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Executive Trends: What to expect the day after OTT (Part 2 - November 2015)

Part 2: The dark side of "Content is King"

 

The current bullish climate concerning the development of multiple new Over The Top streaming services will, sooner or later, find a roadblock: there is a limited amount of high-quality content. And producing it is becoming increasingly expensive. 


The television industry is finding itself between a rock and a hard place because the audience expects, if not "better" programming in terms of intellectual quality, content that is visually attractive and at the same time dynamic in terms of short takes, cutthroat editing and all the gimmicks that create the sensation of "action". All this does not come cheap.

 

At present, there is an interesting inventory of past content that may be somehow recycled, as it happens with telenovelas that apply vintage dramatic situations to more or less new environments. The same happened to pay television thirty years ago, but the valuable stock has been depleted and outlets are now shortening the life cycle of programming, in good measure to reduce piracy. True, you can still watch reruns of "Seinfeld" or "Friends" with a degree of pleasure, but that's it.

 

At the start of this digital platform era, content right owners watched OTTs as an incremental market and were glad to sell their inventory at low prices, no exclusivity allowed. Now, with Netflix, Amazon, Hulu and many others on the buying side of the market, prices have skyrocketed; production expenses, not long ago measured in hundreds of thousands, now are budgeted in terms of millions of dollars. And this is happening at a time when advertising billings are flat and must be distributed among a larger number of players: broadcasting, pay TV, digital platforms.

 
This scenario does not preclude the emergence of new, bright show runners that will build up success from almost nothing. But that's not enough to sustain an industry. Some OTT developers claim they will appeal to market niches, a valid idea that, as it happens in Silicon Valley, calls for further consolidation into fewer, larger companies, maybe operating hundreds of these former upstarts.

 

The linear television challenge

 

With most governments snatching spectrum, from the broadcasters and selling it to the telcos, it doesn't come as a surprise that free-to-air television will become something of a rarity in seven to ten years. This should not be confused with "mobile television", which is a value-added telecommunications service, like WhatsApp.With most governments snatching spectrum from the broadcasters and selling it to the telcos, free-to-air television may become something of a rarity in seven to ten years. This should not be confused with "mobile television", which is a value-added telecom-munications service, like WhatsApp.

 

Yet, most advertising remains geared towards "old" TV, and might be lost if this consumption mode vanishes.Advertising-supported OTT's still don't look promising at this time.

 

 

Full Story Part 3: Linear TV fragmentation (December 2015)
Full Story Part 1: Some definitions, background (October 2015)
Full Story Digital platforms may be good to television (September 2015)

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