Strategy Analytics has been talking about the transformation of television for many years. The latest analysis http://sa-link.cc/1kn from our TV & Media Strategies team suggests that the process is likely to continue for at least the next decade or so. In spite of the success of Netflix, Amazon and others in building audiences for SVOD services, these emerging players still only accounted for 8% of the US market for subscription video and TV services in 2016. And while the share is expected to keep growing, it will only have reached 18% by 2022. If this trend was to continue it would be the late 2020s before emerging players were generating revenues at the same level as legacy providers.

I can already hear the protests. Pay TV and OTT are different. They shouldn’t be combined into the same model. Netflix is not TV, it’s killing TV. Netflix has only just got started – it will find new ways to increase revenues from its loyal subscribers. They are global players and will dominate the premium content market. Pay TV subs are in decline and there’s no way back. Skinny bundles will rule.

Which is all fine, and some of it may turn out to be true. But even though this is internet disruption, it will take time before the impact is fully felt. Viewers are still getting to grips with the complexity of choices they are faced with across the TV and video landscape. Inertia is strong and the legacy players are fighting back, by bundling their TV offers into multiplay packages or launching their own internet-based pay TV services. Their video revenues will start to fall in 2020, but there is a long way to go, if indeed they keep falling.

So beware those headlines suggesting Netflix is now bigger than the cable industry. The OTT players have had a remarkable impact on the video landscape and will continue to shake things up, but there is a long way to go before the winners can be announced. Video providers will improve their chances of succeeding in this complex new environment if they focus on identifying consumer needs and desired experiences, evaluating their existing products and service offers, and monitoring their market performance. These are some of the questions we are addressing:

•             To what extent do consumer segments view these services as competing with each other?

•             What are the sweet spots which will drive maximum revenues or profitability?

•             Which factors drive different consumer segments to choose between the services available?

•             How much will consumer segments be prepared to pay for different video content packages?

•             How important is the availability of individual content titles, such as TV shows or movies, in affecting choice decisions?

•             What is the impact of bundling video with services such as home shopping, mobile or broadband on overall video subscription and usage levels?

If you are asking similar questions, let us know and we'd be happy to chat.

David Mercer