Despite its rapid growth, Netflix will not achieve the scale to compete with the likes of Sky and Canal+ for premium rights, in the short term at least, according to new research.
In the jointly-authored Arthur D. Little and Exane BNP Paribas report, How to Ride the OTT Wave, the strategy consultants says that competition between streaming and traditional pay TV players will inflate the cost of content, but the likes of Netflix will not be able to compete at the highest end of the market.
“Not even Netflix will have the scale to compete with pay-TV leaders such as Sky or Canal+ for the whole range of their content line-ups,” according to the consultants. “Nevertheless, experts anticipate that the battle between traditional and emerging players will continue to inflate overall content costs.”
However, they do conclude that the increased prevalence of connected devices is “creating a new playing field in content delivery” with two thirds of the executives interviewed for the report believing traditional pay TV providers will be negatively impacted.
“While there are serious threats to traditional media, particularly for smaller TV channels and low-end pay-TV, established providers could counter OTT competition by partnering with telcos and launching their own OTT services, leveraging key assets such as brand, relationships with content providers, technical skills, and the intimate and long-established relationships they have with their customer bases,” the report authors noted.
While the OTT market entrants cannot yet take on the pay TV incumbents at the richest end of the rights market, the biggest OTT players may achieve sufficient scale to do so in the medium and longer term.
“While in the short-term, we believe that traditional players will be ready to meet the challenge posed by OTTs, a select number of OTTs could reach the scale necessary to compete with pay-TV on premium content,” said Bertrand Grau, principal at Arthur D. Little in Paris. “However, there is a window of opportunity for traditional media to partner with telcos to improve their respective position vs. pure play OTTs.”