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Marketing - BLOG

Video on demand: some news

Miklos Sarvary |

Video on demand is the hottest topic in media nowadays. Many see it as the next technology ready to disrupt further an otherwise already disrupted traditional media landscape.

One question is: how should traditional channels react to the appearance of this new offer? Traditional channels still have the quality content. Sure, Netflix financed “The house of cards” but this is a drop in the sea of quality content offered by CBS, Time Warner, Disney and others. It is going to take a long time before video streaming sites will be able to provide the quality and the variety that traditional channels offer. Unless the channels sell the content to them, of course, which is what seems to be going on. According to the WSJ (March 15-17), CBS, for example, earns 10% of its operating income from subscription video on demand. Other channels are closer to 5%. Is this a good idea? I am not sure. It reminds me of the 1980′s FMCG industry when national brands helped major retailers introducing their private label brands. In the short run, this meant extra revenues and the good use of capacity. In the long-run however, retail brands became much stronger than national brands reducing the latter’s profitability. Providing good content to streaming sites definitely cannibalizes traditional TV viewing. The better the online content offering the faster will consumers learn that online is just as good but cheaper than cable (and there are no ads…).

Another pressing question is who will be the winners of online video streaming? The online channels who provide traditional content (Netflix, Hulu, etc.) or the likes of YouTube, Vimeo, or even Facebook, who rely heavily on user-generated content (although some started investing heavily in original content too). The latter group bets on a fundamental change in consumer behavior and taste. They seem to have a point: even traditional content is viewed differently in today’s environment with second screens and a preference for seeing anything in the consumer’s preferred time slot (think of binge viewing of series for instance).

It is also interesting to ask: how will this play out in other parts of the world, especially in Asia where growth is faster. Recent data shows that Asia is far from being a homogeneous market. A Bloomberg Businessweek article (March 4-10) reports data showing that Japan is much larger – with about a 120 million unique viewers per months – than any other country, although there is no data on China (India is at about 70 million unique viewers. Japan also has some local large sites besides YouTube (Dwango and FC2) and has few unique viewers for Facebook, that generally appears to be the second largest site in other Asian countries. Google sites in general are far ahead in every country surveyed with about 30-35% of the unique viewers. The global battle is raging on every front.

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