Issue No. 8: The Streaming Revolution
Bloomberg & MEC News | Issue No. 8: The Streaming Revolution
THE STREAMING REVOLUTION
Exploring the future of entertainment
Issue No. 8
A Changing Landscape
The state of media & entertainment
The Streaming Frontier
In 2016, pay TV lost 1.6M subscribers because of the easy, 24/7 access to entertainment via streaming services, but the major cable and satellite companies aren't going anywhere yet. Through efforts like skinny bundles and cross-industry partnerships, there is still a lot of room to compete for consumers' attention.
In this issue, MEC and Bloomberg unpack what marketers need to know most about what's happening now and what's coming next, from key trends to new business models to how to stay ahead of it all.
Relentless pace of change
In the decade since the iPhone redefined the smartphone industry, "watching TV" has changed forever.
More than ever before, consumers have choices for both content and how to consume it. Improvements in handset-screen quality, ever-more-robust mobile networks, and now-ubiquitous unlimited data plans only increase the momentum.
In 2017, expect the competition for audience attention, especially from the coveted 18-34 year old demographic, to foment new strategies, new products, and new opportunities.
+80% of 18-34 year-olds in the U.S. are using mobile platforms to consume content – via Bloomberg.com
"Content on demand is the new reality in the media landscape, and that presents challenges and opportunities for brands - we can't rely on old ad models to be relevant to people who consume content where and when they want it."
– Noah Mallin, Head of Social, Wavemaker, MEC NA
Tech, telecom, pay TV and media companies are coloring outside the lines in an effort to come out on top with consumers, Bloomberg reports.
Carriers like AT&T now want to deliver big-ticket television events like the Olympics to stay relevant with younger consumers.
Tech giants Amazon, Netflix and YouTube have become original content producers. Content creators like Time Warner and Disney are becoming streaming giants.
And it doesn't end there. Pay TV companies Comcast and Charter plan to offer wireless service; and Dish Network's Sling TV, once the only "skinny bundle," is increasingly just one of many options.
Industry deal making intensifies
This year, AT&T expects to acquire Time Warner, and Verizon plans to close its deal to buy Yahoo. At the recent Mobile World Congress in Barcelona, partnerships that would deliver content to mobile environments were a key focus.
Read more: MEC at MWC: Key Takeaways and Trends
2017 could see an additional wave of cross-industry partnerships and takeovers. Bloomberg Gadfly sums up the possibilities in this graphic:
Potential mergers and partnerships among media, telecom, pay TV and tech companies this year
Click to enlarge
Content is still king
Walt Disney Co. Chairman and CEO Bob Iger distills what's important to consumers amid this changing environment in an interview with Bloomberg.
"The consumer is interested far more in content than they are in how they get that content – although that’s important too," said Iger. "I look at the AT&T-Time Warner planned merger as a distribution company needing to own content, as opposed to a content company needing to own distribution."
Click to watch the full interview: Disney Chairman & CEO Bob Iger on Content, Distribution and Data
Assessing consumer touchpoints
Utilizing MEC Consumer Pulse, MEC’s proprietary online survey panel, we’re able to glean insights into consumer-reported viewing habits.
From January 2016 to February 2017, we have seen a downward trend among Millennials who indicate they watch Live TV (defined in Consumer Pulse as "television that is viewed at regularly scheduled time") in a typical week.
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Accordingly, in January 2016, 70% of Millennials said they watched Live TV frequently or very frequently in a typical week; this amount dropped to 58% a year later in February 2017.
However, despite this overall decline, MEC Consumer Pulse reports slight spikes in Live TV viewing that align with key moments of interest, such as live events like the 2016 Rio Olympics in August and the U.S. election season.
So what does this mean for marketers? Brands can still leverage the broad reach of Live TV for key moments or events that are relevant and speak to Millennials.
However, as marketers move towards more audience-centric planning over simple demographics-based targeting, the key is to supplement these mass-reach moments online by reaching the right audience where and how they actually consume content.
The New World Order
Driving the future forward
Re-engineering OTT Entertainment
As consumer expectations dramatically shift, the reinvention of content and how it's accessed is critical to staying relevant - and absolute for those who want to stay on top.
In this section, we highlight four companies at the forefront of these changes, looking at both the tactical toolbox and the broader implications each has for critical topics for marketers, including: Global thinking; customer-centricity; balancing action and consistency; and embracing new technologies.
