Media and Entertainment is a multi-trillion-dollar global industry. Latest forecasts suggest that Video – including traditional broadcast TV, traditional pay-TV, and OTT – will deliver about $700 billion of revenue in 2024. 50% of that revenue will come from advertising, 45% from subscriptions and 5% from public funding. Specifically in OTT video, the fastest growth area is in ad-supported services like AVOD, FAST, and especially in Broadcaster audiences moving to streaming.

While this sounds attractive, there are worrying dynamics for Broadcasters to address. To win the battle for eyeballs, it is now more business-critical than ever for Broadcasters to focus on delivering highly efficient, broadcast-grade streaming.

Audience Dynamics

Broadcast Audiences Are Declining

Broadcast TV viewership has been in general decline for many years. Older age-groups consume the most content and are most loyal to broadcast, but a recent UK-focused Ofcom Media Nations presentation at the Future of TV Advertising event highlighted the continuing decline even in older age-groups.

The Inevitable Shift To Online Viewing

Multiple reports show that the youngest age-groups watch most content on video sharing platforms (e.g. YouTube, TikTok, Instagram), with SVOD/AVOD consumption (e.g. Netflix, Prime, Disney+) representing a bigger share of total viewership in the older 16-34 age-group. For under 34s, Broadcast TV represents only 25% of total viewing time, versus 90% in the Over 75 age group. Research from Magna’s 2023 Time Spent Report highlights further generational differences, showing that content consumption on Connected TVs for Millennials (27-42 age group) and Gen Z (11-26 age group) is 200% higher than for Gen X (43-58 age group) and 400% higher than for Boomers (59-68 age group).

Business Dynamics

Advertizing Is Going Online

Advertizers are taking more of their advertizing budget online. Online ads can be targeted more effectively and find us while we are browsing websites. Critically they can be measured more easily than TV ads. It’s a clear reason to re-focus advertizing budgets.

Worryingly for Broadcasters, a recent report from PWC highlighted that while Internet, Gaming, and VOD are all growing ad revenues with strong future growth expected, Broadcast TV has been flat and is forecast to be flat. Broadcast TV is moving from 30% of total global ad revenue in 2018, to 22% in 2023 and forecast to be just 19% in 2027.

Pay-TV Is Going Off-satellite

Companies offering Satellite TV services are transitioning to streaming-first service propositions (e.g. Sky Stream and Sky Glass). For linear TV channels, Satellite distribution is becoming expensive. Industry statistics show a staggering decline from $100bn of global Satellite TV revenues in 2015 to $42bn in 2028. The shift from satellite to streaming is speeding up the overall consumer shift to streaming-first.

Pressure For TV’s Frequency Is Growing

The World Radio Conference 2023 (WRC 2023) was heralded as a moment when the Ultra-High-Frequency (UHF) band, used by Digital Terrestrial Television (DTT) services in the 470-694 MHz range would become “co-primary” use by Broadcast and Mobile. This would have been a watershed moment in the broadcast industry and potentially marked an acceleration from DTT to streaming. However, the Conference decided to align with the EU’s and UK’s recommended position of “no change” to the primary use of the UHF band for broadcasting while adding mobile services as an optional secondary use of the frequency. This position will be reviewed at WRC 2031.

Despite this decision, the commercial reality is that consumers are buying new SmartTVs and faster broadband, and Broadcasters are offering new services on their streaming platforms. The pressure is on for the frequency, and business models are shifting anyway.

Competition From Pure-Play Streamers & Global Media

The biggest media companies in the world have much higher revenues than the large national and regional Broadcasters. Their long-term capability to invest in content, rights, talent and technology is self-evident. Customer surveys of their services also show that they perform best for user experience and playback quality. This group is a significant threat to Broadcasters for the advertising and subscription revenues that make up 95% of the $700bn annual Video revenue.

Europe Is An Attractive Zone

European Broadcasters are particularly exposed in the coming years. Europe is a prime target zone for global M&E businesses looking for subscribers and advertizing revenues due to its attractive population size and GDP per capita position relative to other markets. As a result, European Broadcasters and streamers face tough international competition and must innovate to survive.

