Connected Apps: The New Battleground for Video Services. A Parks Associates Whitepaper Developed for

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1 Connected Apps: The New Battleground for Video Services A Parks Associates Whitepaper Developed for

2 Connected Apps: The New Battleground for Video Services In a real sense, the OTT video industry is returning to its roots. In its early days, part of Netflix s value proposition was its near ubiquity across Internet-connected platforms. Whether you wanted to watch a movie on your computer or your Nintendo 3DS portable game player, Netflix was there providing access to content in places that pay TV did not. Eventually, having the Netflix app on your connected CE device was seen by device makers as critical to retail success. As new players have entered the market, their focus has centered upon getting the business up and running, with the content, user experience, and business model that can provide differentiation and viability in a crowded market. Presence on connected devices was secondary to survival and also a thorny issue due to the fragmentation and constant evolution of connected CE devices. OTT services are maturing, competition is intensifying, and players are looking to maximize their reach and tailor experiences to particular audiences. Video apps on connected devices are again playing a key role in the competitive landscape of digital video entertainment. The Ongoing Push into Connected Device Apps Video Industry Players Pay-TV Providers OTT Video Services Broadcasters Cable Networks Media / Publishers Importantly, the increased attention on apps is not unique to a particular group of video industry players. Rather, a variety of companies see apps as a way to improve their business and interaction with consumers. Connected Apps: The New Battleground for Video Services

3 Pay-TV Providers Many pay-tv providers were initially slow to redefine their video business, but they now realize that their future success relies upon an ability to reach consumers across all screens. Video apps let operators expand pay-tv service coverage and touch points beyond the managed network, set-top box, and home television. Though TV Everywhere is commonly available on computers, smartphones, and tablets, operator streaming video apps on other unmanaged devices are far less common. In the U.S. market, Charter offers an app for Roku streaming media players. Comcast only recently expanded its app support to Roku and smart TVs. U.S. operator and media company Verizon launched a mobile-only service, Go90, in AT&T has announced that it will launch a mobile-only, DIRECTV-branded video service before the end of OTT Video Services Leading OTT players see connected apps as an area of competitive advantage and a way to stay ahead of the pay-tv industry. Having an app on a connected device prior to rivals allows an OTT service to acquire subscribers or viewers without the competition present on more crowded platforms. It also positions the OTT service as a market innovator. While Netflix has been a global leader in developing apps for a variety of device platforms, other services like Rakuten s Wuaki.TV also support a wide variety of connected devices. All rights reserved Parks Associates Broadcasters Broadcast TV includes some of the most widely watched content in any market, accessible over-the-air and through pay-tv services. Broadcasters use connected device apps to maximize their audience reach and provide advertisers with greater exposure. As viewing habits and preferred viewing platforms shift, connected device apps will help broadcasters remain accessible and relevant to consumers. U.S. broadcaster ABC announced in July that it would be releasing seven original short film series as part of the relaunch of its redesigned app, as well as full seasons of 38 throwback series.

4 Cable Networks In the past, cable networks were often constrained from direct-to-consumer interaction due to their relationships with pay-tv providers. Networks now leverage apps to build connections to their viewing audience, allowing them to grow viewership and brand awareness. Networks tailor their apps to match their content and target audience, blending streamed video access and interactivity that engages fans. Cable networks also leverage apps in order to launch their own direct-to-consumer OTT video services. Discovery launched its new Dplay subscription OTT video streaming services to European consumers in 2015, adding it to the company s Eurosport Player OTT video service, which is available in over 50 global markets. Media / Publishers With the decline of the print media industry, publishers have adopted video in a bid to provide value to advertisers and to appeal to modern consumers. So, not only are publishers and news media competing with each other, they are also increasingly competing with other video options for the attention of viewers. The climbing popularity of social media apps (including live streaming apps), provides another element of competition, particularly for news media that often provide time sensitive content. Publishers and new media are adding connected devices app support in order to reach consumers broadly and quickly, wherever they are in their day. The Economist, National Geographic, and Spiegel are a few publishers that are leveraging video-related apps to extend their reach. The common thread among these need cases is availability versus competition. In an increasingly competitive environment, greater reach and exposure gives a player a greater chance to capture attention and revenues. Connected Apps: The New Battleground for Video Services

5 Consumer Use of Apps Changes in consumption reveal the increasing importance of connected device apps for consumers and, consequently, online video services. Consumers have come to expect OTT video services to support service delivery to ios and Android mobile platforms. The hype around the arrival of Google s Chromecast in 2013, along with strong marketing for Roku and Apple TV, helped unlock the TV for consumers eager to get Internet-delivered video on the biggest screen in their home. Use of Connected Devices to Watch TV Programming and Movies Broadband Households in Specified Countries U.S. U.K. Germany France Spain 50% 25% All rights reserved Parks Associates 0% Tablet Smartphone Internet-connected TV Parks Associates

