Posted: By Andy Marken 03.30.22
|Source: "Foundation," AppleTV+|
“History is the ultimate weapon because it harnesses time itself. Used correctly, the past can alter the present.” – Gaal Dornick, “Foundation,” Apple TV+, 2021
Some folks are talking about Web 3.0 like it is the beginning of a whole new, better world that will make everything that came before it obsolete—especially for the M&E industry. We're also talking about the metaverse like it's the place where everyone is going to be. But entertainment is fundamentally the same, with a few added enhancements—digital and profuse.
You're not going to see the "old, familiar" forms disappear. We'll still have vaudeville. We'll still have live theater and live events with even more people crowding the venues. We'll still have movie houses where folks will want to gather to experience and enjoy dynamic/dramatic projects. We'll still have orderly linear TV that we can turn to for predictable stuff. Technology and data are simply helping us enrich and personalize our content—the more data, the more personal our content will become.
Personal data has enabled Netflix, Amazon, Apple, and Disney to scale up their video streaming services nationally and internationally. The foundation was laid more than 30 years ago when technologists determined a zero-profit tool was needed for people to exchange information and ideas quickly and easily. BAM! Today we have leveraged that tool to enable creative people to develop and deliver more and more varied content to folks everywhere.
Playing politics—Streaming services like to focus on delivering content to as many people as possible, regardless of their home country, but politics often get in the way. China is closed to global streamers for the time being, but its services are growing outside its border.
Global OTT traffic from more than 200 US and 2,000 global services are delivering a dizzying array of content to more than 340 million in the US and more than 770 million around the globe, and traffic is expected to increase nearly 200% this year over last.
The pandemic certainly gave the industry a major boost.
- 82% of US consumers have a video streaming service, with the average being four subscriptions.
- Across the globe, 770 million people signed up for an SVOD service this past year, nearly a 40% increase over the previous year.
- US OTT income will grow to nearly $48 billion in two years, while China’s revenue will triple to $26 billion—one-fifth of the global market.
- Western Europe is projected to have 196.3 million OTT users by 2024, which is 45% of the population.
- The UK has more than 286 million Internet-enabled devices—10 per household.
- Leading Asia-Pacific markets are the Philippines, Indonesia, and Australia, which are predicted to grow to nearly $45 billion by 2024.
- Latin America is projected to have 116 million OTT subscribers, with Brazil and Mexico leading the pack.
|Source: Nestor Research|
Opening territories—Netflix was one of the first entertainment services that saw it was possible to share entertainment across borders, and it continues to lead the way.
Content came first from the technology leaders that had a solid grasp of the fast, reliable, global reach of the Internet. Netflix, Amazon Prime Video, Apple TV+, and Disney+ steadily invested in new, different, unique, and outstanding content. Allan McLennan, CEP/Media, head of M&E North America at Atos, pointed out that we’re two years into the streaming wars and the newness is starting to wear off. People have settled into a modified, yet enhanced entertainment routine.
“All of the services benefitted from the shifting of movies that would have been viewed in theaters to watching them in the comfort of their home,” McLennan observes, “but two years of lockdown and limited access was enough. People are cautiously returning to selective IRL (in real life) gatherings and the office, while tempering their streaming entertainment.”
Netflix, the streaming giant, remains the leader with more than 218 million subscribers worldwide, ahead of its closest competitor, Disney (200 million), which includes Disney+, ESPN+, and Hulu.
Growing—While the financial market likes to think Netflix has reached its peak in the Americas, the company has done an excellent job of reaching consumers and developing content for their service in the EMEA and APAC areas.
McLennan notes that most of Netflix’s new subscribers have come from the Asia-Pacific and EMEA (Europe, Middle East, and Africa) regions. As a result, it has increased its investment in foreign-produced shows, which are not only less expensive to make, but travel well beyond country borders.
Amazon Prime is a strong contender, but it’s difficult to define its subscription base (stated to be over 200 million) because it also includes folks who are there for the shopping discounts and free shipping. However, Amazon continues to invest heavily in new content—$11 billion compared to Netflix’s $17 billion. But with its pending $8.5 billion acquisition of MGM, it will not only have a strong content library to draw from, but also a number of content franchises for future projects.
The streaming services have steadily increased their investments in fresh documentary, family, and animation content, with Netflix and Prime Video leading the SVOD ranks with the largest thriller projects.
The mouse roars—The timing couldn’t have been worse for Bob Chapek to take the management reins of Disney. But while theaters closed around the globe, the company focused on building out a content-rich global streaming service. Now the organization must carefully juggle the theatrical window and new streaming content availability.
Cautiously straddling the lines between theatrical, same day, and streaming first, the family-oriented content producer Disney has had exceptional subscription growth (200 million) in two years. The company has benefited from its extensive global presence and content for Disney+ from subsidiaries including Marvel, Pixar, Lucasfilm, FX, History Channel, ABC, and Touchstone Pictures.
Hulu is an anomaly in streaming because it is 60% owned by Disney (Comcast holds 30%), thus indirectly contributing to the streamer’s growth. If and when Disney can persuade Comcast to give up its 30% share, Hulu will take its rightful place in the kingdom. If not, it will remain a solid financial contributor to Disney’s bottom line and a streaming option for more adult content.
Emphasizing their streaming-first approach, Disney’s CEO Bob Chapek has ensured that new ESPN sports deals also include full streaming rights. The bundle of Disney+, ESPN+, and Hulu offers one of the best streaming solutions for the entire family.
Sweet nectar—While many seasoned studio executives question the long-term viability of Apple TV+ because of the size of their content portfolio, they forget that consumers want new, unique, personalized visual stories, and the company is delivering for a growing subscriber base. Content will always win over process.
