Optimising business models for online video

Published by: Ovum Plc

Published: Sep. 16, 2009 - 60 Pages

Table of Contents

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

Abstract

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