What could an SVOD version of iPlayer look like? Who would its audience be? And what kind of revenues and uptake could it hope to achieve?
You may have seen the news a couple of weeks ago that the BBC’s budget was effectively being cut by around £650m after the British government announced that the corporation now had to cover the cost of providing free television licences for over-75s. In return, it may be able to start charging for access to BBC iPlayer. How it might do that from a technical / marketing / CRM / perspective is a conversation for another article. For now, I’ve been wondering what a subscription-based product might look like, who its audience might be (domestically and internationally) and what kind of uptake and revenue it might get. Some thoughts:
#1. Who Pays and for What?
While the licence fee is still in place it would be impossible, politically and from a communications standpoint, to charge British consumers for content in the current 30-day catch-up window. This is sacrosanct. Viewers have already paid once and they shouldn’t need to pay again. It follows that the BBC could only therefore impose a fee for access to an expanded library made up of archive content, “online-first” premieres and other value-added material e.g. the kind of stuff you find in DVD extras. Incidentally, the new SVOD iPlayer would primarily be a streaming service: downloads to your device would be automatically deleted after a set period. Again, this deserves further exploration but for now, permanent physical and digital ownership (and its own future as a concept) would remain in the domain of the upcoming BBC Store.
#2. A Compelling Proposition?
The British Broadcasting Corporation was founded in 1922 so, in theory, it has nearly 100 years of programming to choose from when opening up its archive in a chargeable version of iPlayer. I say in theory because after the failure of its Digital Media Initiative we don’t know how much of that content is rights-cleared and available for on-demand consumption. Either way, could this long tail alone – without the BBC joining the bidding war (against Sky / Netflix / Amazon etc.) for premium movies and sports – be compelling enough to form a product that users would pay to subscribe to? I think so. The TV catalogue alone could include thousands if not tens of thousands of titles which would be regularly replenished with new, post-broadcast-window material. Brits could gorge on nostalgia and classic shows whilst the international audience, who have long held the BBC as a beacon for quality programme-making (my parents, first-gen immigrants, certainly think so), would have enough viewing to catch up on for a lifetime.
#3. The Size of the Domestic and International Markets
We’ve learnt in the past week that more than 60 million people around the world are bypassing internet restrictions to watch the BBC’s shows online. The study from research company GlobalWebIndex, based on a sample size of 47,000 survey respondents in China, India, Japan, the US, Brazil, Germany and France, states that between one and eight per cent of adults in all of those countries have used VPNs to access iPlayer. I asked a BBC spokesperson for usage statistics for the recently closed “global” iPlayer but was told that none were available.
Domestically, the BBC’s latest figures show a 10% YOY increase. There were 222 million requests for TV programmes in May 2015 according to the BBC’s latest iPlayer Performance Pack and 2.59bn billion in the full calendar year 2014. In its Communications Market Report published in August 2014, Ofcom suggested that iPlayer remained the most popular VOD service in the UK with 38% of adults (aged 16+ from a sample size of 1,644) saying they’d used it in the reporting period.
#4. Conversion Rates & Potential Revenues
If the BBC did start charging for an expanded, archive-inclusive, iPlayer, what kind of uptake and revenues, domestically and internationally, could it hope to get? I’ve spoken to a few industry colleagues about this and although we’re doing a bit of guesswork and a lot of extrapolation here, there are three real world indicators that might point us in the right direction.
a) Conversion Rates
We’ve recently been working on a consultancy project for a major European broadcaster and in the course of that job, we discovered that a Scandinavian operator had achieved a conversion rate from its AVOD to SVOD service of between 0.2 and 0.4%. Apply these figures and the potential iPlayer revenues are pretty slim, totalling less than £3 million a year (assuming a politically palatable subscription fee of less than £5 a month).
Given that Netflix in the UK apparently has about 3m subscribers however, you’d assume that the BBC would aim to at least match that level of success. If so, revenues potentially rise to about £180m: respectable but still only representing a fraction of the budget cut.
b) Market Forces & Consumer Feeling
Netflix looms large in any discussion about SVOD and every broadcaster we spoke to as part of the consultancy project (see above) mentioned it by name. Two takeaways: first, that Netflix has tested market forces and effectively set consumer expectations about how much a premium service should charge. Second, it’s widely acknowledged that the company has done a brilliant job in terms of marketing, customer acquisition and new-territory launch strategy. Sure, it has the finances to enable this but its brand perception is incredibly attractive too. How do we know this? Well, here at VOD Pro, we’ve been tracking references to on-demand services on Twitter for the past year or so. In March 2015, for example, we recorded 8.63 million tweets based on 38 search terms including Amazon Prime Instant Video, HBO Go, Hulu and NOW TV. Netflix was cited in a whopping 4,029,376 (46.72%) tweets. “BBC iPlayer” and “iPlayer” together accounted for just 20,881 (0.48%) tweets.
What’s even more interesting is the tone that people use in their communications. Netflix is seen as a buddy, as a friend. Here’s an example.
“My girlfriend’s away this weekend. It’s just me, Netflix and popcorn!”
Mentions of iPlayer on the other hand are purely functional e.g. “I just watched The Voice on #BBCiPlayer.”
Drop me a line or tweet me @consultVodkr if you’d like to see more of this research.
c) International Revenues
There’s no official line on why the global BBC iPlayer was closed recently but according to a BBC news report, “American pay-TV operators had threatened to drop the BBC America channel if the app had launched locally because they believed it would cost them viewers.”
Clearly, there were reasons. Whilst I’m not going to go into that right now I have been thinking about how much revenue an international version of iPlayer could theoretically make. The real world indicator here is Netflix (again!) in Australia. Before it launched there at the end of March, the service apparently had 200,000 users accessing the service via VPNs. It now, reportedly, has 1.4m subscribers: a 700% uptake of the original VPN base. Let’s call it an even 1m users or a 500% uptake. Imagine a global iPlayer repeating that success? The GlobalWebIndex study says that it has 65m VPN users. It’s a massive, massive stretch but that would mean 325m worldwide BBC subscribers. If they were each paying £2.99 a month (the lower cost would average out across countries), iPlayer annual international revenue would be £11.66 billion.
That’s, of course, the best-best-best case scenario. On the other end of the spectrum, if iPlayer were simply to get the same level of conversions as the Scandinavian operator (0.2 – 0.4% – see section 4a above), maximum international revenues would total just under £10m pa.
As I said, this is just me playing out scenarios but it’s been a very interesting exercise. What do you think? Add your comments below or tweet me @consultVodkr.