6 OTT video services continue to lead pay-tv providers, broadcasters, and cable networks in use of connected apps to deliver content to the television. Weekly Connected App Use, by Video Source, to Watch a TV Program U.S. Broadband Households OTT Video Service Broadcast / Cable Network Streaming Media Player App Pay TV Provider Game Console App Smart TV App 0% 10% 20% 30% Parks Associates Connected device apps have become an important channel for monetization of video services. Among U.S. Broadband Households: Approximately one-half of current OTT video service subscriptions were transacted through the service provider s website. Over one-quarter of subscriptions were purchased through a connected device app, including apps on streaming media players, game consoles, and connected TVs. This finding shows connected apps are the second most effective channel for selling OTT video services. 37% of Hulu subscribers and 28% of Netflix subscribers signed up for their subscription through a connected device. Several services are now relying on blended approaches, offering ad-based, transactional, and subscription options in an effort to find the right mix that will unlock consistent, substantial revenues. Connected Apps: The New Battleground for Video Services

7 Method of Subscribing to OTT Video Service OTT Video Service Subscriptions Held by U.S. Subscribers Mobile / Tablet App Other Method Website Other Connected Device App Parks Associates All rights reserved Parks Associates Which Apps Matter Connected device apps clearly matter to consumers and have become an important channel for subscription revenues. At the same time, the cost of creating apps has declined over time, making it easier for services to consider support for connected device apps. Which apps matter, however, is a more complicated question. Generally, the first apps supported by OTT video services are smartphone and tablet apps. While Android and ios apps are often released at the same time, some services prioritize Apple s ios apps due to the greater stability of the platform and the fact that ios device owners tend to spend more via apps that Android device owners. Owners of streaming media players spend more on subscription video services than owners of other TVconnected platforms. One of the fastest growing categories of connected CE devices is streaming media players. These platforms are typically purchased by consumers wanting to watch OTT video services on their television. Many OTT video services opt to quickly launch apps for streaming media players. Roku remains the market share leader in the U.S., with Apple TV maintaining a lead in worldwide adoption.

8 Home Entertainment Device Ownership ( ) U.S. Broadband Households Q1/2009 Q1/2010 Q1/2011 Q1/2012 Q1/2013 Q1/2014 Q1/2015 Q1/ % 50% 25% 0% Smart TV DVR Blu-ray Player Streaming Media Players Gaming Console Parks Associates Smart TVs are also gaining in penetration. The idea of offering an app on the TV itself attracts many video services to this platform. Samsung boasts strong global penetration of its smart TVs and offers a robust developer support program for its Tizen operating system. LG Electronics, Vizio, Sony, and several manufacturers from China are eager to gain share as well, using Android, WebOS, FirefoxOS, and Roku software as the basis for their smart TV platforms. Some smart TV makers have launched their own apps, offering transactional services for 4K content to help foster the growth of their 4K TVs. All rights reserved Parks Associates While Blu-ray player adoption has cooled, these devices are often made by the same manufacturers as smart TVs. As a result, the apps for these devices tend to be closely related to those of the manufacturer s smart TV app. Among the devices that allow televisions to access online video, game consoles have the highest penetration in connected households but are currently in decline. Over 50% of U.S. broadband households own one or more gaming consoles. While Microsoft and Sony are the leading console makers, each has two platforms (one new generation and one older generation) that are deeply entrenched in the market, with each platform requiring its own app. Thus, video services face creating four separate apps to cover the game console marketplace.

9 Competing Effectively on Connected Apps Several factors impact the success of video service apps: Planned for success A quality app experience brings together content, interface, discovery, and business models that are suited for the strengths of the target app platform. Understanding the core audience is a critical step in planning an effective app experience. Several services have adapted their approach to apps over time as they have learned about the viewing habits and preferences of their users on differing platforms. Success Factors Planned for success Stability and reliability Data-driven decisions Emphasis on easy Promotion Apps must be designed in a way that they can be brought to market quickly and easily maintained and updated in order to keep up with the competition and a changing audience. Stability and reliability While services are eager to seek viewers and revenues on all of the devices and screens that consumers use, the app simply must work. In addition to eliminating software bugs, all aspects of the service on the app need to meet consumer expectations, including video and audio quality, interface, and payment systems or advertising. Nothing slows the momentum of a service quite so much as a problematic app. Not only does it impact those who download the app, it will produce negative ratings and reviews online and in app stores, hindering adoption even after any issues may have been resolved. Connected Apps: The New Battleground for Video Services

