The Future of Video on Demand

by Billy Grant, Head of Product at RealityMine.

APOS was described to me as “the Davos of the media world”. I’d nodded politely on hearing this but, being the cynic that I am, retained a degree of skepticism around the veracity of this statement. Arriving at the venue after twenty three hours of travel, I’d naively managed my own expectations around the quality of the content that we’d be presented with and the relevance of my fellow delegates. I’d been coloured by MarTech conferences in previous roles where the content generally consisted of advertorial in slide form, and attendance was dominated by sales folks experimenting with the latest ‘business-casual’ trends. I cannot begin to describe how misplaced this perception of APOS was and will forever be ashamed.

Daniel Farrell and I had arrived a day early to ensure that we’d shaken off the worst of any jet lag and to maximise the secondary benefit of a business trip to a warmer climate; time by the pool. Guest demographics shifted rapidly from young couples engaging in impromptu photo shoots over to an obviously corporate crowd who had come armed with their finest chinos, linen and polo shirts. The photo shoots had been replaced by Zoom calls in the hotel’s public areas and guests around the pool were clearly trying to dispel any perception of being on a jolly by firing off emails as they sipped on Pina Coladas.

The hotel hosting APOS is best described as commodious. As such, it was very hard to gauge what level of attendance would be secured. The welcome reception revealed all. Hundreds gathered on the first evening and the crowd was cosmopolitan. Whilst APOS focuses very much on markets across APAC, delegates had clearly flown in from far and wide. The scale of attendance and draw of the event is perhaps less surprising given its location. I should have mentioned this earlier - the spiritual home of APOS is Bali and this year’s event was the first return post-Covid; the atmosphere was celebratory.

After a valuable evening with partners that we’d been unable to meet in person for a number of years, we prepped ourselves for the main event. Two full days of panel discussion and presentations lay ahead. Evening festivities and hearing anecdotes from previous years had gone a long way to assuage my worries about what we were in for. I won’t try to summarise everything that we learned over the two days in this article but will tee-up my main takeaways with the following points:

1. We heard directly from a ‘who’s who' in the Asia-Pacific and global media industry.
2. The industry is beset by a range of existential challenges but significant opportunities exist for businesses that can navigate these successfully.
3. Asia-Pacific is the growth-driver for the media industry.

Traditional Pay TV is Dead

I have lost count of the number of times I have been presented with charts that highlight the decline in traditional media; APOS 2023 was no exception. Despite headline figures detailing the resilience of Pay TV’s subscriber numbers, it swiftly became clear that this is a sector in terminal decline - particularly in mature markets. Patrick Delany, Foxtel CEO, talked of his major challenge being “just dumping cost out of the business” to maintain profitability. Despite challenges with their legacy product, ‘Project Magneto’ - which will play the role of aggregator - was touted as the future of the Pay TV business. This aligned with statements from Euan Smith and Harit Nagpal (CEOs of Astro and Tata Play respectively) who struck a confident tone around the aggregator role that legacy players could take in the battle for eyeballs; specifically in simplifying access to content.

The real sucker-punch came on day two when Michael Nathanson (MoffettNathanson Research) and Joe Ravitch (The Raine Group) lifted the lid on just how challenged legacy US broadcasters are. We were presented with ‘Twin Doom Loops’ that spoke to the death spiral that consumer defection to streaming is causing - high quality programming moving to direct to consumer platforms; core propositions being less valuable; an ever growing reliance on expensive sports rights and higher costs for customers; further erosion of the value proposition for non-sports viewers and deepening churn rates. Perhaps most shocking was the reliance that legacy players have on live sports to generate ad revenues and how much it contributes to their cost base. Representing approximately 70% of a network’s cost base and driving 40% of advertising revenue, sports rights are acting as a rather expensive life support for businesses that may be approaching their final days.

Sports & Live Content is the Next Key Battleground

With the majority of premium content having already moved across to direct-to-consumer platforms, sports content has stubbornly resisted (through unsustainable rights deals) migrating over from Pay TV. Joe Ravitch provided an excellent overview of why this market is primed for disruption.

