OTT content is a mega-disrupter. And it could be the best thing to ever happen in Hollywood.
OTT is disrupting the cable industry, broadband industry, advertising industry, mobile industry, movie distribution, and even Hollywood. Story telling as a form of entertainment has been around forever and the fundamentals of good storytelling will never change.
But how those stories are told, packaged, financed and delivered will certainly evolve.
Content Distribution Changes
A fundamental change is taking place in the way people consume video and entertainment. The traditional mode of consumption is being replaced by a new one where many devices – smartphones, tablets, TVs – are being used, sometimes all at once, wherever and whenever the consumer chooses. The selection of content is almost limitless, coming from traditional PayTV cable bundles, subscription OTT service such as NetFlix and Amazon Prime and ad-supported video generally available on the Internet such as YouTube and Yahoo web television.
The global video-on-demand market is expected to be worth US$45.3 billion by 2018 (Euromonitor, 2014). New consumer research from Leichtman Research Group, Inc. (LRG) finds that 56% of all US households have at least one television set connected to the Internet via a video game system, a smart TV set, a Blu-ray player, and/or a stand-alone device (like Roku, Apple TV, Chromecast, or Amazon Fire TV) -- up from 44% in 2013. Subscription OTT services are also gaining traction. Recent research from Parks Associates finds that 55% of U.S. broadband households subscribe to an OTT video service, up from 44% in 2013.
Although all of this OTT content points to entertainment consumption shifting to the home, going to the movies remains a part of our shared experience, and always seems to be a good option for date night or meeting friends. However, movie theaters are morphing too.
Movie Theaters Morph into Entertainment Complexes
Movie theaters are providing more amenities in an effort to bring in viewers. They are trying to create an entertainment experience that includes 3D and surround sound and have morphed into entertainment megaplexes that offer leather reclining seats and serve premium food from well know restaurants as well as alcohol from a fully stocked bar.
Several years ago, George Lucas and Steven Spielberg predicted that VOD will fundamentally change the entertainment business. In this article in Variety, they predict “the imminent arrival of a radically different entertainment landscape, including pricey movie tickets, a vast migration of content to video-on-demand and even programmable dreams.”
No Theaters, No Problem
Late last year, Sony released “The Interview” to a few theaters and expected dismal results. Due to the controversial nature of the film, Sony released the film to VOD at the same time and grossed an unprecedented $40 million in sales. Was it an anomaly? Maybe, maybe not. Blockbusters like “Titanic” grossed $2.2 Billion in theaters and brought in an additional $1.2 billion in DVD and VOD sales.
Changing Landscape of Film Financing
Historically, film financing has been the purview of the established Hollywood network – i.e. the four big studios. That is about to change.
The SEC has passed regulations implementing a streamlined securities registration process and it will change the landscape for film financing. These rules permit investment offerings (including for films) to the general public beginning June 19. Traditional financing for films has been difficult because banks are looking for the “blockbuster” from the top four or five studios leaving a gaping financing hole for independent and emerging filmmakers. This new investment option gives filmmakers not part of the “old Hollywood network” opportunities to get their films or series made. New financing options means more content will be made and find its way to VOD.
OTT is providing more options than ever before
From full-length movies, to snackable video snippets on Facebook and everything in between, consumers are demanding different experiences whether they are at home, in the car, waiting at the doctor’s office, or at a movie theater.
The appetite for entertainment will always be a staple in almost any culture. Hollywood and entertainment creators are now challenged to tell stories in different ways, through different distribution channels. What works in one channel many not work in a different channel. Hollywood has some of the most talented storytelling and production resources in the world. It will be interesting to see how the creative community adopts and leverages the new OTT delivery paradigm.
One thing is for sure. OTT is a major disruptor and it is giving the consumer more options than ever before.
This disruption also requires the underlying infrastructure to evolve rapidly so that it can deliver OTT content with the Quality of Experience (QoE) consumers expect. When subscribers don't get what they want when they want it, they're not happy. QoE can mean the difference between keeping a subscriber and losing them to a competitor.
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