Streaming Media
One of the most-used phrases of 2020 went along the lines of, "COVID-19 accelerated remote/streaming/cloud trends already in play." Far and away the biggest impact on media and entertainment was the rocket that the pandemic put under streaming video and the almost overnight pivots that media organizations made to keep pace.
With nowhere to go but home for large parts of the
population for most of the year, coupled with a related stoppage of live
events, audience-based TV shows, and virtually all cinema distribution, we
escaped to video on demand (VOD). Linear TV viewing also rose, it's true, but
the existing fault lines between pay TV/broadcast and streaming services became
chasms.
A November 2020 survey by TransUnion found that 71% of U.S.
consumers increased their use of paid streaming services since the pandemic
began in March. On average, consumers are spending 3–4 hours a day
watching streaming media, with 55% choosing this type of entertainment instead
of opting for a cable-TV subscription.
"Making Screen Time Family Time," a report
published in December 2020 and authored by ad-supported video-on-demand (AVOD)
network WildBrain Spark and analyst firm nScreenMedia, revealed that family
co-viewing is here to stay. Of the 3,000 U.S. parents surveyed, 75% said they
watch video content with their children several times a week or more. This
result cuts across gender, children's ages, household income levels, and
marital status.
Everybody Is Streaming More
The average 18- to 24-year-old American now spends more than
1 hour and 40 minutes each day watching subscription video-on-demand (SVOD)
services, according to Ampere. The 25- to 34-year-old group shows similar
behavior. It is well-understood that younger consumers watch more SVOD content,
but Ampere's data suggests that the typical 55- to 64-year-old's OTT viewing
increased by more than 50% between Q3 2019 and Q3 2020. "At face value,
this trend would imply that by 2025, 55- to 64-year-olds will be watching as
much SVOD as 18- to 24-year-olds do now," says Richard Broughton, Ampere's
research director.
Related data from Futuresource Consulting concludes that,
globally, the oldest demographics spend the majority of their time watching
linear TV, while SVOD and AVOD services absorb the majority of viewing time of
the youngest. "The burning question is whether these younger age groups
will adopt the habits of their parents and grandparents as they grow older, or
will their current video behaviors remain with them as they age?" asks
Futuresource Consulting analyst Tristan Veale.
Despite increased competition among streamers, the number of
platforms for which consumers have subscriptions may have hit a plateau.
TransUnion found that 44% of U.S. consumers currently subscribe to an average
of three to five SVODs, while only 7% are subscribing to as many as seven to
10. And 67% said they don't plan to cancel any of their existing subscriptions.
DTC Explosion: Multiple Successes
The direct-to-consumer (DTC) explosion that began in 2019
continued apace in 2020, with streaming consumption aided by stay-at-home
orders. For The Walt Disney Co., the pandemic was a double-edged sword. The
closure of its theme parks contributed to a nearly $5 billion shortfall in
revenue in Q3 2020. However, the company's "real bright spot," as
identified by CEO Bob Chapek, was Disney+, which exceeded even the most
ambitious of targets by amassing 86.8 million paid subscriptions by the end of
2020.
As of Dec. 2, 2020, Disney's entire portfolio of DTC
services topped 137 million global paid subscriptions, including 11.5 million
ESPN+ subscribers and 38.8 million Hulu subscribers alongside its Disney+
number. Disney bosses expects Disney+ to reach 230–260 million subscribers by
2024, with its total streaming portfolio hitting 300–350 million in the same
period.
The DTC business is key to the future of the company, said
Chapek in a statement outlining Disney's corporate reorganization around DTC.
Under the new structure, Disney will focus on developing and producing original
content for the company's streaming services, as well as for legacy platforms.
In addition, Disney's new international streamer, Star, was scheduled to launch
in February 2021 in Europe, Canada, Australia, and New Zealand and will launch
as Star+ in Latin America in June. Star will contain content from Disney-owned
brands, including Disney Television Studios, FX, and 20th Century Studios, and
will deliver originals as well as more than 35 first-run series by the end of
its first year. What's more, content will be originated independent of the end
distribution platform, clearing the path for feature films that were once
destined for theatrical release to be additionally or solely released online.
Market leader Netflix had a stellar Q1 2020, piling on 15.8
million subscribers. It was forecast to hit 34 million paid net adds for 2020,
beating its previous annual high-water mark of 28.6 million in 2018. Netflix's
latest figures, from September 2020, report 195.15 million paid customers
worldwide, up 23.3% year over year, with 73% from the U.S. and Canada.