Netflix's reality TV push: innovation with a global focus
Netflix, the world’s largest paid video service, spent about $6 billion on content last year; it is expected to spend a similar amount this year, with $2 billion of that going to original series, according to Bloomberg Intelligence.
The streaming leader, with almost 94 million subscribers worldwide, has upended entertainment industry traditions by releasing its content everywhere at once.
That strategy will extend to the 20 new unscripted TV shows it plans to launch in 2017. The first of those, "Ultimate Beastmaster," which launched in late February, plays to the company's international ambitions with 12 hosts, 108 contestants and six different versions tailored for audiences around the world.
51% of adults overall say they use Netflix compared to 74% of Millennials.
Source: MEC Consumer Pulse
2,500 U.S. respondents, Adults 18+, Feb. 2017
Amazon's Oscar turn helps deepen consumer relationships
Amazon, the world’s largest online retailer, spent $3 billion on content last year, according to estimates. It also has global ambitions, announcing plans last year to stream its own new reality show "The Grand Tour" in 200 countries and territories.
But it has played more by Hollywood’s rules, giving motion pictures a serious run in theaters. That strategy helped deliver a big payoff: the first-ever best picture nomination for an online video service with "Manchester by the Sea."
The brand equity that builds helps the company attract members who pay a yearly fee that includes media streaming. Members are more likely to stick around on the site and spend; in turn, video watchers are also more inclined to renew their memberships.
Last year, Amazon also introduced a standalone service featuring on-demand access to thousands of movies and Amazon originals for $8.99 a month. In all, Amazon had about 65 million members in the U.S. at the end of September, up 38% from a year earlier.
32% of adults overall say they use Amazon compared to 41% of Millennials.
Source: MEC Consumer Pulse
2,500 U.S. respondents, Adults 18+, Feb. 2017
YouTube's big bets stay true to brand identity
YouTube's ad-supported premium content model remains successful. It also wants viewers to pay for original programming via its subscription service YouTube Red.
Its shows are by the aspiring filmmakers and vbloggers who got their start on YouTube, which helps it stand out. But the unfiltered strategy hasn't been without risk, as its biggest stars are also its most outspoken.
YouTube also announced a new service just last month that will deliver an assortment of major television channels to paying customers via the internet. For $35 a month, starting this spring, subscribers to YouTube TV will be able to watch the top four broadcast networks and 35 or so of their affiliated cable channels.
YouTube CEO Susan Wojcicki announces YouTube TV. Photo: Patrick T. Fallon/Bloomberg
Time Warner's Boomerang brings tech in-house to stream back catalog
Meanwhile, Time Warner is mining its huge catalog of content to launch its own distribution channels, according to Bloomberg.
First up is a new animation-themed service, called Boomerang, that will offer more than 5,000 episodes of TV shows - but won't carry ads. It will debut this spring and cost $4.99 a month, about half the price of Netflix’s monthly fee.
Every division of Time Warner, in fact, is exploring the streaming business - and Warner Bros. will provide the technology to support Boomerang, thanks to the acquisition of a streaming service. The studio may build online services devoted to its film franchises in coming months.
The four big players spotlighted in this section will continue to aggressively compete to shape the new media landscape - but they are far from an exhaustive list of all the activity happening in this explosive space. For brands, honing in on which developments offer the right opportunities is key.
Not the same disruption story
Evolving and Adapting
While the streaming revolution may hold more change to come, the news isn't all bad for traditional entertainment providers.
Cable TV has shown resilience, with both recent subscriber gains and broadband growth; music streaming has delivered revenue growth for the music industry as a whole.
In this section, we look at three examples that demonstrate how traditional media is seizing the streaming moment.
"It would be a mistake to ignore the enduring value of television...It would equally be an error to forget that even in 'traditional' media there has always been a dividend for creativity – more people remember – and relevance – more people act."
– Rob Norman, Chief Digital Officer, GroupM
Streaming positively impacts music
Spotify and other paid streaming services have boosted the entire record industry, according to Bloomberg.
Recorded music sales grew 7% in 2016, the fastest pace in decades. Streaming accounted for $5.4 billion of $16.1 billion in global record sales.
That follows significant revenue growth for the recorded-music industry in 2015, thanks in part to streaming. In fact, revenue from music streaming has multiplied fourfold in five years.
