Four Predictions for 2012
Colin Dixon, Senior Partner, Advisory
(Adapted from OTT Monitor published 12/22/11)
Prediction #1: Netflix will return to growth in Q1 2012.
Reason: Consumers will be unwrapping a lot of connected devices with super screens this holiday season, each of which will feature a Netflix app. With a free one-month trial readily available, who can resist giving it a try?
Challenge: Will this new wave of trial members stay with the $8/month fee, or will they bail by Q2? If the latter, watch for churn to be in the five million range in Q2.
Prediction #2: PayTV providers will raise subscription prices in 2012, as the number of subscribers will decline yet again.
Reason: With the NFL increasing fees 60% in 2011, watch for other major franchises to follow suit. As well, broadcasters such as Fox and ABC are looking for new license fees from operators.
Challenge: Stopping a major exodus of subscribers tired of high PayTV costs. Although cable has been losing subs for years, they've been able to increase revenue by getting more out of those that chose to stay. With stagnant salaries, a lousy housing market, and high unemployment, Operators will have a tough time squeezing more from cash-strapped household budgets. Keep an eye on subscriber numbers in the quarter immediately after prices are increased. As monthly subscription rates increase, Netflix and Hulu at $8/month start to look really attractive!
Prediction #3: By the end of 2012, more than 50 million U.S. households will be watching Internet video on their primary TV.
Reason: A number of new OTT video services will arrive in 2012 and exploit unmet needs and niches traditional media simply cannot afford to service. And yes, all of them will be much less expensive than cable.
Challenge: Being found. Consumers are already overwhelmed with content choices. Subsequently, content discovery solutions will have a banner year in 2012.
Prediction #4: By the end of the 2012, all 32" and above TV sets in electronics stores will be "smart." That said, less than 10% of them will contain Google TV.
Reason: The price difference between smart and "stupid" TVs will be almost zero, meaning buyers will have little reason not to opt for the smart sets. Google TV 2.0, while an improvement over 1.0, will fail to connect with TV viewers. Despite Eric Schmidt's protestations to the contrary, with only LG and, maybe, Sony showing Google TV-powered sets at CES, achieving a larger share in 2012 seems far-fetched.
Challenge: Creating a unified application and business environment that works across Smart TV brands. Each TV manufacturer has its own Smart TV interface, none of which work together. Consequently, creating applications for all the different flavors of interfaces is burdensome for developers. As well, content providers simply don't want to share revenue with manufacturers. Can CE manufacturers unify the technical and business terms to create a legitimate TV app and OTT content market?