Who will be the victors in the battle for the future of the TV industry? Will it be the established media groups, the internet platforms, or the incoming telcos?
To understand the roadmap for the future of the industry, four scenarios were presented by Florence Le Borgne of IDATE at our TVLS event in June this year. Surprisingly, while the internet is a major source of disruption, it is not the only one.
The Trend Scenario
This is the scenario that sees the least drastic change from where we are now. It results in the slow growth of the global market for the TV industry, with a slight rise in linear TV revenue, primarily in emerging markets, and a more marked one in on-demand video revenue.
It sees a certain amount of consolidation within the industry, with a decrease in the number of specialist niche channels. A general concentration of power and influence surrounding the traditional players and media organizations will result, though this is balanced with an increase in the power of the OTT players.
On-demand services become more concentrated, while there is an increasing emphasis on events programming from TV channels. The channels in turn continue to ramp up their non-linear offerings. Content is distributed over the open internet instead of the managed internet.
In terms of monetization, the pay-TV market is polarized between premium and low-cost offerings. TV advertising remains the main monetization opportunity, with a marked growth in programmatic advertising as the technology becomes increasingly sophisticated.
The Disruption Scenario
This is perhaps the one that keeps people on tradeshow panels most awake at night. This scenario sees the major online players exerting increasing influence, with internet powerhouses such as YouTube and Facebook engaged in an increasing battle over rights. Global rights deals allow them to tailor offerings at a much more individual level, allowing people to self-build bundles, skinny or otherwise. Facebook’s presence in the mix also hints at the increasing importance of social video. Apple’s use of its devices to distribute content is another form of disruption.
The value of the linear TV market decreases as advertising becomes increasingly targeted. With much of the monetization of the industry concentrated in individual subscriptions and transactional VOD, there is increased pressure on prices.
More insights into SVOD and TVOD in this post.
The broadcast landscape that emerges is very different from the current one, with many of the major TV brands either replaced in their entirety by the internet giants, or sidelined as rights holders move towards direct distribution to the consumer. The OTT market at the global level becomes increasingly oligopolistic.
The Convergence Scenario
Here, the telecom operators become major players in the content industry via upstream integration and we see the emergence of pan-regional entities.
Content as a result becomes distributed most often via an ‘all you can eat’ model which encompasses all forms of media, from TV to literature, and relies mainly on exclusive content to differentiate services. These services in turn are bundled with connectivity, leading to a downward pressure on prices.
The Syndication Scenario
This future sees the TV world manage to capture value and leads to the most positive outcome for the industry. Key to its success is cooperation between the leading players in the field to reach a critical size and unleash profound economies of scale. The established TV brands remain strong and influential, providing core expertise in video content to the new regional ‘entertainment operators’ that come to dominate the industry.
In keeping with the cooperative theme, audiovisual content packages are created by TV publishers in syndication. Monetization and linear programming, supported by advertising, returns to a more abundant and paid catalogue with enhanced features, while there is also growth in freemium content models.
The Most Likely Scenario for the TV industry?
In many ways the Syndication Scenario is the one most familiar to the TV industry. It mirrors on a global scale much of the set-up in the US where local stations are affiliated with national networks. That does not necessarily make it the future most likely to unfold as there are numerous complex factors in play.
The regulatory landscape is uncertain and subject to political forces way beyond any industry control, as the ongoing debates and changes in policy regarding net neutrality in the US showcases. There is also a switch to emerging markets driving growth in the face of saturation in the established ones, the increased prevalence of cloud-based models, consumer attitudes to increase personalization via data analytics, and a lot more to consider.
As ever, the scenario that delivers closer to the status quo can always be considered the most likely. This is the Trend Scenario, the one which extrapolates TV industry directions from the upheavals that have been disrupting the market since 2010. This scenario delivers consistent growth at 2.4% a year until 2025. If the industry wants more than that it is going to have to take action.