Strategic issues facing the VOD industry
The rise of video-on-demand (VOD) platforms has had a significant impact on the media industry in recent years. With the proliferation of these platforms, the traditional power dynamics between studios and linear television networks have shifted towards online platforms. This shift is due in part to the unique advantages offered by VOD platforms, such as greater flexibility in content delivery, personalized recommendations, and the ability to access content from virtually anywhere with an internet connection. To leverage these advantages, many VOD platforms have sought to build on the existing brand recognition and assets of well-known entertainment companies. For instance, Disney has leveraged its extensive library of popular franchises and characters to launch Disney+, while Warner has doubled down and focussed on its HBO Max brand to build on its established suite of intellectual property and its long-established relationships with creators. These established brands and networks undoubtedly provide a competitive advantage to new VOD platforms seeking to enter the market. Newer entities lacking such advantages may struggle to attract audiences and compete with established platforms, particularly as the market becomes increasingly crowded and competitive. Some of the main strategic issues facing the VOD industry include:
Content Acquisition and the VOD industry:
A strategic issue faced by the VOD industry is acquiring a strong content library is critical for any VOD platform, as it is the primary reason users subscribe. However, securing high-quality content can be challenging and expensive for new platforms that lack the relationships with content creators and the financial resources of larger competitors. The reality is that commissioning content is extremely expensive and is an upfront cost that needs to be covered prior to any revenue being generated. Additionally, the streaming rights to popular content can be fiercely competitive and can lead to bidding wars, which further drives up costs.
To address this challenge, new VOD platforms need to identify a unique value proposition that sets them apart from the competition. For example, they may focus on niche content that is not available on larger platforms. Successful examples include Crunchyroll focussing on manga content, Shudder focussing on horror, Gaia focussing on spiritual and wellness content or DocPlay focussing on documentary films. Alternatively, VOD platforms may leverage data analytics and audience insights to create original content that is tailored to the tastes and preferences of their viewers. This can help them acquire high-quality content at a lower cost and differentiate themselves from the competition.
Customer Acquisition and the VOD industry:
Another strategic issue facing the VOD industry is attracting users is another significant challenge for new VOD platforms. With so many platforms available, it can be difficult to stand out and attract viewers. Marketing and promotion strategies will be key to building a user base, but these can be expensive, particularly for new platforms. Additionally, retaining users can be challenging as viewers can easily switch to another platform if they are dissatisfied with the content or user experience.
To address this challenge, new VOD platforms need to focus on building a strong brand and creating a compelling user experience. This can include investing in content marketing, social media advertising, and influencer partnerships to raise awareness of the platform. Additionally, they can leverage user data to personalize the user experience and offer features that are not available on other platforms. For example, they may offer interactive content, social viewing features, or gamification elements to create a more engaging and immersive user experience.
VOD platforms also need to consider whether to license the technology used as a white label solution or to develop the technology themselves inhouse. Developing their own technology can be expensive and may not play to their own strengths, however it does offer potential competitive advantages in being able to adapt their platform in new and original ways.
Monetization and the VOD industry:
While VOD platforms offer a potentially lucrative revenue stream, generating revenue can be challenging for new platforms. Competition is fierce, and consumers are often unwilling to pay for yet another subscription. New platforms will need to consider alternative monetization models, such as ad-supported or transactional models, and balance the need for revenue with user experience.
To address this challenge, new VOD platforms need to experiment with different monetization models and find the right balance between generating revenue and providing value to users. For example, they may offer a freemium model where users can access some content for free but pay for premium content or features, which is often termed as a ‘blended model’. Alternatively, they may offer a transactional model where users pay for individual shows or movies. Additionally, they can experiment with ad-supported models or partnerships with brands to generate revenue without relying solely on user subscriptions. A few examples of VOD platforms that utilize different blended models include:
Amazon Prime Video: Amazon Prime Video is a VOD platform that is included as part of Amazon’s Prime subscription service. This provides users with access to a range of exclusive original content, as well as popular movies and TV shows that can be rented or purchased on an individual basis.
iTunes: Whilst not strictly a VOD platform, iTunes offers a range of movies and TV shows for rent or purchase on an individual basis, as well as a selection of exclusive content that can only be accessed by subscribing to certain channels or services.
Vudu: Vudu is a VOD platform that offers a range of movies and TV shows for rent or purchase on an individual basis, as well as a selection of free content that is supported by advertising.
Hulu: Hulu is a subscription-based VOD platform that offers a mix of original content and popular TV shows and movies. While most content on Hulu is only available with a subscription, some movies and TV shows can be rented or purchased on an individual basis.
YouTube: While primarily known as a platform for user-generated content, YouTube also offers a range of movies and TV shows for rent or purchase on an individual basis, as well as exclusive original content that is available only to subscribers of certain channels or services.
User Experience and the VOD industry:
In addition, user experience is a critical strategic issue that the VOD industry faces, which ensures the success of any VOD platform. Users expect a seamless, personalized experience across multiple devices, and they demand high-quality video and audio. New platforms must invest in technology and infrastructure to provide a high-quality user experience. Additionally, user data and analytics can be leveraged to improve the user experience by offering personalized recommendations and content discovery.
To address this challenge, new VOD platforms need to invest in technology and infrastructure to provide a high-quality user experience. This can include optimizing video quality and buffering speeds, as well as offering a responsive and intuitive user interface. Ensuring that the platform utilises the best content delivery network (the ‘CDN’) for its video delivery is absolutely critical here in ensuring a good viewing experience. Additionally, they can leverage user data and analytics to personalize the user experience and offer content recommendations that are tailored to the user’s viewing history and preferences.
Competition and the VOD industry:
Established VOD platforms like Netflix, Amazon Prime Video, and Disney+ have a significant head start, with large user bases and extensive content libraries. New platforms will need to offer something unique and compelling to attract users and stand out in a crowded market. This could include offering exclusive content, innovative features, or a unique user experience. Offering a point of differentiation or doubling down to focus on a core niche offers the most effective way for platforms to launch and to grab an audience share before subsequently expanding to other target segments. A few examples of niche VOD platforms include:
Acorn TV: This is a VOD platform that specializes in British and international TV shows, particularly those from the UK, Ireland, and Australia. It offers a wide range of content, including dramas, comedies, and documentaries.
BroadwayHD: This platform specializes in Broadway shows and offers a library of recorded live performances, documentaries, and behind-the-scenes content related to Broadway productions.
Fandor: This VOD platform specializes in independent and foreign films, offering a curated selection of movies from around the world that may not be available on mainstream platforms.
CuriosityStream: This is a VOD platform that specializes in documentary content, particularly those related to science, technology, and history. It offers a wide range of documentaries and series, many of which are exclusive to the platform.
Brown Sugar: This platform specializes in classic Blaxploitation movies and offers a large library of films from the genre, as well as a selection of other classic black cinema.
In summary, new VOD platforms face significant challenges in acquiring quality content, attracting and retaining users, generating revenue, providing a high-quality user experience, and competing with established players in the market. Success will depend on the platform’s ability to navigate these challenges and offer a differentiated value proposition that resonates with viewers.