Optimising Business Models for Online Video

Optimising Business Models for Online Video published by Ovum, Ltd. in September, 2009. This report consists of 60 pages and the price starts from US $ 3495.

Introduction

Abstract

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.

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

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