Netflix told shareholders to expect subscriber growth to
return to pre-COVID levels in 2021. In addition, it said, "We continue to
view quarter-to-quarter fluctuations in paid net adds as not that meaningful in
the context of the long-run adoption of internet entertainment, which we
believe is still early and should provide us with many years of strong future
growth as we continue to improve our service."
There were analyst concerns that the long lull in production
would negatively impact Netflix down the line. Netflix, however, says it still
expects to release more originals in 2021 than in it did 2020.
WarnerMedia launched HBO Max in May 2020 to build on the
existing market share of HBO NOW and HBO GO. With a $14.99 per month fee, HBO
Max is one of the most expensive SVOD offerings. By the end of 2020, it had
attracted more than 12.6 million subscribers and is apparently still on track
to hit 75–90 million subscribers globally by 2025. HBO Max has yet to expand
internationally, but is scheduled for a European debut in the second half of
2021.
The decision to stream Warner Bros.' entire slate of 2021
movies, including The Matrix 4 and Dune, on HBO Max alongside a
theatrical release seems designed to light a rocket under that plan. AT&T
CEO John Stankey suggests that the future of movie distribution has changed
fundamentally and that the ultimate window is DTC. (AT&T owns Warner Bros.)
"It's really important that we have a direct relationship with
consumers," he says. With the pandemic closing theaters and interrupting
the production of TV shows, "it's important that these new distribution
platforms scale faster for fear of being left behind."
Apple hasn't yet released 2020 figures for Apple TV+, but
according to Ampere, it could have had around 40 million subscribers as of
December 2020, based on estimates that it had 34 million subscribers as of
January 2020. Some believe it is on track to hit 100 million subscriptions by
2025. "As most Apple TV+ subscribers are non-paying and the service
continues to have a relatively limited catalogue, … customer retention will be
a challenge," says Fateha Begum, principal analyst at Omdia.
In October 2020, Apple announced the extension of its 1-year
free trial to February 2021, as well as the launch of Apple One, which bundles
a number of Apple services, including Apple TV+, at a discount price.
… and One Fail
The out and out fail of 2020 had the most unique business
model. Quibi lasted just 6 months and attracted a fraction of its 7.4 million
target subscriptions before founder Jeffrey Katzenberg pulled the plug.
Arguably, the premium, short-form, mobile-only streaming service never stood a
chance, as so many members of the young working population it targeted were
stuck at home on Zoom. But critics picked up on other reasons for its flop. Its
$1 billion of funding failed to buy any radical watercooler content, and users
were unable to watch on anything other than a mobile and couldn't share clips
on social media, which is a disaster for trying to score a youth audience.
Katzenberg and CEO Meg Whitman blamed the "changed industry landscape and
ongoing challenges" and acknowledged that "the idea itself wasn't
strong enough to justify a standalone streaming service. …"
On the technology side, Quibi's Turnstyle screen feature,
which allows viewers to switch between landscape and portrait viewing on
mobile, is the subject of a patent infringement claim by interactive-video
company Eko. Although Quibi is in the process of shutting down its business,
the suit is ongoing.
AVOD Rises Above the Pack
NBCUniversal is pinning its hopes for Peacock's market
traction on a business model that differentiates it from its studio-backed VOD
competitors. It offers an ad-supported free tier alongside a premium
ad-supported tier ($4.99 per month) and an ad-free ($9.99 per month) tier.
In December 2020, 6 months after its launch, Peacock notched
26 million subscribers. It's widely considered that, unlike AT&T or Disney,
NBCUniversal owner Comcast doesn't view its streaming service's success as a
zero-sum game (yet).
Interestingly, HBO Max plans to launch an ad-supported tier
this year to attract subscription-fatigued and financially pinched consumers.
Fox Corp. (owned by the Murdoch family and separate from
21st Century Fox) jumped on the bandwagon in March 2020 by purchasing AVOD
service Tubi for $440 million. Tubi has one of the largest catalogs of film and
TV shows around, including titles from the Star Trek, The Fast and the
Furious, and Stargate franchises.
"Tubi will immediately expand our direct-to-consumer
audience and capabilities and will provide our advertising partners with more
opportunities to reach audiences at scale," said Lachlan Murdoch, Fox's
executive chairman and CEO, following the purchase. "Importantly, coupled
with the combined power of [Fox's] existing networks, Tubi provides a
substantial base from which we will drive long-term growth in the
direct-to-consumer arena."
