Connected Apps: The New Battleground for Video Services

A Parks Associates Whitepaper Developed for

Connected Apps: The New Battleground for Video Services

A Parks Associates Whitepaper Developed for

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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.

Video apps on connected devices are again playing a key role in the competitive landscape of digital video entertainment.

Connected Apps: The New Battleground for Video Services

Video Industry Players

Pay-TV Providers

OTT Video Services

Broadcasters

Cable Networks

Media / Publishers

The Ongoing Push into Connected Device Apps

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.

OTT services are maturing, competition is intensifying, and players are looking to maximize their reach and tailor experiences to particular audiences.

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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.

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.

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 2015.

AT&T has announced that it will launch a mobile-only, DIRECTV-branded video service before the end of 2016.

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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.

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.

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Consumer Use of AppsChanges 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 MoviesBroadband Households in Speci�ed Countries

© Parks Associates

50%

25%

0%

Germany FranceU.K. SpainU.S.

Tablet Smartphone Internet-connected TV

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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 device apps have become an important channel for monetization of video services. 37% of Hulu

subscribers and

28% of Netflix subscribers signed up for their subscription through a connected device.

Weekly Connected App Use, by Video Source, to Watch a TV ProgramU.S. Broadband Households

© Parks Associates

Broadcast / Cable Network

Pay TV Provider

OTT Video Service

0% 20% 30%10%

Streaming MediaPlayer App

Game Console App

Smart TV App

OTT video services continue to lead pay-TV providers, broadcasters, and cable networks in use of connected apps to deliver content to the television.

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.

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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.

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.

Owners of streaming media players spend more on subscription video services than owners of other TV-connected platforms.

Method of Subscribing to OTT Video ServiceOTT Video Service Subscriptions Held by U.S. Subscribers

© Parks Associates

Mobile / Tablet App

Other Method

Other ConnectedDevice App

Website

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.

Home Entertainment Device Ownership (2009-2016)U.S. Broadband Households

© Parks Associates

50%

75%

25%

0%

Q1/2009 Q1/2010 Q1/2011 Q1/2012 Q1/2013 Q1/2014 Q1/2015 Q1/2016

Smart TV DVR Blu-ray Player Streaming Media Players Gaming Console

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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.

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.

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.

Among the devices that allow televisions to access online video, game consoles have the highest penetration in connected households but are currently in decline.

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Competing Effectively on Connected 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.

Several factors impact the success of video service apps:

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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.

• 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.

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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 $169.99 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 cloud-

based 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.

• 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.

Executives at BroadwayHD suggest that their experience taught them valuable lessons about the video app world:

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Given current trends, the video services apps arena will gain increased attention and competition over the next few years.

The Future for Competition on Connected Apps

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.

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.

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: www.ooyala.com

Contact us: sales@ooyala.com

Your Apps - Powered by Ooyala

About OoyalaOoyala 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.

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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 start-

ups through market reports, primary studies, consumer research, custom research, workshops, executive confer-

ences, 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 972.490.1113 / 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 op-

erators and the market forces affecting their businesses.

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 ID: @BrettsView

ATTRIBUTION—Authored by Brett Sappington. Published by Parks Associates. © Parks Associates, Dallas, Texas 75248. 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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