The Internet has disrupted many industries over the past decade. The traditional television industry is now the latest victim of this disruption. Thanks to the wide availability of low-cost, high-bandwidth Internet access, on demand streaming video services have grown rapidly over the past few years. Such “real time entertainment,” as it is called, has taken a 62% market share in North America during the first half of 2013 according to a survey by Sandvine. Netflix has almost single handedly created a big disruption in this industry. It has a staggering 89% market share in video steaming services in the U.S., followed by HULU and Amazon Prime.
There are four main reasons that on demand services are growing and threatening to wipe out traditional TV.
Adaption to technology
The streaming services have very quickly adapted to new technologies. They started with online video streaming on computer desktops, but understood the rising demand of tablets and smartphones and started offering applications for Android and iOS. These new apps give users access to their favorite shows on the go from their phones and tablets. They now have the choice to watch on whatever device they want.
Netflix and Hulu have partnerships with leading movie and television producers, giving them access to many movies and TV shows, both new and old. The variety of entertainment available to viewers has attracted a huge number of customers (Netflix is said to have more than 40 million streaming subscribers globally). Netflix has also partnered with digital media streaming hardware and console companies to support their services, making it even easier for customers to access the entertainment they want, when they want it.
Because of the large user base and also low overhead – no physical stores and, in the case of Hulu and Amazon, no physical inventory – on demand streaming video services can afford to offer customers a good deal. They are typically freemium and subscription based. HULU offers some of its content for free with advertisements. If the viewer wants to watch ad-free programming, he has to subscribe for a monthly fee. The monthly subscription fee is very reasonable, especially compared to the cost of traditional cable television, or even the cost of traditional movie rentals.
It’s easy and low cost for customers of on demand streaming video platforms to switch from one provider to another. Thus, there is a need for original content to keep customers interested. Netflix started producing its own TV shows – like the Emmy award winning “House of Cards” – which gives users privileged or exclusive access to shows that cannot be viewed on any other platform. Other services, like Amazon and Hulu, are following the same concept of producing exclusive shows, and have been in successful in getting viewers’ attention.
What can other businesses learn from on demand streaming video providers?
If you look back at the reasons above that on demand streaming video services have been so successful, you can derive several lessons that can help any organization be more innovative, even disruptive.
- Adapt to technology quickly, especially technology that your customers are using and that makes it easier for them to consume your product/service.
- Form relevant partnerships that help you deliver more to your customers – more variety, more cost savings, more quickly, whatever you can do better than the competition.
- If you can offer a comparable product/service for less than the competition by targeting a new market (young Internet-savvy movie fans, in this case) you will disrupt your industry.
- Invest in exclusive products/services/features to attract new customers and distinguish you from the new competitors who always follow in the footsteps of a true disruptor.
The future of on demand streaming video services
The UAE has its own prominent streaming video service, Icflix, which was started a couple of years ago. The biggest differentiator is that it provides regional content to suit local audiences. As with other streaming services, membership is offered on a subscription model and rates are quite modest.
With the UAE having 77% internet penetration, I predict there will be plenty of regional players to tap in to this market. The future for these steaming services is bright and competition will be intense. It remains to be seen how the global service providers will expand to other markets and compete with local players.
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