Today’s post is about the questions of why we need a new business model/solution in the video streaming industry.
To better understand the current market situation, let’s run through the main indicators and problems the industry is facing nowadays.
If we look at the tendencies, online and digital ad spends within the overall marketing budget have almost doubled since 2012; on YouTube alone, over 1 billion hours of video content was viewed daily in 2017. Online video sharing platforms have become the main source of news and entertainment especially for young people, making these platforms both the most effective and popular marketing tool in recent years. Half of Generation Y and Z watches online VoD content daily, fuelling an almost 47 billion USD worldwide ecosystem in 2017. This could reach 83.4 billion USD by 2022. It is quite safe to say, that online existence is becoming more and more important going forward.
However, the current business models raise some questions and concerns, as platforms are facing the following problems:
Ad fatigue – probably everyone experienced the ridiculous amount of ads in the videos basically without asking the viewer about it. There are 616 millions of devices installed with ad blockers out there meaning that users are fed up with watching that many ads. It also hurts advertisers, because it results in a drop in conversions and they have to pay more and more to reach their target audience
Monetizing – it is very hard - especially for micro influencers- to monetize their content due to their smaller follower base. 99.9% of content creators are paid a fraction of the cost of content production – not enough to make profit for themselves while making a lot of profit for the platform. Content curators who share the content do enormous favour for video platforms, while they can’t monetize their influence or their following base in any way.
Transparency – video platforms often keep you in the dark about revenue. If you’re a content creator you simply cannot count how much revenue your video will generate due to the complex calculation model current platforms have; revenue depends on the follower base, views, shares and more..
Copyright compliance - When someone stole your content even though you can prove your ownership, you can't prove how much loss it caused. It means you can’t take action against this case. The source of the problem roots form the previous one listed above but hurts content creators in multiple ways.
Virality – it is hard to build huge follower base, and hard to generate click and views but unfortunately content creators will not be rewarded in any other way. Plus,middlemen, such as curators are not rewarded well enough, thus they are not interested in spreading the content.
Subscriptions – in terms of video platforms, have you ever considered how many subscriptions do you need if you want to watch all your favorite movies, series, sports events etc.? You have to pay to Netflix for some of the better series, to HBO for other movies, and NBA, NFL, Formula1 etc. for their events too. But how many subscriptions can one user be expected to sign up for to access all the content she wants to watch?
Clearly, subscription based platforms are not the solution for quality video content.
To sum it up, most of the leading video platforms, including YouTube and DailyMotion, rely almost entirely on ad revenue for income. When viewers are blocking ads and advertisers’ convergence continues to decline, the faucet will run dry. YouTube has been running at a loss for years, and is financially dependent by its parent company, Alphabet.
Key players in the system, such as content creators and curators, who are making those platforms dollar-billion industries, are not fairly compensated to say the least.
Therefore, video sharing industry is ripe for change. In the next chapter, we’ll share working solutions for the above market problems.