Very interesting article, if somewhat dated now. This mainly talks about use of
VOD from inside the walled garden MVPD offerings, but it also explains what's
going on outside those garden walls, with movies from OTT sites.
One big take-away is that TV shows have benefited a lot from VOD availability,
even just within those garden walls. This, combined with the stat that 53% of
TV is now being consumed on demand, makes me very much doubt the old truism
that the linear channel is the most valuable distribution pipe for TV. Or at
least, it makes me doubt that the consumer thinks so.
I also question the other truism, that network TV is being watched less. Looks
like VOD may have turned that around, although the numbers aren't specific
enough to be sure. The numbers don't specify what type of "TV entertainment"
has shown the huge gains, but my bet is that it's mostly the network shows.
Bert
---------------------------------------
http://brucegoerlich.com/2014/04/18/the-transformation-of-video-on-demand/
The Transformation of Video on Demand
Let's take a break from "engagement" to talk about another interesting aspect
of television-how Video on Demand (VOD) is changing. Rentrak has published a
"State of VOD: Trend Report" for several years now. (You can order a copy at
Rentrak.com/SVOD.) One thing that clearly stands out in this year's report is
that popular TV programs are becoming the mainstay of VOD.
First, a little explanation of the jargon (every industry has to have its own).
"Subscription Video on Demand" (SVOD) refers to On Demand content from pay
cable services such as HBO, Showtime, Epix, etc. Most operators (or in the true
inside lingo: Multichannel Video Programming Distributors or MVPDs) give pay
cable channel subscribers the ability to watch their movies and programs On
Demand, so a subscriber can catch "True Detective" on HBO On Demand, or "Hunger
Games" on Epix On Demand.
"Transactional on Demand" (TOD) refers to movies or events paid for by a
household. As an example, a MVPD will make a movie like "Frozen" available On
Demand several months after it has been in the theaters. The viewer then has to
pay to watch the movie (usually within a window of 24 hours after ordering).
TOD content is really what the MVPDs thought VOD was going to be all about-
generating income from movies, events... and porn (oops, make that "Adult
Content").
There is also the "TV Entertainment" category. This category consists of the
most popular TV shows, across all dayparts, which broadcast and cable networks
make available On Demand, including current (and sometimes past) series or
seasons.
Finally, there is all other "Free on Demand" (FOD) content, which refers to all
other free programs, including some specifically made to air On Demand, Music
on Demand, and a variety of other niche programs.
So with the lingo under our belts, let's go back to the days of yesteryear
(2010) and see what VOD looked like then. The chart below shows the share of
viewing hours accounted for by each type of VOD described above in 2010.
VOD-2010
------
My insertion. Graphic shows this breakdown for 2010:
Subscription: 35% (e.g. HBO)
Transactional: 13% (e.g. PPV)
TV entertainment: 20%
Other free VOD: 32%
------
In 2010, "Subscription Video on Demand" had the largest share of viewing hours,
followed closely by "Other Free VOD." "TV Entertainment" was a distant third,
and Transactional on Demand trailed in fourth place.
Now, let's shoot forward to last year, to see a drastically changed picture.
Again, we are looking at share of viewing hours by type of VOD format, this
time in 2013.
VOD-2013
-----
My insertion. Graphic shows this breakdown for 2013:
Subscription: 27% <--- Significant drop
Transactional: 10%
TV entertainment: 35% <--- Big growth
Other free VOD: 28%
-----
There is a dramatic change. The cable and broadcast network's "TV
Entertainment" category is now number one, at 35% share of hours. "Other Free
VOD" edges out "Subscription Video on Demand" by a hair, and "Transactional on
Demand" remains in fourth place, slipping to only 10% of hours.
Share is one thing, but one also needs to consider the absolute growth in VOD.
The total number of VOD hours watched was 3.6 billion in 2010 growing to 4.5
billion in 2013, an overall growth rate of 25%. But that growth rate was by no
means even as indicated in the chart below, which lays out the percentage
growth in hours by type of VOD format.
VOD-Growth/decline by hours in VOD program formats
------
My insertion. Graphic shows this breakdown for growth/decline in hours of VOD,
2010 to 2013:
TV entertainment: +122% (approx numbers)
Other free VOD: +10%
Transactional: -5%
Subscription: -3%
------
You can see that the popular shows in "TV Entertainment" grew by over 120%.
"Other Free VOD" grew by 10% while time spent viewing "TOD" and "SVOD" fell in
the 3% range. However, Rentrak's Digital Download Industry Service reports that
revenue for OTT movies (purchased) has grown by 124% since 2010. So demand to
watch movies at home has not fallen, rather the supply has grown with OTT
options.
Why has viewing of "TV Entertainment" grown so much? Again, supply is a big
factor. In the fall of 2013, the networks and MVPDs worked together to make
available more than the traditional four most recent episodes of popular series
to each household. When more programming options are available, the audience
will come. Or as Willie Sutton, the famous bank robber, said in response to the
question, "Why do you rob banks?": "Because that is where the money is."
And advertisers are starting to go where the audience is. Rentrak estimates
that there is a potential multi-billion dollar business in VOD advertising,
just with digitally inserted pre-roll ads. Those and other details can be found
in the full "State of VOD: Trend Report 2013," which you can learn more about
by clicking here.
-
In case you don't know, I am Bruce Goerlich, Chief Research Officer at Rentrak,
the global standard in movie measurement and your TV Everywhere measurement and
research company. I have been in the research end of the marketing business for
more than 30 years primarily on the ad agency side, with my last stint prior to
Rentrak in the role of President, Strategic Resources Zenith Optimedia North
America. Somewhere along the way I morphed from young Turk to old fogey. Now
that I have grey hair and am horizontally-challenged, I can speak with some
authority on advertising and research issues - which I will do from
time-to-time on this blog.
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