What to Expect in OTT Video, Linear Video Markets, According to Product Life Cycle
Television is not what it used to be. Entertainment video and moves now are consumed on many devices, not just TVs; mobile viewing is growing and younger viewers show a preference for streaming, versus linear formats.
Some logical conclusions might be drawn. Entertainment video is a product like any other, with a product life cycle. And linear video unquestionably is a product in the “decline” period of its lifecycle, as “over the top” or streaming services emerge as the replacement product.
If Netflix and other streaming services are in the growth phase, we would expect to see growing sales volume; scale benefits (lower cost per customer); growing supplier profits and more competitors entering the market.
Conversely, if traditional linear TV is in its decline phase, we would expect to see falling sales volume; lower profits; lower cost per customer and fewer competitors.
There is one important caveat. Real-time streaming services are probably in the earliest phase of the life cycle, but nearing the transition to the “growth” phase of the cycle.
That implies high costs per customer; still-low sales volume; financial losses for providers and relatively few suppliers are to be expected. In the next phase (“growth”) we would expect to see growing sales volume; scale benefits (lower cost per customer); growing supplier profits and more competitors entering the market.
In the immediate future, linear TV suppliers are going to employ a hybrid strategy: sustain the existing product as long as possible while investing in OTT alternatives.
For firms such as Comcast, with a big stake in legacy TV revenues, one concrete form of that strategy is that it recently boosted internet access speeds by 100 percent, at no additional charge, for Comcast customers who buy at least one other Comcast product (a bundle).
That is intended to shore up linear TV subscription demand, and undoubtedly will do so.