According to Ampere's Broughton, Tubi "offers Fox a new
opportunity to diversify its now-diminished content distribution portfolio and
reach some of those consumers it may have lost from its broadcast
channels." He adds, "Library size matters more for AVOD than for SVOD
providers. … AVOD services, in order to make money, require their users to view
content and the accompanying commercials. Tubi's large and genre-diverse
catalogue is therefore well suited to ongoing monetisation of users."
Similarly, in February 2020, Comcast acquired Xumo—with its
5.5 million monthly users and 10,000-title library—to exploit the opening in
the streaming landscape for ad-supported, premium content. In addition, Pluto
TV, one of the largest global AVODs, had around 30 million sign-ups by December
2020, according to Bob Bakish, CEO of ViacomCBS, which owns the service.
YouTube continues to rack up 2 billion viewers a month, and
in Q3 2020, it saw global ad revenues soar 32% year over year to $5.04 billion.
It risked the wrath of content creators by saying it has the "right to
monetize" all content on its platform, including putting ads on videos
from channels that are not in its Partner Program, which shares ad revenue with
creators.
With what it claims is "the largest-ever content
offering of any new streaming service," Discovery+ launched globally on
Jan. 4, 2021. In the U.S., Discovery hopes Verizon will accelerate the adoption
of Discovery+ (as it did with Disney+) with an exclusive offer that makes
original programming and on-demand favorites available to Verizon's 5G customers.
The platform will look to establish itself as the go-to streaming destination
for factual, lifestyle, and reality content. But with consumer appetite for
streaming services reaching the saturation point, it could be the ad-funded
version of Discovery+ that attracts most households.
Pay TV Must Act on Super Aggregation
None of this activity should hide the fact that, according
to Futuresource Consulting, pay TV "dominated consumer spending at 58%
($100 million) of the global home entertainment market in 2020." In addition,
"Overall spending reached $172 billion, which included pay-TV, SVOD,
[transactional video on demand], electronic sellthrough, DVD and Blu-ray Disc.
SVOD spending reached $55 billion, with Netflix capturing about 50% of all
global subscription revenue." By 2024, Futuresource Consulting expects
that more than a third of home entertainment spend will be on SVOD.
In response, a growing number of operators are reinventing
themselves as content aggregators offering, say, Amazon Prime and Netflix
alongside their own linear and VOD channels. "We'll see more operators
following the lead of one of our largest customers and supersizing their
ambitions by aggregating up to five or six streaming services, all supported by
a supersized universal search capability to make it easy for viewers to find
something to watch," predicts Peter Docherty, founder and CTO of
ThinkAnalytics.
But the time to act is short. According to Omdia's Begum,
"Pay TV operators must act quickly to retain their customer bases and
drive the value of their offerings and services. The [set-top box] represents a
key connected device in the home, one that is managed by the pay TV operator
and is a key driver of value perception for pay TV against OTT services. …
Timing is everything, because cord-cutting is now spreading beyond the US and
will be increased by the pandemic."
Gaming Blends With the Mainstream
Few industries were more prepared to exploit the new online
normal than video games. A 2019 SuperData study of U.S. preteen gamers found
that one of the main reasons kids ages 7–12 played games such as Roblox, Minecraft, and Fortnite was
to spend time with friends after school. COVID-19 has propelled this
trend.
According to Nielsen, digital game spending in the first
half of 2020 jumped 12% year over year ($61.3 billion versus $54.6 billion in
2019). In its Q2 2020 earnings call, Activision Blizzard revealed that half of
its 400 million players are female. Time spent in the company's games grew 70%
in the quarter, with engagement and player investment at historic highs.
"Consumer leisure time has been shifting to more
interactive forms of entertainment for many years, and that has just
accelerated in the recent months," says Daniel Alegre, president and COO
of Activision Blizzard. "We expect that as new players engage and form
in-game connections with existing or new friends, many of them will stay
engaged for the long term, and we see this as a really big opportunity."
Consumers have been spending more time watching games too. Facebook
Gaming's monthly views leapt 238% year over year in April 2020, according to
data compiled by StreamElements. YouTube Gaming Live was watched for more
than 4.3 billion hours between January and September 2020; this was 38% more
than in all of 2019.
