VOD and Chill?

VOD and chill just doesn’t sound right – however this future innuendo might ring true and render “Netflix and Chill” obsolete. At least that’s what one of the keynote speeches at last month’s Mediatel conference suggested in a much more eloquent manner; looking at the future of aggregation. Those who are new to the term, aggregation refers to pooling together online viewing platforms into a single hub.

Thanks to the success of platforms such as Netflix and Amazon Prime, there is a plethora of different viewing methods available for the customer to choose from – in fact on average in the UK, customers now have 2.6 Subscription VOD (SVOD) products. Customer sentiment to SVOD products is also increasing, taking one service means you are more likely to take another and naturally takes viewing from linear TV; customers who watch SVOD watch 16% less scheduled TV than average.

However, there is a finite amount a customer is willing to spend on VOD subscriptions. Netflix in its basic model is £7.49, Amazon Prime Video is £5.99 and a third subscription would push the monthly spend towards £20 a month. The diversity of content is also another issue, with an overlap of some films and TV shows on SVOD products, is it worth paying more just to get House of Cards on Netflix but have a large amount of the same content on each?

TV aggregation solves most of these issues and is something that is gradually occurring in the UK market. Operators such as BT, Virgin and TalkTalk have already initiated this model by including Netflix in the set top box as standard. The US has expanded on this, with an operator called Zone TV providing a shared revenue model, with both broadcasters and short-form video platforms available on one hub. For a flat fee in the region of $15, customers are able to watch content on a variety of different platforms. Operators are participating with this model, as it creates a symbiotic effect of each viewing audience congregating on the same platform, thus removing the need for them to subscribe to their platform directly.

An aggregation model in the UK similarly sized to Zone TV could be created by one of the large pay TV broadcasters, such as Sky or Virgin. However, traditional broadcasters such as ITV and Channel 4, may be reluctant to hand control of their inventory to a competitor, complicating any aggregator model at scale in the immediate future.

For now, Netflix and chill seems to be safe as the crude innuendo it is – however, if an aggregation model featuring all available SVOD is created, we may have to revise it.

(Sources: Jeffrey Weber, CEO, ZoneTV & Richard Broughton, Partner, Ampere Analysis)

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Nick Bolton

Nick is an Investment Buyer at OMD UK, having joined the agency in 2014. His specialist subjects include Rugby and Star Wars.

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