Latin America. If you have not prepared to know all the changes that the competitive world of digital services and entertainment will bring us in 2018, do it now! Expect to see more OTT services launching, merging, and sadly, falling.
This year will be really exciting; many are charting new routes or completely changing direction but definitely, all will try to bring the consumer on board.
What does 2018 have in store for us? I tell you what I hope for this year:
1. VR and AR: Will 2018 be the year of both technologies? Augmented Reality (AR) — powered by major purchases from Apple (ARKit), Facebook (Camera Effects platform) and Google (ARCore) — will flourish throughout the year. The most important VR event in 2018: the Winter Olympics. This global event hopes to expand VR-verse (Virtual Universe) as companies slowly move away from annoying, unergonomic headsets. In 2018 we will find more lightweight Google Glass wearables and even suits that can make us feel temperatures, and even pain!
2. OTT continues to grow and the white on Netflix's back enlarges. While Netflix continues to generate huge consumption figures and subscriber growth, other OTT services are quietly growing alongside it. Niche services that feature content that Netflix doesn't have, including local streaming stations, sports and events (and potentially pay-per-view specials), will grow.
3. The decline of cable TV is worsening. In 2016, pay TV continued to decline when it lost around 2 million subscribers; and in 2017, losses in Q2 and Q3 alone approached 2 million. This year these losses will be higher, it is likely that they will reach 5 million.
4. We will see an even more mobile world. In Ooyala we found that mobile video occupied 58% of all video consumption in the third quarter, being the sixth continuous quarter of growth in that segment. We believe these numbers will exceed 60% in the first half of 2018, as more wireless carriers push more OTT content — both SVOD and AVOD — on customers and as mobile data prices decline around the world. There has been a similar growth of long-form video on mobile devices: smartphones are catching up with tablets as the display device of choice.
5. Amazon and its new plays in sports. Amazon spent $50 million to stream 11 NFL Thursday Night Football games in 2017, a grain of sand compared to what they plan to spend in 2018, looking to become the sports channel of the next generation. The bid in 2018 is, among others, for the English Premier League broadcasting rights, which cost $1.3 billion over the past three years. Also this year, Amazon closed a deal for the rights to broadcast 37 ATP World Tour tennis events live to the UK and Ireland.
The company will also have to decide whether it wants to keep the rights to NFL Thursday Night Football, which will likely lead to a higher price in 2018.
6. Content spending will reach new heights in 2018. Netflix plans to spend $8 billion usd on producing content in 2018; Amazon will spend nearly $5 billion, and HBO $2 billion. Apple plans to invest $1 billion or more, as does Facebook, and if live sports exclusives are included, those numbers could grow even more. Content costs will continue to rise, driven by competition among distributors.
7. The slow decline of traditional advertising. The advertising industry is finally understanding that the future lies in interactive ads and sponsored programming. In short, they must make a radical change in how advertising is consumed. Expect to see lighter ad loads on AVOD sites, better targeting, and more agile campaigns using data and new technology.
8. Penetration of the use of data, Artificial Intelligence (AI) and machine learning. This year, more devices will use voice biometria to help us find content. Nuance's Dragon TV, Apple's Siri, Google Home and Amazon's Alexa are leveraging AI and machine learning to help us find what we viewers want to see without having to type in titles, names or genres. Artificial Intelligence will no longer be limited to improving discovery and recommendation: companies will begin to reap the fruit of targeted advertising on mobile devices used at home and outside it.
9. More mergers and acquisitions of companies in media and entertainment. The U.S. government is unlikely to end up blocking AT&T's proposed $85 billion acquisition of Time Warner — the key is in the guarantees AT&T provides to make its shares fair to consumers. That won't be the only big deal: Disney will close a deal to acquire several Fox assets and I can predict the deal closing in 2019. Those offers will likely lead to additional offers to fuel consumers' insatiable appetite for content.
I'm sure I'm not the only one forecasting what he expects for next year. I'd like to hear what you think will be the most important trends for this year.
Text written by Jim O'Neill, principal analyst at Ooyala.
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