Video entertainment viewing in the typical American household has evolved. Gone are the days where broadcast television gained the lion's share of consumer attention. Meanwhile, legacy pay-TV services have struggled to keep pace with shifting customer preferences and numerous alternative lower-cost offerings.
Average monthly spending on subscription video-on-demand (SVOD) services among U.S. broadband households increased from $3.71 per month in 2012 to $6.19 per month in 2015, according to the latest market study by Parks Associates.
Parks examined new business models emerging from the increasing consumption of over-the-top (OTT) content in the American video entertainment market -- including new experiments in content windowing.
How the OTT Trend Disrupted the Market
"Multiple content players have held onto traditional content windowing strategies for years, but OTT technologies and emerging business models have finally forced these companies to experiment with new windowing strategies,” said Glenn Hower, research analyst at Parks Associates.
Their analysts believe that new models for movies include day-and-date availability, as with the movie 'Beasts of No Nation', where it was released for streaming the same day as in the theater.
For streaming TV shows like the Netflix Studios series 'Jessica Jones' or the Amazon Studios series 'Transparent', viewers can watch full seasons all at once, satisfying people's desire to free themselves from traditional linear broadcast TV constraints.
According to the Parks assessment, consumers have quickly adopted these new viewing habits as part of their OTT monthly subscriptions.
Broadband Household Spending on Video
A typical price point for a subscription service is $7-$10, but several niche services are available for under $5, according to Hower.
U.S. broadband households on average spend less than $1 per month buying and less than $1 per month renting digital video, indicating they purchase less than one digital video a year and rent between one and four videos per year.
"The subscription model clearly dominates in the U.S., which could create a disconnect in value propositions between consumers and content providers, who might seek out revenues from more lucrative transactional services over low-margin SVOD services," Hower concluded.
Currently they are exploiting multiple digital distribution outlets to monetize current and library TV content, including authenticated catch-up players, third-party aggregators, and direct-to-consumer subscription services.
There are also bidding wars for premium library TV content, with Netflix paying a reported $118 million for the 'Friends' TV series and Hulu paying a reported $160 million for the 'Seinfeld' series.