While streaming video and virtual bundles have proliferated in recent years, this is only the beginning of the transformation of the video market, according to representatives of Amazon.com Inc., Hulu LLC and Alphabet Inc.'s YouTube, three companies at the forefront of over-the-top and streaming TV today.
Speaking at a March 11 panel at the South by Southwest Conference — an event that brings together thought leaders to discuss the convergence of the interactive, film and music industries — the executives said much of the potential for the evolution of video will depend on streamlining the digital TV industry. A lot of complexities still need to be resolved as viewers, content owners, distributors and device manufacturers shift away from the existing linear paradigm to a digital paradigm. But as distributors and rights holders embrace more experimentation, and the new digital services expand and mature, the industry will simplify, the panelists agreed.
"There's some consolidation that's ultimately going to have to happen there for this to really go mainstream and hit the big time," said Richard Irving, Hulu's vice president of product. He suggested it will take integrated companies able to bring together a range of skills, with some likely acquired from other companies, to better address today's gaps in video delivery.
Content and the rights to distribute it are evolving to better support new digital delivery methods. The duration of rights agreements are compressing every year, as rights holders account for a more rapidly changing distribution-technology environment, noted Kathy Payne, head of content acquisition for Amazon. Short-form and other nontraditional content lengths also are becoming more common, and advertising is becoming more interactive and more seamless within the content. Interactive products like a recent launch from Hulu that allows viewers to purchase movie tickets directly from a promotional trailer also will become more common, panelists agreed, as the overall space allotted to advertising is compressing.
"Advertising is a really critical part of the business," Irving said, "but volume and flexibility are important."
However, in the near-term, profitability for the new digital offerings may be elusive, said Hulu's Irving and Christian Oestlien, director of product management at YouTube. New virtual bundles from Hulu, YouTube and others are generally priced at or below $40, and Kagan research suggests that some are running at a loss. Kagan is a media research unit of S&P Global Market Intelligence. Oestlien said competitive pricing will remain the norm for the foreseeable future as platforms compete for subscribers.
For Hulu's live TV service, launched in May 2017, the majority of viewing is still on-demand, but live video consumption is growing rapidly, Irving said. At YouTube, which launched its live YouTube TV product in select markets almost a year ago, executives are noting just the opposite: viewing has shifted to a majority of livestreams for those subscribers who can access the live TV product, Oestlien said. He said the most-used formats on YouTube TV are live, DVR recording and on demand, in that order. YouTube in February announced a price increase, to $40 a month from $35, and expanded markets for the live TV offering.
While the living room television will likely remain the "tent-pole" experience for private video viewing, as Oestlien put it, that experience will become increasingly moderated by the mobile device. Television sets may remain the favored TV display, but they will likely become a screen on which users cast the shows they accessed on their mobile devices, Irving said. That type of user behavior allows viewers to protect their personalization preferences on various video platforms without disruption as they move to a TV or set-top box.
"Mobile is going to become the dominant way you watch something, even if you don't recognize it as mobile," Irving said.
But the end game is more choice, more flexibility and a better video experience for consumers and distributors, panelists agreed.
"It's really a heyday for consumers," Payne said.
