Analyst Reports News

Revenue distribution shakeup expected in TV: AT Kearney

More than a half of industry executives and experts (53%) expect transformational shake-up in revenue distribution over the next five years, according to a new global study on the changes in the video and television industry by AT Kearney. The report also states that production houses and (diversified) internet companies providing OTT video will be major winners going forward. Respondents mention Netflix (32%), Google (26%) and Amazon (17%) to be the biggest threats to their business. On the other hand, pay TV operators and broadcasters are the most at risk mainly due to the lack of experience in digital experience building.

The new edition of AT Kearney’s NextGen study, which assesses the disruption and sheds light on new business models of the global TV market, expects major disruption in the next five years, across all markets although at different speed. In markets such as Northern Europe, North America and developed Asia, disruption is already well under way.

Based on interviews with C-level executives from pay TV providers, telecoms, cable companies, broadcasters, and online video providers, 64% of respondents expect broadcasters to market their own OTT platform and estimate that 75% of consumer paid revenues in OTT will be from subscription vs. 25% from pay per use.

Three Middle East countries feature in the top 20 countries in the report’s TV Disruption Index including Saudi Arabia, Qatar and the UAE.

Christophe Firth, A.T. Kearney principal and co-author of the report said: “Markets experiencing disruption are expected to follow a similar curve. There is therefore much to learn from markets that are both at the same stage and those that are further along the curve. Although some markets appear to be safe from short-term disruption, the landscape can change quickly, particularly through supply-side innovation and changes in connectivity, such as national fiber rollouts, the launch of 5G, or mobile data price wars.”

As content and distribution converge, and all players pursue direct-to-customer models, there is a massive increase in content and platform options for consumers. These developments lead to an oversupply of video services for consumers to choose from. The study indicates executives expect households to pay for only two or three video subscriptions. With most content owners and new service operators lacking capabilities, resources and experience to provide direct-to-consumer offering, market fragmentation will create opportunities for companies to deliver this overflow of content in a compelling and structured way.

“Our study indicates a strong latent demand for what we call content navigators. To thrive in this new environment, having the right content is no longer enough. The user experience and branding are also central elements of the value proposition,” added A.T. Kearney Partner Jan-Piet Nelissen, co-author of the report.

“Many companies in the TV ecosystem can pursue a content navigator role, but given our consumer insights, there will not be a place for everyone. Speed and scale will be critical.”