10 Data-driven decisions Collecting data on content performance and consumption behaviors allows services to understand their customers experience and adapt the service accordingly, an essential element in remaining competitive. Not only do apps need to be designed to capture such data, the systems used to deploy and manage the apps need to be able to do so as well. Emphasis on easy The best apps are easy for consumers to use, including easy authentication, an issue that has been a challenge for some TV Everywhere implementations. Easy apps leverage intuitive interfaces and personalization capabilities to minimize user decisions and get consumers to interesting content quickly. With the increasing penetration of connected CE devices worldwide, more and more consumers are accessing online video on their TV for the first time. Making the experience easy for all consumers, even those who may not be accustomed to using connected device apps, is important to achieving broad exposure and ongoing use. Promotion Beyond the function of the app, services need to market and promote their apps to generate awareness and use. As services attempt to outperform competitors on connected devices, they are leveraging a variety of techniques in order to be noticed and downloaded from the device s app store. All rights reserved Parks Associates Some services are paying for placement in the app store or are employing SEO techniques to produce better results in user searches in the app store. Other options include providing users with special bonuses or incentives for tweets, likes, ratings, and reviews of their app.

11 Case Study: BroadwayHD While many video services focus on TV programming, movies or sports, BroadwayHD offers viewers access to theater-based productions, including live streaming of productions or behind-the-scenes looks at the Tony Awards. The OTT video service launched in October 2015 and claims a library of over 150 full-length stage plays and musicals. Subscribers can receive unlimited access to the service s on-demand library for $14.99 per month. An annual subscription of $ provides access to on-demand and live theater content. Alternatively, users can purchase access to a particular on-demand production for $7.99 and live events for $9.99. BroadwayHD was the first OTT video service to stream a live Broadway show, doing so on June 30th with the Roundabout Theater Company s production of She Loves Me. In addition to its website, BroadwayHD offers access on mobile platforms via web-browser rather than a dedicated mobile app. For consumers that want to watch theater on their biggest in-home screen, the service supports Roku, Apple TV, and Chromecast streaming media players. BroadwayHD first launched with web browser support, which provided the easiest path to market. However, the service s growing customer base quickly expressed interest in watching BroadwayHD s content on connected TVs, particularly via Roku or Apple TV. This feedback was important in the fledgling company s decisions, allowing BroadwayHD to expand its service availability to meet the needs of consumers that were highly likely to pay for its content. Today, the company is working with Ooyala to create native apps for Android and ios devices rather than relying upon mobile browsers for those platforms. Ooyala developed BroadwayHD s existing apps, supports the service s hybrid monetization approach (transactional and subscription) and is providing cloudbased content management, analytics, and content delivery. The native apps will provide BroadwayHD with support for DRM, which is contractually required for some of its content partners but also allows it to better protect its most popular content. The apps will also allow the service to support Chromecast. The service s apps are only available to subscribers. Those who download the app are prompted to either login or to create a subscription account. BroadwayHD is adding a feature to its AppleTV app (already available on Roku) that will prompt users to purchase an account if they do not already have one. Executives at BroadwayHD suggest that their experience taught them valuable lessons about the video app world: The user interface should be consistent, simple and meet customer expectations. BroadwayHD believes that good content is what drives repeat use of a good service. The company designed its interface to be similar to the look and feel that users experience in Apple s app store. The sliding rows of poster art options and the search capabilities are simple, quickly guiding consumers to desired content and then getting out of the way. User acquisition and conversion is critical. New services must generate revenue quickly in order to achieve long term viability, and converting visitors to paying customers is key. BroadwayHD s visitor and app experience focus on creation of accounts. The service s most popular content is displayed first in its UI, working like an endcap in retail stores to help drive sales. Connected Apps: The New Battleground for Video Services

12 The Future for Competition on Connected Apps Given current trends, the video services apps arena will gain increased attention and competition over the next few years. Popularity in livestreaming will drive increased interest and expectations about live content on connected apps. While many consumers are only now learning about livestreaming apps such as Twitter s Periscope and Facebook Live, the companies backing these technologies are placing large bets on live, app-based video. These players are heavily promoting livestreaming and are covering popular events, such as award shows and NFL games, in order to generate awareness and viewership. These efforts will help set consumer expectations that apps are a go-to source for live video, allowing viewers access to events or programming in real-time regardless of their location. An increasing number of OTT services will go app first. All rights reserved Parks Associates While large OTT video services will continue to compete across all platforms including websites, a growing number of services will opt to offer their services exclusively on particular CE platforms. Some are already offering mobile-specific services, including Viacom s Noggin and Verizon s Go90. This strategy will allow these services to adapt their experience and service to suit particular niches and to engage in unique marketing partnerships with CE makers.

