Sony discussed its Crackle OTT offering at the Next TV Summit. Sony stated that networks have become more equal in the eyes of the consumer through the use of apps. At the same time, the on demand behavior changes the amount of money consumers are spending on DVD, Blu-ray and VOD. As a response to these changes, Sony is releasing its OTT service Crackle.
Eric Berger from Sony/Crackle explained Sony’s intentions and reasoning behind the OTT plans. With the changes in the TV industry from a cable subscription model to a more on demand model, new business opportunities and approaches will allow the players to explore new business platforms.
He stated that based on a study authorized by Sony, 80% of US consumers have a pay TV subscription. There are also 10% who have never had a pay TV subscription and 10% that cut the cord recently. This shows that pay TV is still the dominant form of TV in the home. However, the survey also identified that 19% of pay TV subscribers would cut their cords within the next six months if they were forced to decide. This does not mean that these 19% are actually planning on cutting the cord, but they are open to the idea.
This trend of cord cutting is not really new, but more detailed statistics show that this trend is more common among the younger generation. The Baby Boomers are the lifeblood of linear TV, though they are no longer the strongest consumer group in the USA. According to these studies, 25% of Millenials are not reachable via TV. This entices advertisers to find new channels to reach the younger generations. Mobile TV is definitely one platform that they will explore.
According to Sony, new technology platforms have to address all issues related to TV Everywhere. This does not only mean issues concerning delivering content to the consumer but also where it is stored and how it can be protected against piracy.
Data about the user will become a necessity in the future to attract marketers to a certain platform. Video without a clear description of the viewer will command a lower price. This is not what the networks will want to accept. The user profile data set will be part of all inventory transactions.
Marketing of content will be part of an audience management system that not only looks at the content as the common denominator for the viewer, but also for direct data on who is accessing the content and when and where. Big Brother is already creating Big Data for those advertisers.
Part of this focused advertising will be programmatic TV, a term that describes an automated buying of content by agencies. This view is not shared by all and we will discuss this topic in more detail in another article.
As Sony sees it, linear TV revenue will grow only by under 3% while digital video revenue will grow by over 20%. This is a clear indication of what is already happening in the industry.
Sony’s game plan is to enter the game early with the hope that it can create a brand early and capture a sufficient part of the marketing before other players follow suit.
Meanwhile Sony has released more information on its Crackle release. The service will be coming to metro areas like New York and Los Angeles first and will only be available on the Sony PlayStation. This will be broadened to other devices and areas at a later date. The monthly fee could be in the $50 to $80 range (depending on who you believe). This is one of the key criticisms of the model. With an $80 monthly price tag it is difficult to see how this, plus the necessary broadband internet connection, will add up to any kind of savings in the long term. As soon as cable subscriptions go down the cable providers will increase prices for broadband internet to make up for the lost revenue. – Norbert Hildebrand
