The Netflix effect

Tom Williams, CEO of Ostmodern, looks at how broadcasters can survive and prosper in the age of OTT TV.

For better or worse, the growth of video-on-demand has irreversibly changed the face of modern broadcast. As recently as a decade ago cable TV was in its prime, and gathering around the living room television to watch ‘live’ content was a regular occurrence.

These habits are now changing. Fuelled by a combination of readily available internet access and a growing constellation of mobile devices, consumers are now provided with an unrivalled choice over how, where, and when they consume content. At the head of this change is streaming service Netflix, a platform which is now used by 23% of adults in the UK on a weekly basis. The content giant has broken the traditional barriers imposed by live TV, empowered the consumer and set a benchmark expectation for an entire generation of convenient content available anytime and anywhere. But Netflix is not alone in its success; this all-you-can-eat culture has given rise to an influx in new VOD services trying to capture the attention of today’s audiences.

The growth of streaming services does not mean that traditional television has entirely lost its value for consumers, as there will always be a demand for live TV. However, VOD services, with their vast choice of original series, have the potential to steal a significant chunk of market share. So, it is no surprise that the growing popularity of subscription VOD services has led many to ask whether traditional TV has a place in the future of entertainment. And with research from Q4 2015 showing that over 24 per cent of households in the UK are now subscribed to Netflix, Amazon Video or Sky’s Now TV, this topic is only set to remain a hot debate within the broadcasting industry.

The simple answer to whether broadcasters can survive the changing market is yes. Traditional players hold the keys to a number of factors that have the potential to allow them to reap the rewards of launching a successful VOD service. However, there are no quick-wins when creating a VOD platform, and broadcasters should steer clear of imitating all the strategies of Netflix. Features that contribute towards Netflix’s success won’t necessarily work across the board for all VOD platforms – just because Netflix offers a particular feature to its subscribers; it doesn’t mean that the same features will benefit broadcasters too. Instead, broadcasters must play to the strengths which made them so popular in the first place. By implementing this strategy, broadcasters can ensure that they develop VOD platforms that encapsulate the tone of voice, personality and style that viewers at home already know and love.

A new approach

A large majority of established broadcasters have already successfully launched VOD services, providing viewers with a platform to catch up on content that has already aired. What Netflix and other subscriptions services have done, however, is demonstrate to broadcasters the opportunities available by expanding their own platforms beyond purely catch up VOD services. Netflix, for example, has cottoned onto the needs of the ‘want it now’ consumer, allowing viewers to binge on original content such as House of Cards, Stranger Things, and Orange is the New Black, by releasing an entire series in one go. In an age where viewers are happy paying for content services, the recent widespread adoption of VOD has also highlighted to traditional players the possibilities of profiting from archived content or old series. The BBC is rumoured to be in discussions with rival broadcaster ITV over launching a streaming service where viewers would pay a monthly subscription to view a huge archive of older shows outside the free 30 day period of iPlayer. This example demonstrates how the growth in VOD services need not mean the death of broadcaster, but is merely acting as a catalyst for change.

Local players

While Netflix has extensive budgets, which traditional broadcasters could never hope to compete with, there are a number of key strategies they can use to thrive. Over the years, broadcasters have developed an understanding of their audiences, their values and local culture. This means unlike Netflix, broadcasters do not need to invest in researching the various nuances between each audience, it’s a strength that they can play on from the get go. Similarly, broadcasters have a prime understanding of how to promote content to consumers, scheduling content, in daily, monthly, yearly cycles in a way which they know appeals to their audiences.

The build-up to, and during, major calendar events such as Christmas and Easter, and sporting events like the Olympics, FIFA World Cup and Wimbledon Tennis are prime opportunities for broadcasters to demonstrate this understanding as well as capitalise on the festivities. By promoting and arranging related content during these periods, be it short video bites or feature-length series, broadcasters can prove they are in touch with their customers.

The personal touch

But simply relying on their knowledge of localisation will not be enough to give broadcasters the upper-hand in the world of SVOD. Other factors such as personalisation are crucial to creating a unique and meaningful VOD product. Netflix’s complex recommendation engine, for example, powered by large technology budgets, is heads above most services and attempting to create a ‘Netflix clone’ with less only runs risk of failure.

Broadcasters would be better placed to exhibit their informed understanding of what users want and need. One strategy that Ostmodern’s client base has seen success with is the adoption of a human editorial approach to recommend programmes, instead of machine-automation often used by steaming services. Using a human-curated approach allows broadcasters to use tone of voice, style and individual personalities that audiences can engage and identify with, something which a purely algorithmic-based system is unable to provide. A more humanised system, using hand-selected content by real people, also ensures that there is a clear thread of authenticity, credibility and trust to win over the hearts of subscribers.

VOD here to stay

Netflix is unquestionably a VOD-era success story, with the service attracting over 79 million subscribers in 192 countries. However, the growth of service’s subscribers is finally slowing thanks to a price hike which came into effect in recent months. In addition to this, the platform has decreased the number of films and TV programmes available to subscribers this summer, and consumers (particularly in the UK) are gradually waking up to the realisation that the platform is no longer a one-stop-shop for content.

In a field which is constantly changing, it is now vital that broadcasters react to the modern age of video consumption habits to avoid being left behind. The current state of the video-on-demand industry is a perfect opportunity for traditional players to capitalise on the changing viewer habits by creating VOD platforms that appeal to their individual audience needs and expectations. To succeed, broadcasters should combine their long-standing expertise with the help of a VOD delivery expert who has an in-depth knowledge of VOD technology as well as understanding of the broadcaster’s unique style, to avoid falling into ‘one-size-fit-all’ trap when building services.

On-demand viewing is now part of many people’s lives and will undoubtedly continue to grow. Rather than killing traditional broadcasters, the ‘Netflix effect’ should instead be viewed as a blessing in disguise.