13 Your Apps - Powered by Ooyala Ooyala helps meet the growing demand for OTT apps by offering both an out-of-the-box OTT app development and delivery solution for the most common use cases, as well as custom application development services through Ooyala s Professional Services Group when there is a need to tailor offerings to more specific business needs. Ooyala AppStudio, the company s out-of-the-box offering, makes it easy for companies to deliver content seamlessly across smartphones and tablets, web browsers, and popular OTT devices including Apple TV, Roku, Amazon Fire TV, and Google Chromecast. Pre-integrated with best of breed products from Ooyala and its partners it includes everything from video and application content management systems, subscriber management, monetization, analytics, personalization, and application builder all hosted in the cloud. In particular, it works together with Ooyala s core video publishing and management solution, Ooyala Backlot, and its award-winning Ooyala IQ solution for measuring content performance and consumption trends. Ooyala AppStudio contains advanced UI templates and a powerful drag-n-drop interface to easily configure layouts, schedule content, and manage apps. Apps and web experiences can be easily matched to any brand look and feel for consistency and to drive awareness and recognition. Companies can also update any app UX without the need to re-build or re-certify the app, or for consumers to re-download the app. Ooyala s industry-leading analytics and reporting dashboard, Ooyala IQ, provides real-time insights to make business decisions and transform the layout and behavior of apps in minutes. It offers a 360-degree view of content performance and viewer engagement on all devices, allowing companies to make real-time content and UX decisions in Ooyala AppStudio without changing a line of code. Further, Ooyala AppStudio is pre-integrated with Ooyala Pulse and other major ad serving platforms to maximize monetization of every video asset. For custom application needs, Ooyala s Professional Services Group can help build bespoke applications and/or integrate with existing components or systems, affording you the flexibility needed to best suit your needs. For more information: Contact us: sales@ooyala.com About Ooyala Ooyala is a US-based subsidiary of global telecommunications and IT services company Telstra. Ooyala s comprehensive suite of offerings includes one of the world s largest premium video platforms, a leading ad serving and programmatic platform and media logistics solution. Built with superior analytics capabilities for advanced business intelligence and a strong commitment to customers success, Ooyala s industry-leading end-to-end solutions help large-scale broadcasters, operators, media companies, enterprises, and brands build more engaged and more profitable audiences, and monetize video and TV with personalized, interactive experiences across any screen. ESPN, Univision, NBCUniversal, Star India of 21st Century FOX, Sky Sports (U.K.), ITV Studios (U.K.), RTL Group (Germany), M6 (France), TV4 (Sweden), Mediaset (Spain), America Television (Peru), and Media Prima (Malaysia): these are just a few of the hundreds of broadcasters and media companies who choose Ooyala. Headquartered in Silicon Valley, Ooyala has offices in New York, Dallas, London, Chennai, Stockholm, Sydney, Tokyo, Singapore, Cologne, Madrid, Paris and Guadalajara, and sales operations in many other countries across the globe.

14 Parks Associates is an internationally recognized market research and consulting company specializing in emerging consumer technology products and services. Founded in 1986, Parks Associates creates research capital for companies ranging from Fortune 500 to small startups through market reports, primary studies, consumer research, custom research, workshops, executive conferences, and annual service subscriptions. The company s expertise includes the Internet of Things (IoT), digital media and platforms, entertainment and gaming, home networks, Internet and television services, digital health, mobile applications and services, support services, consumer apps, advanced advertising, consumer electronics, energy management, and home control systems and security. For more information, visit parksassociates.com or contact us at / info@parksassociates.com About The Author Brett Sappington, Senior Director of Research, Parks Associates As a senior director of research at Parks Associates, Brett Sappington leads Parks Associates services research team, including access and entertainment services, digital media, OTT, cloud media, video gaming, and technical support services. Brett is an expert in worldwide television and broadband services. His personal research focuses on the activities and trends among operators and the market forces affecting their businesses. All rights reserved Parks Associates Brett has spent over 18 years in the industry as an analyst, executive manager, and entrepreneur. Brett holds an MBA from the University of Texas at Austin with a concentration in high-tech marketing and a BA in physics from Baylor University. INDUSTRY EXPERTISE: International Digital Living Trends, Television Services (IPTV, cable, satellite/dth, terrestrial/ DTT), Broadband Services, Multiscreen Services, Value-added Services, Cloud-based Consumer Services, Set-top Boxes, Residential Gateways, Electronic Program Guides, Video Search and Recommendation, Video Metadata, Middleware, Technical Support Services Twitter ATTRIBUTION Authored by Brett Sappington. Published by Parks Associates. Parks Associates, Dallas, Texas All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher. Printed in the United States of America. DISCLAIMER Parks Associates has made every reasonable effort to ensure that all information in this report is correct. We assume no responsibility for any inadvertent errors.

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