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Six Elements of OTT Success

How to lay a foundation for a thriving video-streaming business 2/13/2017 8:00 AM Eastern

Dramatic changes to the media, entertainment, broadcast and communications industries have taken place in recent years. Over the last five years, over-the-top video has proven to be a creatively disruptive industry force.

 

Savvy, established companies have reacted with OTT initiatives to protect their customer base and generate additional cash flow. Astute entrepreneurs have created advertising-supported, subscription-based and hybrid alternatives. As expected, some of these ventures have been successful while a greater number have failed.

 

The challenges of building a successful OTT business are real whether the companies involved are large incumbents or small entrepreneurs; whether they provide advertising-supported, subscription-based or hybrid fare targeting a niche or mass market; or whether they require large amounts of capital, a seed round or venture funding.

 

Here are six major elements critical to success:

VISION AND BUSINESS DEFINITION
Having a vision is often overlooked, but it provides the foundation for an attractive business plan. The original path to success probably changed with market realities, but the concept of having a vision and articulating the longer-term opportunities is still extremely important. If the plan underestimates implementation cost and the number of potential customers required for success, its foundation will crumble.

 

Instead the plan must define the vision and the business, identify the customer, define the strategy from startup to profitability and show capital needs to reach the major milestones. After reviewing the executive summary, its creator must step back and see if it passes the “sanity check,” both personally and with respect to potential investors.

 

CUSTOMER FOCUS
The most crucial element is a comprehensive focus on identifying and understanding the customer. Without the customer, there is no business. There are two components to this:
• Identify the Target Customer: It is important to determine not only which customers you are trying to reach but also their general characteristics. This includes the size of the market, growth potential, geographic clusters and demographics such as age, affluence, education, lifestyle and occupation.
• Answer Key Questions Regarding the Target Audience: It is also vital to understand what core benefit the proposed service would deliver, e.g., less searching time for information or finding more fulfilling content. In other words, what problem would the proposed new service solve — for example, eliminating frustration with surfing multiple sites or providing better service quality? Why will the proposed service be relevant, compelling and credible? What current options will the proposed service replace? Finally, what future innovations would be necessary to improve retention and encourage word-of-mouth comments?

 

CONTENT DIFFERENTIATION
A “me-too” service won’t cut it! Some form of exclusivity would of course provide an important differentiating factor but this applies more to a large company with sufficient resources to develop or secure exclusive content. However, for smaller companies or startups, it might be possible to identify a niche and offer content not currently offered to the target audience.

This content might not necessarily be “exclusive” in the long term, but it could provide an important initial competitive advantage. Further, content mix and curation could also provide some level of differentiation along with some attractive local content. Developing a competitive analysis would help validate areas of content differentiation.

 

MARKETING
You might have mastered the steps noted thus far, but if the prospective customer does not know that the service exists, all of this effort is wasted. Remember, nothing sells itself! It is essential to allocate sufficient budget resources to inform the target audience of the existence and appeal of the service. In this regard, it is important to develop a brand positioning strategy showing why your customers will be attracted to the proposed service.

 

Tactically, a would-be OTT provider might want to try out its messaging in one small area of a “test” market before rolling it out. There are various ways to reach a target audience, whether it be a combination of initiatives via grassroots marketing, targeted ads, PR and social media, depending on the size and resources of the company. It is important to test various product offerings and to be flexible enough to adjust, based on consumer reactions. Finally, eventually establishing loyalty programs could help to retain customers.

 

TESTED IP PLATFORM
The right streaming video platform must be chosen to deliver a high-quality service to your customers. For larger companies with lead times and ample resources that regard owning and controlling an IP platform as a strategic necessity, it might make sense to develop a proprietary platform. That also may be advisable for existing consumer-focused businesses wanting to expand their services to more screens. But for others with limited resources or time, it might be preferable to contract with one of the many qualified OTT technology providers and deploy their services quickly.

 

Contracting has allowed many content brands to quickly enter the market to prove their concept, validate their value proposition and build a customer base. As the strategic environment changes, a company could eventually opt out of such an arrangement and build its own platform.

 

Content providers should select a scalable streaming video platform that provides a seamless and enjoyable video experience along with a customer-friendly UI. Viewership analytics are important and this data should be used to support product and marketing teams and reinforce relationships with content owners.

 

EXECUTION
A good plan incorporating the previous five elements still won’t prevent major problems without proper execution. This involves hiring a strong leader and a talented and adaptable management team.

 

It is important to remember that no matter how solid the original business plan, actual first-year results will always differ as the company adjusts to market changes. Accordingly, it is vital in the initial planning processt to think about a Plan B and Plan C in the event that original assumptions are not correct.

 

In sum, following the aforementioned six elements should increase your prospects for success. It won’t be easy, but it will ultimately be worth the effort.

 

Mickey Alpert has been a communications/satellite TV executive, an industry consultant and a former Cablevision Systems executive vice president and senior adviser to chairman Charles Dolan. He founded the Mersico Solutions consultancy after Cablevision was sold to Altice. He can be reached at malpert@mersicosolutions.com

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