While Apple has always been known as a content-over-process company, many in the M&E industry really didn’t take the fruit company’s Apple TV+ seriously because of its calculated, slow-paced approach. But projects like Ted Lasso, The Morning Show, Greyhound, Finch, and The Velvet Underground have earned the company a shelf full of awards and an estimated 40 million subscribers (free and paid) from the more than one billion global Apple users.
And should CEO Tim Cook and his crew decide to ramp up the company’s entertainment presence, Apple has cash reserves of about $200 billion, which could enable them to acquire one or two of the streaming latecomers.
|Source: Warner Bros. Discovery|
Big five potential—Discovery’s David Zaslav will eventually be taking the helm of the combined entertainment service Warner Media and Discovery, which has lots of potential if his team and he can mend fences with A-listers and theater chains, while reducing/eliminating a lot of overhead.
Now that the merger of Warner Media and Discovery is almost within reach (Warner Bros. Discovery), HBO Max has a solid chance of becoming a fifth major streaming option for folks around the globe. The $43 billion megamerger adds a lot of financial pressure for Discovery’s David Zaslav, the head of the new firm. However, he is confident he can quickly reduce expenses to an estimated $3 billion to $4 billion by eliminating duplication (staff cuts) and merging the two firms’ subscribers—70 million from HBO and 20 million from Discovery—into a strong global viewer base.
Sorting it out—Not every new streaming service will survive as an individual entity, even if they believe they have the best, most desired content in the world. Subscribers already have multiple services that offer more content than they can possibly see… ever. Mergers and acquisitions will become more prominent in the years ahead as the herd is thinned.
Many believe that only five streamers can succeed on a global scale, which leaves others to focus on regional or niche participants. This calls into question the place for Peacock (Comcast’s NBCUniversal) and Paramount+ (ViacomCBS’ rebranded CBS All Access) in the global streaming marketplace. The two have worldwide subscriptions of more than 54 million and 47 million, respectively, but still rely heavily on day/date series and film/show libraries.
McLennan notes that broadcast outlets still attract millions of viewers daily and that pay-TV will continue to be a profitable entertainment alternative to streaming for the foreseeable future. However, for streaming, we can expect more consolidation and service aggregation.
“The major differentiator between appointment and streaming video entertainment is data,” McLennan emphasizes, “and the tech-driven organizations have understood this at the outset.”
Tastes vary—To be successful, today’s streaming services need to determine (and anticipate) what content genre will appeal to the greatest number of present and prospective subscribers, and then use that data to guide the development and /acquisition of new, different projects.
“From the outset, they have been accumulating vast caches of information—feedback, subscriber day/time/location information, and even a breakdown of the amount of time people watched individual movies and shows,” McLennan says. “Instead of practicing the mantras of ‘content is king’ and ‘if you build it, they will come,’ they understand that the consumer is king and his/her viewing habits vary and are constantly changing.”
Yet, there is so much premium content at their disposal (more than they can possibly consume) that their interests and entertainment needs are constantly changing.
Interests change—People don’t always want the same thing in the entertainment they watch and listen to, and interests change over time and are influenced how you feel/think at various times. The challenge for streaming services is to anticipate those changing interests.
To keep pace, McLennan said that AI (artificial intelligence) and ML (machine learning) data are increasingly being used by streamers, project creators, and A-listers to track and anticipate what new content will appeal to subscribers and potential subscribers. In the early days, Netflix focused on subscriber households that tuned in to at least two minutes of a program. It produced impressive numbers (billions of minutes) but was also rather meaningless. Other streaming services quickly followed suit, as did measurement services. To make show and movie viewing more meaningful (and probably keep everyone guessing), they shifted to total hours viewed as a standard metric.
“The demand for original and exclusively licensed content is a leading indicator of subscriber growth for SVOD platforms,” says McLennan. “Since this form of delivery isn’t selling ad slots within their content, it’s obvious that they are a little less outwardly transparent on project performance. Instead, all the data results and analysis are used internally to develop new movies and series, keep present viewers, and entice new subscribers.”
Home view—Perhaps it’s difficult and perhaps impossible for you to get your family together to watch a movie or show as this couple does; but you have to admit, it’s something you can hope for, rather like a Norman Rockwell painting.
“In their defense,” McLennan adds, “streaming services are hesitant to share their results, especially when it comes to what really counts—viewer wants and sentiment feelings, views, and opinions.”
Financial analysts like to point to the deep, wide libraries of “rich” content they have that will obviously ensure their success. Wrong! First, if you viewed many of the films and shows in terms of today’s political and social environment, you’d notice they have to be seriously edited or folks would unsubscribe— in droves. You know, stuff we innocently enjoyed years ago—Blazing Saddles, Airplane, Tropic Thunder, Sixteen Candles, Breakfast at Tiffany’s, Song of the South, many early Bond films, Dumbo, The Jerk, Sausage Party, and your own WTF unfaves!
No, people want fresh, original content that “feels” as though it has been developed for them personally. Content that interests, attracts, and keeps them. When viewers log in to watch “something,” they want and expect a hyper-personalized bundle of entertainment options that gets better and better the longer they subscribe. That data also helps Netflix, Amazon Prime, Apple TV (and increasingly, Disney) to determine which projects to greenlight. It also helps the production team create a film or series that will earn audience attention and accolades around the globe.
|Source: "Foundation," AppleTV+|
Even A-listers understand what Abbas meant in Foundation when he said, “Past behavior is the best predictor of future performance.”
We’d just like to be able to use one entertainment search entrance point instead of our five separate streaming sites. We know Foundation’s Demerzel meant well when she said, “The search for meaning is not always about the answer. It’s also the process of seeking that enlightens.”
Thanks, but we simply want our entertainment coming to our screens as we envisioned it five years ago!