BCG Analyzes the Factors Driving Digital Disruption in the TV Industry

NEW YORK, NY--(Marketwired - Mar 21, 2016) - The global television industry is in the midst of a digital revolution, and it is now clear that streaming video and nonlinear viewing will be the most disruptive forces this industry has ever experienced, according to a new report by The Boston Consulting Group (BCG). The report, titled The Digital Revolution Is Disrupting the TV Industry, is being released today.

The amount of time people spend watching television shows online jumped 50% in just 12 months -- from December 2013 to December 2014, the report says. In 2015, in the US and the UK, more than 50% of entertainment programming was viewed on-demand -- not according to a schedule fixed by a network or distributor.

"The television industry has seemingly 'defied gravity' as the only media industry in which traditional players and business models have not been disrupted by digital distribution. But that is about to change," said John Rose, a BCG senior partner and coauthor of the report. "The explosion of new viewing pathways, nonlinear viewing alternatives, and new players along both dimensions will create the same degree of disruption that we have seen roll through media segments, such as music, radio, and print."

The report highlights several trends that have fundamentally altered industry dynamics:

• Online and mobile viewing will exceed facilities-based video viewing. By 2018, online video will likely account for nearly 80% of fixed-data traffic and close to 70% of mobile traffic.
  
  
• On-demand viewing will eventually exceed live, linear viewing. The share of nonlinear viewing is currently reported to be just over 20% in the US, but this number is expected to double to more than 40% by 2018 and continue on this aggressive growth trajectory. And many European markets are not far behind.
  
  
• New companies and business models are capturing significant value online. In the US, online-advertising revenues increased sevenfold from 2010 through 2015, and growth shows no signs of slowing down.
  
  

Four Disruptive Scenarios

The report identifies four potentially disruptive scenarios, depending on which industry participants seize the advantage in the battle for market share:

• The Universal Remote. A wealth of compelling content exists in the fragmented mosaic of broadcast TV, pay TV, and Internet-based offerings, but consumers can't access and stream all video content across pathways and devices using a single point of navigation. Companies that can become the go-to, anytime-anywhere access point for living-room TV, smartphone, and tablet viewing have an opportunity to gain a huge competitive advantage.
  
  
• The Walled Garden. Certain types of content, such as serialized dramas and top-tier sports events, are becoming increasingly popular with viewers, and distributors and aggregators can capitalize on this trend by locking up exclusive entertainment content. With subscribers choosing distributors on the basis of content preferences, exclusive entertainment content can become a critical strategic asset and differentiator.
  
  
• Distribution Disintermediation. Networks with strong brands and top-tier programming -- or the rights to hit content -- can seize the advantage by delivering content directly to consumers.
  
  
• "Live" TV Online. One of the main reasons viewers don't cut the cord is that traditional television still offers live programming and content across all categories (not just entertainment, but news and sports as well). Online aggregators that integrate live content with their own on-demand offerings -- and price the package right -- can transform their value proposition for consumers.
  
  

"TV companies will need to make smart decisions about how to adapt in order to tap into changing consumer preferences," said Jacob Rosenzweig, a BCG partner and coauthor of the report. "To thrive in the digital revolution, TV players must think strategically about how to maximize the assets and content they have, invest where they have gaps, and anticipate where their traditional business models will be most at risk."

Staying Relevant in the New Ecosystem

The report explores implications for all participants in the video-industry value chain: content creators and rights holders, broadcast networks, cable and satellite companies, and online content aggregators. Content creators and rights holders are well positioned to thrive in virtually all scenarios, but the same cannot be said for others in the industry. Companies with businesses built on traditional TV and streaming video need clear strategies to prepare for the changes to come and -- where possible -- to influence outcomes in their favor.

A copy of the report can be downloaded at www.bcgperspectives.com.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 85 offices in 48 countries. For more information, please visit bcg.com.

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