We’ve already seen some fragmentation of video distribution services and it begets the question if this is just the beginning. Further fragmentation will have some common characteristics.
First, I believe this further fragmentation will happen around lower dollar value digital assets. These types of digital assets have the likeliest chance of propagating further fragmentation because their appeal will be strongest among niche segments of the population as opposed to mass audiences. Therefore, these lower dollar value digital assets will generally have older publication dates and be less likely to potentially damage existing owner-distributor relationships – like the relationships between studios and MSOs.
Secondly, as alluded to above, fragmentation will occur (and ultimately be most successful) where niche audiences exist.
Third, fragmentation makes sense where there is a concentrated appetite for given digital assets (ie content genre) and there is also a wide assortment available to distribute.
Fourth, fragmentation makes sense where renting v. owning makes sense. One can easily argue we are already there on this fourth point.
NetFlix is of course the first-mover here and I think their recent price increases were a move to increase the dollar value of the digital assets for which they have rights. But if we apply the NetFlix model to other lower dollar value digital assets we can imagine low cost streaming services for niche content like fitness videos, certain foreign films (by language for example), or other niche content. These type of content have concentrated value within the niche. So they won’t damage owner-distributor relationships, but they’ll be able to support a monthly subscription fee.
As Internet-enabled TVs generally become more available or if traditional cable content is eventually distributed via apps across app-enabled TVs such that users can access different feeds of content seamlessly across app platforms then these isolated services (and thus fragmentation) will gain steam.
