Optimising business models for online video

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