TBI Tech & Analysis: How OTT is impacting distributors’ thinking

The launch of streamers such as Disney+, WarnerMedia’s HBO Max and NBCUniversal’s Peacock has underlined the rapidly shifting direct-to-consumer strategies of the US studios, as well as the increasing dominance of OTT stateside. But what about distribution elsewhere? Here are five takeaways from The Future Of TV Program Rights In An On-Demand World report, produced by TBI sibling Omdia.

The business of distribution has been in considerable flux for the past five years as streamers such as Netflix seek to secure talent and grab as many global rights deals as the market will allow, slashing potential sales opportunities as a result.

For distributors, it has meant a rapid adjustment. Many are now financing programming more than ever before to secure a pipeline of product to then sell, while others are using their deep content libraries to go direct to viewers in their own way – just look at Endemol Shine Group’s recent activity over the past few weeks.

Prior to the global Covid-19 pandemic taking hold outside of Asia, TBI sibling Omdia polled more than 30 distribution companies around the world to get their take on the changing ecosystem and what it means.

The US studio streamer effect

Strategies for the streaming services emerging direct from the US studios contrast considerably at present. HBO, for example, last year renewed its output deal with Sky and will co-produce with the UK-based, Comcast-owned operator, suggesting it is unlikely to launch in the region soon. Disney, however, looks to be reserving its premium content for Disney+ in most of Europe, although Canal+ in France will still have access to Disney-branded content in the first pay TV window. While the long-term impact of DTC launches remains uncertain, more than half (55%) of distributors thought that the studios will no longer release any of their premium content to third parties – meaning operators that previously relied on this content will require other options, providing a potential a boon for distribution firms.

National SVOD prospects

Most distributors were uncertain about the prospects for national on-demand services like BritBox in the UK, Joyn in Germany and the much-delayed Salto in France, with 32% of respondents non-committal and another 19% being skeptical about whether they will succeed. Challenges facing the local platforms include ‘subscription fatigue’, with one respondent suggesting they will “fade away” as the studio-backed D2C services grow. Others were prepared to give the national offerings a chance, provided they offer original and exclusive content and differentiate themselves from the international streamers. Competitive pricing is also a key.

Delineating content consumption…

Viewing of linear TV channels is declining – albeit not as quickly as many predicted – in most countries, with younger age groups particularly affected. The impact of this on distributors is clear: just under two-thirds of respondents made a majority of sales across both online and linear, reflecting the habits of acquisition execs who now normally want to be able to offer programming live and then on demand. However, for a quarter of respondents, linear TV-only deals made up a majority of sales by value over the past year to March.

… adds to sales decline

Distributors mostly expected the value of linear TV-only sales to decline in the next two years, though a minority expect them to increase. Meanwhile, all respondents think that online-only deals will increase in value or stay about the same and distributors also expect a strong increase in deals bundling linear TV rights with online.

On the fence with AVOD

Advertising-supported video on demand (AVOD) was meant to be the next big thing in 2020 – and it might yet be proven to be so. For most distributors, its impact is unclear, with nearly half (49%) believing it’s too early to say what the effect of AVOD will be. However, almost one-third of sellers see AVoD platforms as potential customers for first-window, exclusive (and therefore, premium-priced) content. A significant number (16%) think AVoD will only buy library, non-exclusive content.