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How Beneficial Is an OTT Platform for Content Owners Like Disney?

December 12th, 2017   ||    by Charlene Weisler   ||    No Comments

The line between traditional media and over-the-top (OTT) streaming is blurring as more content originators begin testing streaming services. Companies like Disney, Hallmark, and Discovery are all exploring OTT platform options—from joining Netflix and Amazon to striking out on their own.

But what exactly are they after?

The Path to OTT

The core cable television model has always had two major revenue streams: affiliate fees and advertising sales. Although the advertising sales model has been sorely tested recently (with the proliferation of devices and increased content sources), it’s the affiliate fee side of the revenue equation that has been especially pressed.

Cable operators—feeling the pinch of declining subscribership—no longer feel compelled to pay for all the cable network services provided by media corporations, preferring instead to offer skinny bundles that cost less to subscribers. Some networks, multi-channel video programming distributors (MVPDs) argue, are too niche or controversial for their markets—or don’t fit well with their market demographics.

This leaves networks struggling to find ways to maintain their affiliate-fee revenue streams for all their network services while also grappling with the increasing technological fragmentization of the industry.

The Rush to OTT

In response to all this, many media companies are examining OTT platform solutions by offering their content to services like Netflix, Hulu, or Amazon. Some, such as Disney, are exploring the launch of their own streaming services.

The cost of entry to these next-generation platforms is compelling content that attracts a meaningful number of subscribers. The quest for quality content is energizing some company stocks on Wall Street, where even the hint of a Disney purchase of Fox spurred great optimism, according to Forbes.

In addition to possible acquisitions, Disney is also cannily planning to launch its own streaming service in 2019, featuring a deliberately lower price point to spur sign-ups. Disney recently pulled all of its content from Netflix to be able to offer exclusive content on its new streaming service, including both movies and TV series.

“Disney understands exactly what brands drive its popularity, and it plans to develop a number of projects and original content around them,” said Disney CEO Bob Iger on a recent conference call with analysts, according to Forbes.

The Risk in OTT

For content creators, placing content in walled-garden streaming services has several drawbacks:

  • There’s a risk of alienating those viewers who may feel such content is nice to have, but not worth the extra money. The question is whether subscribers willing to pay specifically for such content are a significant subset of a content creator’s total audience.
  • Programmers are placing their streaming content in environments that cannot leverage the strength and brand of surrounding competitive programming or local-interest content, such as local news. Such content will succeed or fail based solely on its appeal—without the benefit of lead-in strength or competitive cross-promotion marketing.
  • For advertisers, the apparent disadvantage is that many OTT services are subscription-based and commercial-free . . . at least for now.

Amid all the back-and-forth, community-oriented local television offers an untapped advantage for both content providers and advertisers.

“Local activity is very well-connected into the community. People have a feeling about their local personalities,” according to Mitch Oscar, advanced TV strategist at U.S. International Media (USIM).

That loyalty can translate into an emotional connection to other content and the advertising that accompanies it.

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