Online streaming has become the music industry's #1 revenue source - but that's lifted the entire industry. Source: Bloomberg
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A surge of new subscribers
Meanwhile, Comcast, the largest U.S. cable operator, is enjoying a golden age of TV - cable TV. The company gained TV customers in four of the past five quarters and added to its subscriber rolls, reclaiming market share from some telecom carriers and satellite-TV providers, Bloomberg reported in January.
Executives attribute the momentum in their cable-TV business largely to their new video platform, called X1, which makes it easier to search for shows and movies on TV and on Netflix from their cable set-top box.
Executives attribute the momentum in their cable TV business largely to their new video platform.
In February, Comcast added YouTube to the X1 platform as well; the move lets customers avoid the hassle of toggling between their cable service and web-connected devices.
And the company's high-speed Internet service is also growing. It signed up 385,000 new broadband customers in the quarter, topping analyst predictions.
TV service from cable and satellite companies is in roughly 85% of U.S. households; online TV options have increasing subscribers
Click to enlarge
Time Warner reported fourth-quarter sales and profit that beat analysts’ estimates. That growth came largely from negotiating new, more lucrative deals with distributors for its premium content, according to Bloomberg.
The company's divisions also posted positive results. At Turner, which owns CNN, TBS and TNT, revenue increased 7% due to higher subscription sales.
At HBO, revenue rose 6% thanks to higher subscription and content revenue. HBO Now, the premium channel’s web-only service, has surpassed 2 million total online subscribers in the U.S.
Total online subscribers HBO Now has in the U.S. Source: Bloomberg
What's next from media companies?
The traditional TV industry is divided on whether to welcome internet streaming and video-on-demand providers onto set-top boxes - while Amazon has said it's open to pushing content through cable boxes, and Netflix already has such partnerships.
Streaming consumption trends are sure to keep accelerating -- but the technology that powers it will need to keep pace. Several high-profile live-streamed recent events experienced hiccups, and consulting firm Activate estimates that only 12% of U.S. households have fast enough internet speed to support multiple people watching TV online.
Estimated share of U.S. households that have fast enough internet speed to support multiple people watching TV online. Source: Bloomberg Gadfly
In coming months, Unisphere Research and StreamingMedia.com will release the most recent annual OTT Video Services survey, offering a window into where industry members see the market headed.
You can also expect plenty of new digital video content and product ideas from media companies during the two week-long IAB Digital Content NewFronts starting May 1.
MEC will be on the ground reporting live from the NewFronts – look out for our MEC@ Digital Content NewFronts Takeaways Report.
Cable and pay TV operators are making sizable investments in their future, including those listed below. Which do you see as most important?
- Leveraging new technologies to create advanced set-top boxes
- Expanding network capability to meet growing data demands
- Increasing business services offerings
- All of the above
Fighting for connection
Phones, tablets, computers and soon to be cars are where consumers are increasingly spending their time being entertained.
In the near term, that puts the focus squarely on how well brands leverage all the available ways to connect.
In the longer term, as industry players consolidate and 5G becomes available, the ease of the journey across devices and touchpoints is where the future lies.
Here are three key strategic points to consider.
1. Watch for wireless and video convergence
While 5G service isn’t expected to be commercially available until 2020, Verizon and rival AT&T are bringing the technology out of the lab and into the hands of actual users with market testing.
Improved connections and capacity will help companies offer fast Internet speeds while relieving congestion created by consumers who demand video streamed directly to their phones.
It is essential for marketers to understand the opportunities that can come with undisrupted streaming experiences and how they can change expections and pathways for consumers.
2. Creative chops and tech skills both matter
The question of whether content or distribution is more important may not have an answer; each is dependent on the other to disseminate ideas, foster relationships and spur action.
For example, vertical video ads haven't yet gone mainstream - but that may be about to change. Marketers must consider both sides of the equation, evaluating how brand content interacts with means of distribution and what opportunities new technologies afford for creating brand content.
3. Planning ahead helps strike the right balance
Understanding where, when and how to act on new capabilities requires steadfast alignment, not only with core brand values and assets, but also with the needs of consumers at each stage.
Planning for the resources needed to seize new opportunities will help marketers execute on strategies while maintaining focus on paramount brand attributes.
The streaming revolution is nascent, but the shift in entertainment consumption habits and preference is real. That requires a content strategy hard-wired to the purchase journey in order to transform brand performance.