But Amazon's Twitch takes on all comers, with 76% of the
live-stream market. Overall hours watched on Twitch grew 123% year over year
from March through June 2020. According to Nielsen, "Viewers weren't just
coming to Twitch because of a lack of alternative entertainment options. Using
the platform is also a communal experience. Livestream viewers can use text
chat and emotes to interact with fellow watchers and the streamer."
In September 2020, Twitch rolled out a general release
of Watch Parties, a feature that allows its communities to "come together
to watch, react, and discuss any movie or TV show that is available with their
Amazon Prime or Prime Video subscription, directly on Twitch." Erin Wayne,
Twitch's director of community and creator marketing, says,
"Because Twitch's desire is to build communities around interactive
experiences, we were already set for success when it came to products like
this. We were already on track to launch these types of things ahead of
covid-19. It just happened to coincide with all of the things that we were
doing."
This trend won't suddenly reverse once real-world events
become safer. "Brands that previously reached consumers in real-world
settings through physical media like billboards will need to plan for more
gatherings to happen inside video games," says Carter Rogers, principal
analyst at Nielsen. The Biden-Harris presidential campaign even released yard
signs for supporters to display in front of their Animal Crossing homes.
Not only have people been playing video games for
entertainment, but they are increasingly being used to host live events. Fortnite held
a virtual Travis Scott concert and screened several of director Christopher
Nolan's films. Celebrities like Selena Gomez have been interviewed in Animal
Talking, a late-night show filmed within Animal Crossing: New Horizons.
Even business meetings are being conducted in the Rockstar Games titles Grand
Theft Auto V and Red Dead Redemption 2 because they offer more variety than a
typical Zoom or Skype call.
Cloud gaming will have generated revenues of $585 million in
2020 on its way to reaching $4.8 billion by 2023, according to Guilherme
Fernandes, a market consultant at Newzoo. North America will provide the
largest slice (39%) of that total. Factors contributing to this include
Microsoft adding xCloud to Xbox Game Pass Ultimate for free, which promotes a
faster uptake than if a premium were charged.
"Streaming games via the internet is disrupting the
games market, echoing how video-streaming disrupted the movie and television
markets," notes Fernandes. "However, the sheer scale of cloud gaming
technology and the interplay between its players is far more complex. Across
the board, cloud gaming service providers are continuing to experiment with
their services as they discover how to maximize potential and growth."
According to Gamestream, a B2B cloud gaming service,
"The dawn of 5G has led telcos to search for the best use case for this
new technology and how to best advertise its potential. Cloud gaming provides a
clear and obvious use case." However, Antstream, a B2C cloud gaming
service, warns, "The preconceived notion that quality and streaming
can't be synonymous still exists and debunking it is one of our biggest
challenges."
ATSC 3.0: A Game Changer for Broadcast?
Futuresource Consulting estimates that there are more than 1
billion smart TVs installed worldwide, as consumers become increasingly reliant
on TV delivered OTT. The 2020 rollout of ATSC 3.0, which began with stations in
Las Vegas in May, gives broadcasters the ability to multicast audio, video, and
data on a scale they were never able to before. ATSC estimates that by the
middle of 2021, ATSC 3.0 will reach another 61 markets across the U.S., which
collectively would mean next-gen TV reception for more than 70% of all viewers.
The transition to ATSC 3.0 is phased and will last several
years while the legacy signal is taken off air and broadcasters must adopt
spectrum-sharing arrangements. It's an effort in which everyone is apparently
united because the benefits to viewers and broadcasters are overwhelming. For
the viewer, these include better picture quality (UHD and High Dynamic Range)
and interactive content (such as personalized ads, enhanced camera angles, and
sports stats). Meanwhile, the broadcaster finally has more of a level playing
field to fight off OTT competition.
The true power of the technology lies in its hybrid design,
which combines multicast with targeted content (unicast) and services delivered
synchronously OTT. Broadcasters could, for example, reach particular
communities in their region by transmitting the same content in multiple
languages. They could more cost-efficiently air "flash" channels to
cover more angles on a live sports event or to give viewers the option of
viewing breaking news, such as press conferences, or setting up personalized
audio preferences, such as commentator audio.
It's worth noting that in South Korea, the first country to
start ATSC 3.0 deployment, its Electronics and Telecommunications Research Institute
conducted a trial of 8K delivery in October 2020. It made use of MIMO
(multiple-input, multiple-output), an option available in the 3.0 standard, to
deliver 113Mbps over the air with 8K encoded in HEVC. This could be used to
transmit multiple 4K UHD services, should that become commercially viable.
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