The State of OTT 2019
2018 was a year of subtle repositioning of some of the major over-the-top (OTT) platforms in preparation for what is likely to be a cutthroat 2019. As always, we begin with the market leader.
Netflix now has a dominant position in the market globally, with around 137 million subscribers, and last year released around 700 new series of content. This has not come cheap, with the total spend on content reaching around $8 billion, but with original content such as Bird Box being viewed on more than 45 million accounts globally in the first 7 days after launch, it is certainly delivering significant viewership.
Netflix has also continued to innovate not only with the content it produces but also in the ways it interacts with customers. It has tried to drive consumers to engage with the brand directly when it comes to payment by redirecting them from using in-app purchases through the Google Play or App Store. Both Apple and Google tend to take 30% of any initial payments in the first year and 15% in each subsequent year.
Moving customers into Netflix’s own payment system could mean not only a significant increase in revenue but could also put Netflix on a collision course with both Google and Apple. This is a calculated risk, as the strategy is key in some more immature markets where Netflix has been trialling lower-cost, mobile-only subscriptions with a more limited selection of content. Removing the additional overhead of subscriptions bought on other platforms could significantly increase revenue and aid more experimentation in regional lower-cost propositions.
In more mature markets, the battle with the app platforms, while a worthwhile fight, may be less of an ongoing concern. A recent Wall Street Journal article suggests that around 40% of users are so happy with the service, they would be willing to pay more for it, so there could also be potential price rises on the way in these more mature markets.
Innovation is also a key growth strategy for Netflix going forward. Despite the demise of the gaming company Traveller’s Tales at the end of 2018, its final completed game, Minecraft Story Mode, was released on Netflix in November.
Presenting a pared-down version of the original game, this version allowed viewers to make binary choices throughout its runtime, which had a meaningful impact on the outcome. This was followed by the launch of a Black Mirror interactive episode “Bandersnatch,” structured like a “Choose your own adventure” book, which allowed viewers to make decisions within the narrative, leading to multiple different endings. There is already speculation that there could be future special episodes of Netflix’s other well-known franchises.
In December, Netflix premiered “Bandersnatch,” an episode of Black Mirror in which viewers could make selections throughout the programme
that would change the narrative they viewed.
Innovation was not just about new ways of engaging with content but also about new forms of content and the potential film and TV content generated from it. The Millarworld acquisition in 2017 has meant that Netflix has a steady flow of series and films under development and in production based on Mark Millar’s comic back catalogue and new characters he has developed. In addition to this, Netflix published his first brand-new comic series, The Magic Order, in June, with another new comic, Prodigy, released in December.
This twin track approach of producing new comics that are also being turned into ongoing series or films gives Netflix the potential to grow audiences across both formats, mitigating the upcoming loss of Marvel content (more on that later).
Whether comics will ever end up being digital assets on the platform is still in doubt, but it can’t be ruled out as the strategy develops.
One of the major factors disrupting this market in 2019 is the planned launch of the new Disney streaming service. The service is already having an impact on its rivals even before launch, but not in the way you might think.
By December, Netflix cancelled three of its shows based around Disney/Marvel properties, with the rest of the slate looking as if they would be cancelled once all seasons are released. Lower viewing figures were cited as the major influence on the decision. However, from a pure business perspective, it must be clear that producing expensive licensed shows and having no share in any IP could not have been very palatable for Netflix, particularly when the partner it is licensing the content from is not only setting up a rival service but ending its own content deal, thereby removing a large number of high-profile movies, including all Marvel content. The question is whether Netflix can take new, lesser-known comic properties and create popular shows of the same quality it has previously managed with Daredevil, Jessica Jones, and others.
Disney’s new service, Disney+, is now looking to launch in Q4 2019 (at least in the U.S.), but how does the House of Mouse aim to take on the behemoth of Netflix along with all the other streaming platforms out there?
Its focus is similar to Netflix’s strategy based around creating compelling exclusive content as well as keen pricing of the product. Disney’s Bob Iger is on the record as saying the service will be cheaper than Netflix at launch.
In terms of content, no more of Disney’s Marvel movies will premiere on Netflix after Ant-Man and the Wasp. Instead, starting with Captain Marvel, Disney+ will be the new streaming home of Marvel movies. Reports also suggest there will be around 500 movies available at launch with 7,000 additional TV episodes.
Leveraging IP is key to Disney’s strategy, but this means not only existing content but also new and exclusive content, so there will also be limited-run series based on existing and established Marvel characters; the first will be Tom Hiddleston’s Loki. The focus is not just on Marvel, as there will also be two Star Wars-based series debuting on the service, as well as content based on Monsters Inc., High School Musical, and other properties.
The service will focus heavily on family-friendly content, with nothing R-rated at all. This will position the platform as offering safety and security to parents who are already having to manage exposure to content on a lot of platforms for their children.
Netflix may have pioneered online pay TV on-demand with a model that every other SVOD chased. From April 2022, a pivot was required of every player, Netflix included.
The SVOD market is already crowded. Do new entrants Disney+, Apple TV+, and BritBox have what it takes to give Netflix and Amazon Prime Video a run for their money?
Our annual big-picture look at the numbers that tell where the online video market is today and where it's headed in the next year