Major Players Square Up in Battle for Online Revenues
Reed Hastings, Netflix's chief executive, used the recent Guardian Changing Media Summit to fire a warning shot across the bows of BSkyB, declaring he wanted a "fair fight" with the pay-TV broadcaster.
Talking about Sky's exclusive content rights deals with all six leading Hollywood studios, Hastings said they are actively targeting the big studio deals with the ambition of winning one over the next year or so.
Hastings argued against the need for immediate government intervention, although he didn't rule it out, in order to open up the market. He even suggested the two could cohabit: "Frankly, we think many people will get Netflix in addition to Sky Movies or Sky Atlantic."
There is good cause for such optimism. At the Changing Media Summit, Red Bee published research findings from its Tomorrow Calling programme, showing that online video services are expected to fuel significant sector growth in the next decade, with annual revenue from pay online TV services predicted to quadruple by 2020.
In this rapidly expanding market, Hastings confirmed he has a target to achieve 10% market share in the UK. He would not, however, confirm a date to achieve this.
Of course, Netflix is unlikely to have it all its own way. Only the day before, Sky's chief executive, Jeremy Darroch, had thrown the first punch by announcing details of NowTV, the company's new internet TV service that is due to launch this summer. For customers who do not have Sky subscriptions, NowTV will offer content on a pay-as-you-go or contract basis over the internet, tapping into the explosion of connected devices.
A clever and timely move, NowTV has been devised to attract revenue from the 13 million homes that do not subscribe to Sky television. It is not Sky branded and seeks to capitalise on the growing market and help combat the threat from lower cost internet services.
Of course, content will remain the crucial selling point for all of these services and the competition for premium content rights is likely to intensify as the major players fight to secure the most valuable rights.
Indeed, our research points to this trend with 72% of the industry believing this to be a significant battleground. More broadly, YouTube is predicted to spend more than £100m on commissioning original video in the UK annually as the content landscape grows ever more competitive.
What is clear is that the incumbent broadcasters and platforms are set to go toe to toe with internet and technology players for the industry's growing and emerging revenue opportunities. But as the battle for over-the-top services continues, the question remains: who can build a successful business model that will allow them to acquire the premium content rights that consumers want and provide it at a price point that consumers are willing to pay?
How will traditional broadcasters and platforms fare? Will they be able to maintain market share? Or do you think the likes of Google and Apple, with their deep pockets of cash, will dominate and transform the TV landscape as we know it beyond recognition?
Let me know your thoughts in the comments below or send me a tweet @stellamed.
Stella Medlicott, Chief Marketing Officer