
Faced with a huge library of content available on the web, it becomes very difficult for users to choose what they want to watch, so they will either look to their network recommendations (their social graph) or recommendations suggested to them by their content provider.
Netflix in the USA has perfected their recommendation algorithm, so that more than 70% of their online video sales come through recommendations. Recommendations, are therefore as important to the consumption of online video as they are to companies such as Amazon that sell books and other items online.
Entertainment is shifting across devices
The TV is no longer the only viewing device in the home, and the set-top-box is no longer the only mechanism for receiving paid-for content.
The home entertainment experience is shifting across devices as most consumer equipment is becoming internet enabled. Console games such as the Microsoft XBOX 360 and Sony Playstation come with a built-in wi-fi connection. Consequently, companies such as Netflix in the United States (a video download service), have capitalized on this by enabling users to pay for, and download movies through their XBOX Live service for example.
Internet Video is increasingly becoming a “10 foot experience” because the TV is marrying the internet as more devices in the living room become connected to the web.
Mobile video consumption will also become more of a viable option to consume on-demand content as the phone form factors are improving, providing better quality, high-resolution video to consumers in the palm of their hand.
In South Africa, the mobile phone is the predominant Internet device, as phenomena such as MXit (the South African mobile IM service) have an user base that has roughly 3 times more internet connected users on mobile, as there are on the PC users in South Africa.
If you couple the improved form-factors of phones, and the fact that 3G is perfectly acceptable for medium-bit rate VOD content on those devices, it becomes an incredibly delivery relevant platform for African markets.
The traditional content value-chain is being altered by broadband enabled video consumption and therefore TV usage is likely to be consumed on multiple non-traditional platforms.
The good news for consumers is, that they will have more choice, as to when, where and how they consume video content in the future.