OTT platforms come with their share of disadvantages, and there are several challenges that OTT businesses may face. These are the six key OTT challenges you must address to ensure success in the ever-evolving landscape.
Launching an OTT service has never been easier. Despite the strong demand for content, accelerated by the pandemic, technology has advanced, embracing cloud solutions and incorporating live streams, including sports and other live events. With the advent of ultra-fast broadband and the expansion of 5G networks, it’s now possible to deliver the high-quality, low-latency streaming video that consumers crave.
However, it’s essential to recognize that, despite the success of giants like Netflix and Disney+, the OTT industry is not immune to failure. Even these global leaders have encountered challenges and growth slowdowns over the past year.
OTT platforms have their downsides, with various potential pitfalls, some more evident than others. This guide aims to help you start your OTT business and provides insights into avoiding the common stumbling blocks.
6 OTT Challenges
Some of the following may seem obvious, but the growing list of failed OTT companies suggests that not all these issues were carefully thought out.
1. Not understanding your audience
Understanding your audience and their content preferences is crucial when launching an OTT platform. This is especially important for niche channels, as they can make two common mistakes: either targeting an overly narrow niche or entering a crowded niche space.
Audience attention is becoming increasingly divided. Recent data from the US market shows that the average number of individual TV services used by consumers has risen to 11.6 video services per household. This figure encompasses traditional Pay-TV, all available streaming services, and over-the-air reception via antennas. Notably, this number is on the rise, with 8.9 video services per household in 2022.
This trend is primarily driven by younger viewers, with Millennials averaging 16.3 video sources, Generation Z at 12.7 sources, and Generation X at 12.2 sources.
With a limited pool of viewers and a finite amount of time for content consumption, the competition is fierce. In the past, certain OTT services have failed due to missteps in targeting their audience. For instance, Fandor and FilmStruck aimed at the already crowded cinephile market, and both struggled. Highly specialized services like Hortus TV, catering to gardeners, and XtraFrame, offering live access to bowling events, also failed to gain traction.
Recent notable casualties include Hooq in Asia, Quibi, and TVision in the US. Other closures involved Acorn TV in South Africa, live music specialists Mandolin and Sessions, GolfTV, and more.
The key lesson here is to thoroughly research and understand your target audience. Some ideas might be better suited as YouTube channels initially, as the monetization opportunities there can be more accessible, despite YouTube’s own set of challenges.
2. Using the wrong technology
Today, there’s a clear distinction between the right and wrong approaches when it comes to technology, especially in the TV industry. The right way involves harnessing the capabilities of the cloud. Over seven years ago, Netflix’s CEO, Reed Hastings, demonstrated the immense power of the cloud when he expanded the streaming service to 130 new countries with the press of a button during a presentation at CES. Today, Netflix operates in 190 countries worldwide.
In essence, the cloud offers the ability to rapidly and efficiently scale operations without the massive upfront costs associated with on-premises equipment. This scalability and cost-effectiveness make the cloud the most rational and viable choice for any business plan, whether you’re running an OTT platform or any other service in today’s digital landscape.
3. Showing the wrong content
Two critical elements for the success of your content delivery are understanding your audience’s preferences and leveraging TV business analytics. Big Data, now commonly referred to as ‘analytics,’ provides invaluable insights into the performance of your content library. It helps identify what content is resonating with your audience and what is not. This data-driven approach is essential for optimizing your content library, removing content that isn’t performing, and retaining content that continues to attract viewers over time.
Content is often a significant expense, particularly in emerging markets like OTT sports. Therefore, every minute and every gigabyte of your content should serve a purpose and deliver value. Additionally, safeguarding your content is crucial. New forms of video piracy, illegal apps, IPTV, and streaming are on the rise. To protect your investment, a comprehensive anti-piracy strategy is essential.
4. Offering a poor user experience
When launching a new OTT service, operators often find themselves competing with established global SVOD (Subscription Video on Demand) giants like Netflix, Disney+, and Amazon Prime Video. These industry leaders have meticulously crafted user experiences that efficiently connect customers with content. They employ personal recommendations, outstanding user interface design, and provide seamless support across various platforms.
The good news is that you don’t need to invest the same level of research and development (R&D) budget to create a similar experience. Ready-made solutions are available off the shelf, such as the one we offer. However, the challenge is that your customers will expect a similar level of quality and convenience.
This customer-centric approach extends throughout your organization, including customer service. User experience is not limited to the interaction with a screen but encompasses all interactions with your company, whether it’s an email to technical support, an account inquiry, a request on social media, or any other form of contact.
Additionally, there are certain barriers to entry that must be addressed. Making it easy for people to sign up is crucial. Long contracts, hefty fees, and limited payment options can deter potential subscribers and hinder your ability to thrive in the market.
5. Catching a bad wave
Navigating the OTT (Over-The-Top) market is akin to surfing in the ocean—waves constantly ebb and flow, and not every wave carries you smoothly to your destination. The industry is in a state of perpetual change.
For instance, when this piece was originally written in May 2019, Transactional VOD (TVOD) was seen as the next significant trend in the industry. However, the subscription model consistently outperformed it. In 2021, the impact of the COVID-19 pandemic reshaped the landscape, with TVOD becoming a potent tool for Hollywood film studios trying to recover revenue during cinema closures.
Today, we can confidently discuss the rise of AVOD (Ad-Supported Video on Demand) and FAST (Free Ad-Supported Streaming TV) services. Many operators are now adopting a tiered approach, offering everything from ad-supported and free content to premium SVOD (Subscription Video on Demand) and multiple levels in between.
The dynamic nature of the industry is illustrated by the evolving trends. Services targeting the 3D and VR markets have faltered, while those exploring esports have experienced rapid growth. Predicting the future of the OTT market is akin to playing the stock market—potentially rewarding, but fraught with risks and uncertainties.
6. Managing expectations
This is an internal problem, but no less of an issue because of that. Because some companies have made successful investments in OTT operations, it doesn’t necessarily follow that all will. Nor, indeed, that a company will be as successful and show returns as quickly as its investors want. Netflix is just one company whose share price is still incredibly exposed to shifts in subscriber numbers growth, with any quarter that underperforms compared to analysts’ expectations seeing it punished in the market.
The long and the short of it is that companies can achieve success in subscriber numbers and even turn a profit but still be killed off because the internal expectation was set so much higher.
Solving the common OTT challenges
The potential offered by OTT solutions is immense, but it’s also an increasingly competitive marketplace where companies must establish the essential foundations before launching their services. Some solutions are technical in nature, such as leveraging the power of the cloud and utilizing data analytics. Others revolve around sound business practices that are relevant to any industry.
OTT is not a guaranteed path to instant riches. While there is money to be made and audiences to be reached, success requires more than just introducing a product and expecting profits and viewers to pour in. A solid plan is essential, involving the delivery of compelling content at the right price, and then giving the product time to grow and scale. Even after an initial burst of success, the period leading to sustained, long-term growth can be a nervous one for all involved, and ongoing diligence is required.
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