OTT Reaching Maturity - Budapest 2016
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Netflix has aggressively expanded internationally and added more subscribers, but the OTT market is reaching maturity with increased competition from other content providers like HBO, Crackle, and Hulu entering the market. While Netflix's international expansion provides opportunities for growth, its inflexible $10 per month subscription model and lack of localized content and payment options has drawbacks. Additionally, Amazon has a substantial infrastructure advantage over Netflix through its AWS platform that provides monthly content and delivery. As competition in the OTT market increases and the U.S. market becomes saturated, margins will shrink and content will become more fragmented.
OTT Reaching Maturity - Budapest 2016
- 1. OTT Reaching Maturity JUAN RAMON ZARCO MANAGING DIRECTOR SILICON VALLEY VENTURES GROWTH PARTNERS LLP [email protected]
- 2. Introduction Netflix aggressive international expansion – more subscribers Other Content Providers Entering the Market Market niches by smaller OTT providers FCC opening the door for more OTT content via cable box OTT market is reaching maturity with more entrants, more content, and greater diversification Strong marketing and content needed for survival 2
- 3. Netflix 3
- 4. Netflix 2 – Margins Stabilized 4
- 5. Netflix 3 - International 5 Strong U.S. currency, inelastic subscriber fees (<U.S.), less localized content
- 6. Netflix - 4 “From today onwards, we will listen and we will learn, gradually adding more languages, more content and more ways for people to engage with Netflix. We’re looking forward to brining great stories from all over the world to people all over the world.” CEO Ed Hastings. 6
- 7. But New Entrants, Inflexible Business Model, Infrastructure Netflix charges US$10 a month internationally, requires credit card There are now 2,571 fewer titles; that is a 33% drop in the number of movies and 25% fall in TV shows. HBO Crackle (SONY) Hulu Comcast Amazon with its Cloud system, AWS, offering monthly content and infrastructure advantage Google? Apple? China – Youku, iQiyi Independent Operators 7
- 8. Independent Operators and Content OTT-Platforms Vimeo, TAPP Pivotshare Content Hungry Monk Yoga (US$15/Month) Chris Cox Horsemanship (US$20/Month) OASLife (US$20/Month) Zombie Go Boom (US$5/Month) 8
- 9. Amazon Entry and Infrastructure Costs US$99.00 per year Downloadable Content for later viewing $8.99 per Month for Video, $10.99 per month for Amazon Prime (Books, Videos) As of December 2014, Amazon Web Services operated 1.4 Million servers across 11 regions and 28 availability zones Compare Netflix and, based on the 3-cents-per-gigabyte assumption, it costs Netflix about 6 cents to deliver one SD movie and 9 cents to deliver one HD movie. Those numbers would be about 25% lower if the length of the movie were 90 minutes instead of 2 hours. It would also be a little lower or higher depending on the exact bitrate, since some movies are streamed higher and some lower, and Netflix only has about 400 movies available in HD. Netflix uses about 1,000 of the storage systems with CDN. Note that Netflix uses AWS for storage and distribution. 9
- 10. Regulatory Changes Cable set Boxes President Obama lobbying with the FCC to open up cable boxes to other content providers (April 15, 2016) Impact to co-ax and satellite providers to open up their boxes to Netflix, Google, Apple, etc. 10
- 11. U.S. Media Consumption 11
- 12. The Big Whale - China 12
- 13. Mobile is Critically Important 13
- 14. U.S. Market Saturation Amazon has substantial infrastructure advantage over Netflix Netflix reducing the number of titles International market opportunities exist but local competitors and localized content and business process must conform Competition for each U.S. consumer’s 11 hours per day is finite Margins will shrink, content will be more fragmented 14
- 15. 15 Juan Ramon Zarco Managing Director Silicon Valley Ventures Growth Partners llp [email protected] thank you! köszönöm!