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Report: TV industry must evolve to stay relevant

The global television industry is in the midst of a digital revolution, and it is now clear that streaming video and non-linear viewing will be the most disruptive forces this industry has ever experienced, according to a new report – The Digital Revolution Is Disrupting the TV Industry – by The Boston Consulting Group (BCG).

The amount of time people spend watching television shows online jumped 50 per cent in just 12 months — from December 2013 to December 2014, the report says. In 2015, in the US and the UK, more than 50 per cent of entertainment programming was viewed on-demand – not according to a schedule fixed by a network or distributor.

“The television industry has seemingly ‘defied gravity’ as the only media industry in which traditional players and business models have not been disrupted by digital distribution. But that is about to change,” said John Rose, a BCG senior partner and co-author of the report. “The explosion of new viewing pathways, non-linear viewing alternatives, and new players along both dimensions will create the same degree of disruption that we have seen roll through media segments, such as music, radio, and print.”

The report highlights several trends that have fundamentally altered industry dynamics:

  • Online and mobile viewing will exceed facilities-based video viewing. By 2018, online video will likely account for nearly 80 per cent of fixed-data traffic and close to 70 per cent of mobile traffic.
  • On-demand viewing will eventually exceed live, linear viewing. The share of nonlinear viewing is currently reported to be just over 20 per cent in the US, but this number is expected to double to more than 40 per cent by 2018 and continue on this aggressive growth trajectory. And many European markets are not far behind.
  • New companies and business models are capturing significant value online. In the US, online-advertising revenues increased sevenfold from 2010 through 2015, and growth shows no signs of slowing down.

Four Disruptive Scenarios

The report identifies four potentially disruptive scenarios, depending on which industry participants seize the advantage in the battle for market share:

  • The Universal Remote. A wealth of compelling content exists in the fragmented mosaic of broadcast TV, pay-TV, and Internet-based offerings, but consumers can’t access and stream all video content across pathways and devices using a single point of navigation. Companies that can become the go-to, anytime-anywhere access point for living-room TV, smartphone, and tablet viewing have an opportunity to gain a huge competitive advantage.
  • The Walled Garden. Certain types of content, such as serialized dramas and top-tier sports events, are becoming increasingly popular with viewers, and distributors and aggregators can capitalise on this trend by locking up exclusive entertainment content. With subscribers choosing distributors on the basis of content preferences, exclusive entertainment content can become a critical strategic asset and differentiator.
  • Distribution Disintermediation. Networks with strong brands and top-tier programming — or the rights to hit content — can seize the advantage by delivering content directly to consumers.
  • ‘Live’ TV Online. One of the main reasons viewers don’t cut the cord is that traditional television still offers live programming and content across all categories (not just entertainment, but news and sports as well). Online aggregators that integrate live content with their own on-demand offerings — and price the package right — can transform their value proposition for consumers.

“TV companies will need to make smart decisions about how to adapt in order to tap into changing consumer preferences,” said Jacob Rosenzweig, a BCG partner and co-author of the report. “To thrive in the digital revolution, TV players must think strategically about how to maximise the assets and content they have, invest where they have gaps, and anticipate where their traditional business models will be most at risk.”

Staying Relevant in the New Ecosystem

The report explores implications for all participants in the video-industry value chain: content creators and rights holders, broadcast networks, cable and satellite companies, and online content aggregators. Content creators and rights holders are well positioned to thrive in virtually all scenarios, but the same cannot be said for others in the industry. Companies with businesses built on traditional TV and streaming video need clear strategies to prepare for the changes to come and – where possible – to influence outcomes in their favour.


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