NAB Amplify
Quibi was an anomaly. The mobile-first SVOD launched and
crashed in the blink of an eye but every other major league streamer is
steaming ahead. There’s more than enough growth in the market to keep them all
increasing their subscriber count — for the time being — but at the cost of
three significant and legacy parts of the M&E biz.
Rather than fighting off rivals in the so-called
#Streamingwars, SVODs are cannibalizing pay-TV at a rate that will see SVOD
subs nearly double from 650 million worldwide at the end of 2020 to 1.25
billion by the end of 2024.
The forecast, from Lightshed Partners, comes with
significant health warnings.
“The reality is that as each [SVOD] service has launched, it
has accelerated the consumer transition from linear TV to streaming TV rather
than cannibalizing each other,” its new report states.
Look no further than the results in the past year from
Netflix, Disney+ and HBO Max all of which have seen subscriber levels increase.
Netflix added an annual record 37 million new subs. Hulu has added roughly nine
million new subs since being included in the Disney bundle. AT&T said it
now expects global subscribers of between 120 million and 150 million for HBO
Max and HBO by the end of 2025. Back in October 2019, the company set a goal of
hitting 50 million U.S. subscribers by 2025.
With linear TV viewing already down sharply from where it
was even 5 years ago, viewership will take an even more dramatic dive over the
next several years. To make matters much worse, even sports are now migrating
to streaming. Thursday Night Football is moving from Fox to Amazon Prime in
2023 in a 10-year exclusive deal.
This is striking fatal blows to the TV ad market. “An
optimist could say that while legacy media will have more intense digital
advertising competition, they can target ads far more effectively,” say the
report’s authors. “We suspect this will never happen, as the amount of data
legacy media has relative to their digital native peers (not to mention knowing
how to utilize that data), means their level of ad targeting/ROI will never be
competitive to companies such as Google and Facebook.”
The second group of losers identified by Lightshed are the
MVPDs and virtual MVPDs. Cord cutting is going to continue and drastically
undermine the pay business as content shifts inexorably online.
“Most of the major legacy media companies, make far more
from the legacy multichannel bundle than from streaming subscribers. When you
then factor in customer acquisition cost, incremental programming spend and
technology investments along with far higher churn (given the lack of friction
to cancelling), the economics of streaming are dramatically worse unless they
can get to truly ‘global’ scale.”
Writing on the Wall for Cinema
Then there’s theatrical exhibition which is likely to be
squeezed to a niche, per LightShed, as legacy media companies like Disney
attempt to reach their long-term newly found digital first subscriber goals.
The analyst suspects that studios will be forced to make
SVOD the second window after a short theatrical window versus the historic
sequencing of theatrical, then home entertainment and then SVOD.
Paramount has already indicated this is their plan for late
2021 into 2022 for Paramount+ and Lightshed suspect this is where Warner Bros.
is headed with HBO Max for 2022 (perhaps with some films remaining
day-and-date).
“While Hollywood studios are all still publicly talking
about the ‘importance’ of maintaining an exclusive theatrical window, the
writing is on the wall,” it states. “Theatrical windows have been shattered by
COVID-19 and the need to attain subscriber growth for SVOD will force studios
to further collapse the sequential release windows to the detriment of movie
theaters.”
Perhaps the bigger bloodshed will come post 2024/25 when, if
all the forecast of earnings and subscriber targets are met, pay-TV could have
yielded entirely to the streamers. In that case, growth will only come from
eating each other. Like the rat-eat-rat world of Skyfall, then let the
#streamingwars commence.
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