Sports Have Created Stronger Competition For Broadcasters

Broadcasters already had competition for entertainment content from the Pay-TV and SVOD businesses. But when DAZN entered the market for major sports rights, followed by Amazon Prime, Apple and YouTube, the game really changed.

Of the Top 10 Sports Broadcasters globally, including household names like ESPN (Disney) and TNT Sports (Warner Brothers Discovery), 3 are pureplay streamers (DAZN, Prime, YouTube). These streamers have invested in major European football rights like Serie A Italy and LaLiga Spain, plus NFL rights in the USA. Apple is currently no.19 on the list because it has so far only invested in Major League Baseball and Major League Soccer in the US. As prices rise for sports rights, Broadcasters are priced out but still retain rights and responsibilities for major entertainment and news broadcasts. This still requires a very large scale of distribution but reduces the revenues available to the Broadcasters, creating extra cost challenges.

Technical Dynamics

Guaranteeing Viewer Satisfaction

The internet is a crowded place, with video, gaming, e-commerce, and websites. In this congested environment it is hard to guarantee a video will be delivered perfectly. Even the best OTT streamers do not have perfect broadcast-grade performance. Many news headlines have highlighted how difficult live streaming is, not just for video quality but also for App performance, including log-in, registration and payment services.

Research from Akamai and Sensum, measuring emotional response to video quality, has shown that high quality streams increase viewer engagement by almost 20%, while rebuffering causes a 16% increase in negative emotions.  A highly significant 76% of research participants said they would stop using a service if rebuffering occurred several times.

To offset these business-critical risks, the best OTT streamers have invested heavily in their own infrastructure, with large internal development teams and significant resources to resolve issues. Netflix reports it has invested over $1bn since 2012 in its Openconnect CDN platform. Broadcasters transitioning to streaming at scale must also guarantee video delivery quality, or else the audience will disappear. To do this cost-effectively requires a different type of video delivery architecture and purchasing model, which pioneering companies like DAZN have recently proven.

Connected TVs Are Taking Over The Living Room

The big-screen TV in our homes is changing. It is now becoming an internet-only SmartTV – a Connected TV – with only streaming apps on board. YouTube has become the No.1 channel worldwide on Connected TVs. As Evan Shapiro has reported, advertisers now consider Connected TVs the “horizontal, premium advertizing space”, while Mobile devices are the “vertical, incremental advertizing space”.

This transition to Connected TVs not only increases streaming volumes, but it also puts pressure on streaming quality which demands higher-performance video delivery than before. It’s a double-whammy for streaming services and makes video delivery quality a mission-critical activity. It also dramatically increases video delivery volumes with higher bitrates which increases costs in traditional CDN purchasing models.

What Does All This Mean?

Streaming capacity must grow to keep up with the demand for more streaming and for higher-quality streaming. But it’s not only about more capacity in the delivery networks. It’s about more efficient use of the capacity and the networks between the Broadcaster and the Viewer. It’s about having SLAs that guarantee quality to satisfy viewers. It’s about moving fast enough for your audience and your business rather than waiting for general industry capacity to become available.

Recognising the threat to Broadcasters, government regulators like Ofcom in the UK are conducting reviews of TV distribution strategies for the future. This move to streaming is a tectonic paradigm shift for Broadcasters whose businesses are caught between competition for eyeballs from Global Media, pressure from Telcos for the broadcast frequency, and expectations from consumers for more advanced viewing experiences.

The Way Ahead

For Broadcasters, there are some significant concerns ahead. To protect against adverse business impacts, Broadcasters must guarantee flawless content delivery to protect Viewer QoE. The global streaming pioneers invested heavily in new technology and business models to build their market-leading services, and they have best-in-class QoE. But Broadcasters can access the same types of technology and business models from today’s commercial managed services.

The 3-pronged approach we strongly suggest Broadcasters follow is:

1. Lay strong foundations today: use new business models that provide economies of scale for broadcast-grade OTT video distribution.
2. Retain control of distribution channels: design a video delivery pathway with suppliers that can guarantee flawless video playback to every viewer.
3. Deep-dive into edge network architectures: look at new ways to leverage an Edge network to deliver a super-fast and high-quality Application experience for your viewers.

To learn what MainStreaming has done for leading Streamers like DAZN, Sky and RAI, contact us here.