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Online video beyond Netflix and Youtube: live interactivity is the key

Netflix and Youtube have proven that yes, there are sustainable business models for online video. However, their way of managing content works for a limited number of genres: Netflix is the master of long-form dramas and documentaries, while short-form vlogs are Youtube’s bread and butter content. Meanwhile, other genres and formats familiarized by traditional television are suffering in the global video market-place. Viewership is shifting from linear television programming to online video in its myriad shapes and forms — and yet, there is still a glimmer of hope for TV as new, more creative episode formats business models emerge. If you ask us, live interactivity is the key.

On traditional television, viewers watch a mix of comedy, reality shows, soap operas, game shows, sports, current affairs, and drama series. In comparison, the variety of content that viewers enjoy online is limited to content that has found a sustainable business model to serve it up to the masses. Netflix’s business model and discovery system is limited in the sense that it only works for certain types of content: namely, engaging dramas and kid-friendly content with a prolonged shelf life and an international audience.

The online video market has not been reduced to subscription-based Netflix and ad-funded Youtube.

At the other end of the spectrum, Youtube has emerged as the kingpin of ad-supported video. Youtube reaches one quarter of the global population every day with its vast offering of videos of all kinds. In this case, the chosen business model is also the greatest inhibitor regarding the type of content that gets published on the platform: Youtube is ideal for vlogs, music, and largely promotional content for media found on regular television.

Between the high production value of international drama series on one end of the spectrum, and vlogs with low production value on the other end, there seems to be little room for other genres like game shows, current affairs programs, and reality series. Sports is another story entirely, as a genre currently experiencing declining ratings while maintaining fierce competition among video publishers for broadcast rights.

But all of this seems to be changing. New formats boasting strong viewer demand have promising business models are emerging. Twitch, the live streaming platform, is building a healthy following thanks to its direct to viewer donation capability and linked virtual goods. Alibaba’s artful union of entertainment and online shopping drives sales better than any regular ad. In the mobile world, 9-month-old HQ Trivia is reinventing the quiz show by plugging users into an app, making every viewer a contestant.

At first glance, these apps seem to have very little in common. If you look below the surface, though, you will notice that their business models aim to build reach using video, while generating revenue and value through active engagement. When the viewer simply views the content, there is little value being created. This is different from Netflix and Youtube. Netflix evaluates the value of its content — and thereby its investment decisions — based on the content that is being watched, with a particular focus on binge watching. Youtube is content agnostic: its algorithms evaluate content based on the number of views, likes, and comments submitted by users, as well as the willingness of advertisers to place their ad on a given video.

Twitch, Alibaba, and HQ are fuelled by live interactivity. For Twitch, value is created once viewers start to interact with their chosen streamer. They can get involved either by taking part in the chat, subscribing to a channel, or cheering using Twitch’s ‘bit’ currency — this is when revenue really begins to pile up. Third parties can also send donations via Twitch: sums have historically ranged from a few dollars to nearly $10,000 in one fell swoop. In exchange, the vlogger acknowledges the donor, or sends the donor virtual goods. Streamers and viewers develop and strengthen their relationships this way. The viewer understands that the streamer lives off of the donations and therefore supports him or her in this way.

Interactive live video is emerging as a new genre and a new business model

For Alibaba, engagement is expressed by purchasing something directly off of the screen, either as a part of the entertainment bonanza that is Singles’ Day — which featured Pharrell and Nicole Kidman in 2017 — or using the Tmall fashion collection’s See-Now-Buy-Now feature. These shows are live-streamed on multiple platforms, including traditional television. Viewers can buy the items shown on their screen using the digital platform with which they are watching the stream, or in the case of traditional television, using special features on the Tmall app that displays shoppable items in sync with the stream. And although Alibaba’s narrative is not sales-y like TellSell or QVC, there are clear calls to action. It is shoppable video done right.

HQTrivia’s twice daily video quiz shows attract up to 2.2 million players per round. These are not just viewers; they are players, so engagement is very high by definition. Our analysis, and that of other people familiar with the industry, identifies three possible business models: native advertising such as branded countdown timers or sponsored questions, paying for in-game items (e.g. extra lives), or a premium gameplay option with bigger prizes. Just last week HQ had its first sponsors, Nike and WarnerBros. In both cases HQ was the native advertising tent pole in a large activation campaign.

The common characteristic that unites Twitch, Alibaba’s new retail platform, and HQ is the live interactivity narrative. Streamers, presenters, and hosts actively invite viewers to chat, vote, buy, like, or play along. Casual interactivity is not a gimmick, but a means of increasing engagement and removing inhibitions that stand in the way of a transaction. With the addition of interactive features, viewers can actively take part in each show. Viewers then become users, and engagement therefore increases. Interactivity is gateway behaviour for transactions or donations and a rich source of user data.

User interaction is visible on-screen, prompting the streamers, presenters, and hosts respond to them: they serve up quips at comments in the chat, shout-outs to returning viewers, and results from polls or votes that display avatars or user data. The feedback loop is closed, and the sense of being a part of something bigger than yourself increases, especially when the experience is shared with hundreds of thousands or millions of viewers. The interactive component turns a broadcast event into a collective experience that fosters an actual connection with the event, as well as the other people watching alongside you.

For interactivity to work, it needs to be live. Only then can viewers truly take part in such a wildly valuable collective experience. Only then can the feedback loop be closed by the emcee. Only then can a video transform into an engaged collective experience instead of a canned linear narrative. Only then can transactions become a part of the process.

There are opportunities for other formats in this emerging market, from reality and game shows to current affairs and sports.

The online video market has not been reduced to subscription-based Netflix for high-production-value international content, and ad-funded Youtube for vlogs. In different markets and with different commercial propositions, the pioneers in this genre have shown that there is a third option. Interactive live video is emerging as a new genre and a very viable business model. Twitch, Alibaba, and HQ have created business models that engage viewers through live interactivity and convert said engagement into direct revenue.

There are opportunities for other formats in this emerging market, from reality and game shows to current affairs and sports. As opposed to Netflix, this will be a local play. The fact that the formats need to be live will also benefit local players. Anyone who has tried to win HQ Trivia’s main show at 3AM Central European Time can attest to this.

If you want to create your own interactive video show, let us help you. At Ex Machina Group, we provide everything you need to create exceptional live interactive video shows, including concept creation, business modelling, front end design, back-end development, and operations. Check out our website to get inspired by our portfolio and client list. Or contact me directly on LinkedIn.

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The best insights from the Ex Machina Team. We develop innovative, interactive, multiscreen solutions for brands, media, and e-commerce companies. Our concepts, designs, apps, and platforms reach tens of millions of users, powering thousands of hours of interactivity worldwide.

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Jeroen Doucet

Jeroen Doucet

Innovating the medium formerly known as television. My day job is Chief Strategy Officer for ExMachinaGroup. Amsterdam based, but often in a hotel near you.

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