Account-sharing is a significant part of the problem, even if many consumers don't see it as a form of video piracy.Upwards of 5 percent of viewers used someone else's credentials to access a pay-TV service, and 6 percent did so to access an online video service, based on Parks' survey of U.S. broadband households. In the United States, some 12.5 million pay-TV households accessed pirated video in 2019. That is actually a low number compared to Asia and Pacific, where there are far more users but where the average revenue per user (ARPU) is smaller.
As a result, video providers are monitoring this type of piracy and working to address it.
Return of the Ads
One answer to video piracy -- particularly for streaming providers -- might be a dynamic shift in the business model, namely to ad-supported services.Twenty-five percent of U.S. broadband households watched video on a free, ad-based over-the-top (OTT) service during the 30 days prior to being polled, Parks reported in "360 View: Video Services & Connected Consumers." No single service dominated the market, but Parks found that 7 percent of U.S. broadband households used The Roku Channel, 6 percent watched Pluto TV, and 6 percent watched Crackle. None of these services offers the same level of premium content as Amazon or Netflix, but their programming is comparable to that of basic cable channels such as AMC or FX, which also are ad-supported.
A good example of what may come could be Hulu. The service now is fully controlled and majority-owned by Walt Disney Direct-to-Consumer & International, a business segment of The Walt Disney Company, with Comcast-owned NBCUnivesal as an equity stakeholder. When it launched in 2007 Hulu was available as a free service that was ad-supported, but in 2009 it shifted to a subscription service, at the time dubbed "Hulu Plus." The Hulu Plus brand disappeared in 2015, and Hulu became a subscription-only service. Starting in 2019, Hulu offered a basic ad-supported plan for $5.99 a month and a No Ads plan for $11.99 per month.
Its not just about the fun and games. Other than providing action-packed, fun-filled entertainment for the entire family, VR plays a big role to help humanity as developers use it to help those in need in ways that were unimaginable 20 years ago. Some use it to cure phantom pain among amputee victims, while others rely on VR to provide therapy for soldiers suffering from post-traumatic stress disorder. VR has also been proven to help children with autism by teaching them social cues and real world lessons. It is being used as a practice board for surgical students before they make the first cut. There is even a VR content targeted at young adults that simulates their physical condition when they get to their 60s, and thus encourages them to save for the future.
Fighting the Pirates
Even with its ad-supported plan, Hulu faces issues with account-sharing. Given the high cost of creating original programming, the OTT players will need to do something to address the lost revenue resulting from all forms of piracy."Piracy and account-sharing have been eating away at OTT services and I don't see any slowdown going forward," warned industry analyst Jeff Kagan. "The industry is looking for alternatives that would be welcomed by users, and one of those alternatives is a choice of advertising versions and paid non-ad versions," he told the E-Commerce Times.
For advertisers this could be welcome news. The arrival of the DVR some 20 years ago brought not only time-shifting -- allowing viewers to watch programming at their convenience, but also the ability to pause live TV. The DVR has made ad-jumping very easy.
However, "streaming services can make it hard for users to avoid the ads," noted Kagan.
Redirecting the Stream
Another significant change could be in how streaming is tied to users. The various services set limitations on the number of devices that can be used simultaneously, but tighter restrictions could diminish the number of users who share a single account.
"The basic question about account-sharing is whether an OTT platform thinks it's selling a subscription to a stream, or a license to use the stream to a particular person -- or household," said Steve Blum, principal analyst at Tellus Venture Associates.
"If it's about the stream, then there's a technical solution: Only allow one stream to be used by a particular account at any one time -- or however many streams that the platform chooses to sell," he told the E-Commerce Times."If it's a personal license, then it gets trickier, but this is not a new problem," added Blum.
This form of sharing really isn't much different from making cassette copies of music recordings decades ago, or sharing PC video games when it was impossible for the computer to know if a copy was installed on another device.
"Software developers have been trying to restrict copying and reuse since the days of Fortran," noted Blum.
The U.S. Government Loves VR. Both NASA and the U.S. military are investing in virtual reality. NASA uses the technology to try to connect engineers with the devices they send into space. Using the Oculus, and motion sensing equipment from the Xbox One gaming console, NASA engineers are developing ways to control a robotic arm with gestures made by the operator here on Earth. The military uses VR to recruit and to train soldiers before they are deployed. The simulated scenarios provide opportunities for teams to work together in immersive, realistic environments to better prepare them for the chaos of combat.
Controlling the Streams
Streaming platforms have an advantage, in that these have a real time, two-way connection with the subscriber, or whoever is accessing a stream at any given time. This allows them to limit the number of people accessing the account simultaneously, to a point."That gives them the ability to implement conditional access solutions, similar to what DirecTV or DISH use, but probably more effective and less costly," Blum said.
That approach might limit use, but it would be "more trouble than what they're doing now," he added.
It would be more costly, and it would decrease convenience for legitimate viewers, potentially having a negative impact on operations, the selling proposition, and subscriber retention, warned Blum.
Then there is the fact that the services already face a churn problem -- viewers canceling when they find nothing worth watching and moving to a rival service. If one service is too controlling or restrictive, it can turn off viewers, especially since there is so much content available on the various services, and a limited number of hours in the day to watch it.
The key may be to ensure the value proposition to the consumers."Among U.S. broadband households using free, ad-supported video services, 97 percent also subscribe to a premium OTT or pay-TV service," noted Brandon Riney, research analyst at Parks Associates. "NBCUniversal's upcoming Peacock streaming service checks both boxes for consumers by providing both ad-supported and paid programming tiers," he told the E-CommerceTimes. "Consumers are willing to pay for -- and pirates are more likely to steal -- content they perceive to be of a higher value," added Riney. "Consumers supplement their video entertainment with ad-supported content, while pirates use free content to bulk up their illegal offerings."
There is a case to be made that consumers would be willing to accept some restrictions -- such as limited login options or ads -- as long as they perceived value in the service.
"Much of Peacock's library will be available within the ad-supported tier, while its original and more premium content will be behind a paywall," said Riney.
"As a leading media brand offering originals, exclusives, early-window and live sports programming, its range of programming should hold broad appeal," he noted. "Free, ad-supported services are highly complementary to subscription services -- they typically feature older, late window and short-form content that is less costly to produce."
The Royals Are Also Using It. You know that virtual reality is big when highly prominent people are also getting in on it. In March 2018, Prince Harry and Meghan Markle honored International Women's Day by encouraging young women to study science and technology. In the process, they attended a school and tested out a virtual reality set. The couple had a positive experience with virtual reality. They both appeared to enjoy learning about the technology and how the headset works.
Lessons From History
This is a time of transition -- not just for OTT services but for the entire TV landscape. OTT is the latest disruption, and it could take a while to address all the ongoing issues, including what consumers will pay for and how to address piracy.
"We went through this same transition in the satellite industry in the 1980s and came out just fine," noted Blum.
Tiered options could create alternative revenue. One tier could include minimal ads -- or some other form of sponsorship, perhaps similar to the approach taken on PBS where there are promotional considerations, if not outright ads upfront, but no interruptions in the actual content.YouTube is another example of keeping the ads to a minimum but making those few spots difficult or impossible to skip.
"Different kind of alternatives will be tried by some -- not all -- services," said Kagan. "This has been a long-term issue, and it isn't going away anytime soon."