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Optimising business models for online video

Ovum Plc
September 16, 2009
60 Pages - SKU: OV2446856

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Making money from online video is proving difficult, because audiences have not yet reached a critical mass that can generate profits from transactional or ad-supported business models; a situation exacerbated by content acquisition problems and the slow adoption of connected television devices. This report uses insights drawn from Ovum’s consumer video trends survey to derive a set of possible business models and optimisation recommendations for online video services.

Executive summary: In a nutshell; Key messages; Media giants demand payment for valuable content; Monetisable audiences are too small; Understanding ‘free’ is key to the value proposition; Advertising alone is not yet a sustainable business model; Widespread authentication is set to boost subscription; Paying will make consumers more demanding, but more loyal; Two top-level target consumers identified; Lower-risk business models found upstream in the value system; Recommendations for players; Close content partnerships are essential; Deliver online video to the TV set; Device integration provides competitive advantage; Flexible ‘freemium’ model appeals to viewers and content providers; Background trends in online video; Strong growth in online viewing; Strong ad growth but from a small base; Monetisation of online video is proving difficult; Survey results: viewing trends by age and country; Online viewing varies considerably by age and country; Young watch frequently; middle-aged do not; Survey results: attitudes to payment; ‘Free’ remains a big attraction; Viewing of online video would increase if it were free; Free content has many channels; Paying for online video downloads or streams; Online video is highly price-sensitive; US spends the most; France and Germany spend the least; Five patterns of video spending and viewing frequency; China and Korea; UK and Italy; Australia, Germany and Sweden; US; France; Renting video is price-sensitive; No significant variation in spending by gender; Factors reducing willingness to pay; Video downloads are too expensive; Content portability not an issue; A large minority appear to distrust their service provider; Movie blockbusters most likely to attract paying customers; Pay-per-view and download-to-own payment options required; Subscription is expected to grow despite consumers’ lukewarm response; Survey results: advertising-supported online video; Advertising is not popular in videos of any format; More creativity needed in video ads to boost consumer engagement; Survey results: devices and content; TV is the preferred device for watching online video; Race for the TV set is driving innovation; Frequency of viewing online video by device; Downloading preferred but streaming gaining ground; Choice of video content; PC first choice for music video, adult and short clips; Hollywood blockbusters would drive more online viewing; Comedy and action genres most popular; Survey results: consumer experience; Quality of consumer experience; Viewing and sound quality most important features; Viewing location; Living room most popular location for viewing online video; Youngsters like watching in the bedroom; Optimising business models for online video; Business model structure for online video; Target consumer; Teen video-addicts; Young self-purchasers; Value proposition; Content features; Consumer experience features; Payment models; Special or unique features; Distribution channel; Device choice directly impacts business model design; Delivery networks must enable the consumer experience; Create an engaging customer relationship; Monetising revenue models and cost structures; Optimising the revenue model; Pay-per-view rental model; Strengths; Weaknesses; Opportunities; Threats; Download-to-own model; Strengths; Weaknesses; Opportunities; Threats; Subscription model; Strengths; Weaknesses; Opportunities; Threats; Ad-supported model; Strengths; Weaknesses; Opportunities; Threats; ‘Freemium’ model; Strengths; Weaknesses; Opportunities; Threats; Content syndication model; Strengths; Weaknesses; Opportunities; Threats; Platform white-labelling model; Strengths; Weaknesses; Opportunities; Threats; Capital asset model; Strengths; Weaknesses; Opportunities; Threats; Infrastructure management; Value configuration; Core competences and scarce resources; Building special relationships and business alliances; Valuable technology IP; Enabling network effects; Subscription marketing and service bundling; Content production; Established consumer franchise; Other valuable integrated services; Installed base of devices; High-level example of an optimised business model; About our survey; Ovum’s consumer video trends survey; Survey sample; Number of respondents; Age and gender; Annual household income
List of Tables: Table 1: What type of on-demand content are you happy to pay for?; Table 2: Video content genres of any format ranked by country; Table 3: Features of a video service ranked by importance; Table 4: Income bands used in each country
List of Figures: Figure 1: Frequency of watching Internet video, by country; Figure 2: Watching Internet video several times a week, by age; Figure 3: The appeal of Internet video; Figure 4: Factors that would encourage more Internet video viewing; Figure 5: Internet video acquisition; Figure 6: Factors encouraging payment for Internet video; Figure 7: Amount spent per month watching video in any format; Figure 8: Spend of $5+ per month watching videos in any format at home; Figure 9: China and Korea: View several times a week online and spend $5+ per month on video of any format; Figure 10: UK and Italy: View several times a week online and spend $5+ per month on video of any format; Figure 11: Australia, Germany and Sweden: View several times a week online and spend $5+ per month on video of any format; Figure 12: US: View several times a week online and spend $5+ per month on video of any format; Figure 13: France: View several times a week online and spend $5+ per month on video of any format; Figure 14: Amount paid for video rental of any format; Figure 15: Male versus female: spend $5 or more a month on video of any format; Figure 16: Factors preventing payment for downloaded video; Figure 17: Preferred payment styles; Figure 18: Willingness to view adverts; Figure 19: Preferred advertising formats; Figure 20: Factors inhibiting Internet video viewing; Figure 21: Preference for TV over PC as viewing device; Figure 22: Preferred devices for Internet video viewing; Figure 23: Streaming versus downloading; Figure 24: Preferred content genre by device type; Figure 25: Content genres which would encourage Internet video uptake; Figure 26: Which content genres do you normally watch, by age? (1); Figure 27: Which content genres do you normally watch, by age? (2); Figure 28: Importance of video service features; Figure 29: Location of online video viewing, by country; Figure 30: Location of online video viewing, by age; Figure 31: Business model structure for online video; Figure 32: Two top-level target consumers; Figure 33: Value segment captured; Figure 34: Supporting organisational structures; Figure 35: Example: optimised business model for mobile online video; Figure 36: Number of respondents per country; Figure 37: Number of respondents by country and by age; Figure 38: Number of respondents by country and by gender; Figure 39: Number of respondents, by country and by income level; Figure 40: Number of respondents that did not disclose income, by country

Optimising business models for online video

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