The entry of serious institutional capital looking for big returns best underlines the transformation that we should expect to see over the coming decade. Whilst big investments in European teams have brought joy to some (as this Manchester City fan knows well), accusations of financial doping and ‘sports washing’ have not been far behind. Whilst there is justifiable unease amongst local supporters seeing their cultural and community assets evolve into vehicles focused on brand strength and commercial return, there is no stopping the juggernaut that is now in motion. Here's why:

Global Fanbases

Sports and their associated leagues have huge followings that transcend borders, generate high levels of engagement and deliver eyeballs at levels that scripted content can only dream of. It is clear that leagues and the teams within them are on a very clear mission to grow the value that they can capture from these audiences.

Competition for Sports Rights

Traditional media continue to maintain control of sports rights in many markets, but there are a range of new players that are actively competing or disrupting the status quo. JioCinema’s astounding success in streaming the IPL this year showed that non-linear players are more than capable of upsetting existing value chains. Whether tech giants will fully enter the fray remains to be seen, but the desire to maintain high levels of engagement amongst their audiences alongside mature advertising business may make this too tempting to pass.

Incremental and Adjacent Opportunities

Whilst it is easy to limit our thinking to the value that exists today, it is abundantly clear that growing the size of the pie is a focus for all. Whether that means growing fanbases in new markets, introducing additional leagues, pushing greater resource into women’s leagues, or the production of non-live content; we are already in the midst of this transformation and can expect more to come. The adjacent opportunities are no less enticing - gaming, sports betting growth and merchandise opportunities all represent significant opportunity.

Direct to Consumer?

The big unknown. Will leagues attempt to circumvent intermediaries entirely?

Expect A Lot More AVOD

The only slight cloud hanging over APOS 2023 was the reality that both the media and advertising sectors have been going through a tough period. Economic uncertainty has driven a contraction in advertising spend and all the money spent on streaming wasn’t generating enough of a return. JB Perrette of Warner Bros Discovery summed it up neatly - we’ve been through a decade of oversupply and underpricing, underpinned by an industry wide “content production bender”. The race to capitalise on the consumer migration to streaming platforms meant that many businesses were focused on short term growth metrics without much focus on how to make these platforms sustainable over the long term. It’s clear that reality is now starting to bite.

With SVOD saturation being reached in many key markets, flatlining subscriber numbers, and churn now representing a very real threat; getting serious about a model that works was high on the agenda. Whilst we’re able to observe these changes in real time, reduced content alongside the dash to ad-supported tiers and price increases are the levers being pulled most fervently. The extent to which customers will be accepting of these changes after a decade of excess remains a big unknown.

Consolidation is Coming

With streamers and studios in an embattled state, the word beloved of M&A bankers and advisors across the world was being uttered at an alarming rate. The hard reality being wrapped in eloquent corporate prose is as follows: there are too many global streaming platforms and they’re not all going to survive. It would be unfair to expect representatives of some of these players to publicly throw in the towel and state that they were desperate for a rival to buy them but it became clear that, for some, this is exactly what is going to happen.

The strength of legacy Pay TV businesses was that they were a one-stop-shop for the best content, whatever its source. As major studios have all dug moats around their content and pulled up the draw bridge to traditional licensing deals, some have simply found that their IP just isn’t as desirable or valuable in isolation as they expected. We should expect a much narrower range of global platforms to survive this Darwinian purge and a high likelihood of mergers amongst content producers who will need all the leverage they can get.

Short-form Video is the Future

Everyone knows that YouTube’s audience is big, but they don’t always know how big. Throw TikTok into the mix and eyebrows start to become raised. Add in a dash of the media that is consumed across other platform owners such as Meta and mouths are agape. Short form video has driven much of the recent growth in content consumption. Whilst commentators have been quick to view this as a phenomenon driven by the young, they are wrong. It is true that platforms such as TikTok achieve massive penetration amongst younger audiences, but they are also generating significant reach amongst older demographics in all markets.

A central theme from speakers focused on sports, children's and even long-form content, was that short form video is going to be a crucial distribution and acquisition channel that cannot be ignored.

For me, APOS 2023 provided a serious, entertaining and essential education in how the media industry is likely to evolve over the coming years. The RealityMine team are already building plans that will allow us to better support clients in navigating this change. We’ll be communicating more on these plans over the coming weeks and months.

In closing, I’d like to offer two unsolicited recommendations.

1. If you’re considering attendance at APOS; don’t think - get that ticket booked.
2. The venue certainly helps but the real draw is the content you’ll be exposed to and the people you will meet.

Hopefully I’ll be able to share the same summary for APOS 2024.