Over the past couple of weeks, we have discussed the need for a video search platform as well as the current market dynamics. But just where is the pot of gold in all this? And why isn’t next-gen video search here by now?
For starters, there is good logic behind why traditional TV conglomerates have avoided next-gen video search. One reason is that the technology is difficult.
Another reason is that they’re afraid of the economics. For traditional networks, keeping viewers on their channels is crucial, because that’s how they get ratings. Higher ratings lead to higher affiliate fees and higher advertising revenue. So a tool like the next-gen search engine we’re talking about, that allows the consumer to find content elsewhere, would be very bad for business.
Similarly, services like Netflix and Hulu that do not rely on affiliate fees or advertising do rely on monthly subscriber fees. Those services want their subscribers to use their platform as often as possible and not even think about finding content anywhere else. So a video search engine that takes viewers off their platform accomplishes the exact opposite of what they are trying to do.
It turns out that TV conglomerates are fundamentally opposed to what their consumers really want. If you recall our earlier analogy relating hotels and online travel agencies, you understand that consumers want to be able to search all hotels at once rather than one at a time.
It’s the same in the TV world: consumers want to search all content options, not just their limited cable TV system (for example).
While it’s important for every platform to have its own search engine, having an external service offers greater value to the consumer. Just as hotels and airlines couldn’t stop this from happening 15 years ago, content platforms won’t be able to stop next-gen search in the very near future.
Now the question is: Who would be the logical owner of this platform? The answer is that it’s not quite so simple.
A player like Amazon, or perhaps even Google or Roku, could be the right entity to deploy next-gen video search. Giants like AT&T and Verizon could be well positioned for this, given that smartphones are the perfect gateway for this service. Tech companies like Cisco or IBM may be a good match too. For any of these companies, figuring out how to play, and soon, is critical.
The dollar potential is huge. Netflix estimates its recommendation engine contributes approximately $1 billion to annual profits by ensuring people stay on the Netflix platform. A true next-gen video search engine would do more and capture enormous additional value.
Consider the following:
A service that is able to guide the flow of traffic to digital content is going to be incredibly well positioned for years to come.
This is Part 3 in a series on video search by Dan Schechter, Gil Moran and Francesco Di Ianni from L.E.K. Consulting’s Media & Entertainment practice.