Streamticker: The Biggest Streaming Media Mergers & Acquisitions of 2022

Streaming Media

When it comes to mergers and acquisitions in the streaming industry in 2022, there’s only one place to start: with Warner Bros., which officially merged with Discovery in April and has been in restructure mode ever since.

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Teething problems followed inevitably on the US$43 billion deal, as the media giants merged to form Warner Bros. Discovery (WBD). As 2023 begins, the company is under pressure to slash US$3.5 billion in cost and grow its global streaming business. On reporting its Q3 2022 figures in November, WBD’s stock had lost half its value since the merger closed.

The big plan is to merge HBO Max and Discovery+ streaming services into a single offering, which will launch first in the US this spring. WBD then plans to roll out the unified platform worldwide (with Europe/Asia Pacific pegged for 2024). The brand name and pricing have yet to be unveiled.

WBD expects to have 130 million global subscribers and its DTC business to generate US$1 billion by 2025. It reported a net loss of US$2.4 billion in Q3 2022, following a loss of US$3.4 billion in Q2, but added 2.8 million streaming customers (HBO Max, HBO, and Discovery+ subs combined) in the third quarter, bringing its total to 94.9 million globally. Revenue from streaming dropped 6% to US$2.3 billion, with decreases in licensing and distribution revenue.

Synergies have to be found in the content creation and distribution operations of legacy Discovery and Warner Bros. companies. While Discovery is still best known globally for its blue-chip factual programming, in Europe, its brand is increasingly synonymous with live sports. Squaring those two pipelines is a huge and possibly insurmountable task.

“We will start by tackling opportunities in standardisation,” explained Warner Bros. CIO Dave Duvall at IBC 2022. “There are more than 850 distributed linear feeds in the combined portfolio evenly balanced between the two legacy companies. Playout technologies is an area we are pushing to standardize and align.” He went on to explain, “In places where we duplicate, we need to rationalize. There’s no sense having different tech stacks or teams. We want to eliminate that and centralize where it makes sense.”

Duvall said the biggest challenge with live is needing to produce more content in support of the digital experience. “It’s not just linear output; it’s the every-minute-of-every-match promise. The volumetrics of how we do that is with more software and more capability. Live is very intensive from a human capital perspective. HBO Max has very limited live, but its efficiency versus that of Euro­sport is night and day.”

Cost savings have also included restructuring at the top of many of the group’s divisions, content write-downs (including, controversially, the non-release of the feature Batgirl), and making 30% of the company’s ad sales staff redundant.

WBD CFO Gunnar Wiedenfels said in September that the company already achieved US$2–$3 billion of actual cost savings, with the rest due in 2023.

That hasn’t stopped questions from arising about whether this mega-merger is too big a tanker to equip with outboard motors. Rumors are circling that the merged company is already for sale, which couldn’t legally happen until Q2 2024.

“We are certainly not above this M&A speculation, and our corporate demand data shows the benefits of a future WBD merger or sale to fellow legacy media giants NBCUniversal or Paramount Global” is how Parrot Analytics assesses the situation. It adds, “A theoretical combination of WBD and Paramount Global would have a corporate demand share of 30.3%, which would lead Disney by a staggering 10.5%.” Parrot also speculates that a buy by NBC­Universal “would account for more than a quarter of US demand for TV content. Its 27.7% share would dwarf Disney’s 19.8%.”

According to Parrot, “Neither of these M&As would require the sale of a broadcast network, potentially making them more palatable to investors and regulators.”

Discovery and BT Sport

Discovery+ in Europe offers sports at a premium tier, and this will be further developed when the joint venture with BT Sport is fully online. Announced last February, sealed in May, and rubber-stamped by the UK regulator in July, the US$756 million deal is for a 50/50 joint venture between BT Group and WBD.

Discovery is the senior partner. The UK telco had entered the pay TV market in 2013, investing heavily in rights to English Premier League (EPL) football as a loss leader to upgrade subscribers to its broadband package. With its attention now on rolling out 5G, BT sought to divest a non-core and expensive asset that is dictated by bidding wars to UK football rights.

Although Discovery has made headway in the UK, particularly with Eurosport’s Olympics coverage, its alliance with BT Sport gives it instant access to mainstream sports fans in the country. With the deal comes a package of live EPL matches until 2025 (shared with Sky Sports and Amazon Prime) and exclusive rights to the UEFA Champions League in a deal worth US$1.5 billion for 3 years to 2024. Eurosport brings staples like winter sports world cups, cycling grand tours, and tennis Grand Slams.

BT Sport had successfully wrested the mantle of most innovative sports broadcaster—in Europe if not the world—from Sky. It pioneered live 4K UHD broadcast and regular 360-live video and has experimented in 8K broadcasts, data-centric apps, and augmented reality. It also pivoted to remote production and has stuck to this since the pandemic.

Discovery is no slouch in the tech stakes either. Its flagship is the Cube virtual studio, but more significant is its pan-European operation, which sees tailored versions of the same event produced for different nationalities.

“The last thing we want to do is stop any of that innovation,” Scott Young, SVP of content and production at WBD, tells SportsPro. “I don’t mean just technological innovation but how we [innovate] in terms of the rights we acquire, how we deliver those rights to various platforms, and how we bring all this content together into one sports ecosystem. We want to build a sports platform that is premium for our audience.”

DAZN and ELEVEN

Sports streamer DAZN was at one point considered the favorite to land BT Sport. Having failed, it turned its attention to the ELEVEN Group, acquiring the global sports media business in September.

Global it may be, but 89% of ELEVEN’s revenue comes from Portugal and Belgium, according to Sportico, and the US$300 million in annual revenue ELEVEN generates does not appear to materially affect DAZN’s top or bottom line. For perspective, DAZN has committed to spending more than US$825 million per year on domestic Serie A rights in Italy alone.

The deal does, however, cement DAZN’s ambition to dominate European football streaming, which now includes the integration of ELEVENsports.com and the 40,000 games it streams each year. DAZN is now the OTT home of Liga Portugal and Belgium’s Jupi­ler Pro League. Crucially, it has no soccer presence in the UK but could be a strong bidder when Premier League rights are auctioned again in 2024.

The deal also saw DAZN take control of Team Whistle, ELEVEN’s dedicated social media unit, which is ranked within the top 10 US media sports properties on Comscore, with more than 700 million followers across its channels.

As Marc Watson, CEO of ELEVEN Group (and the former CEO of BT TV, where he helped establish BT Sport), says in a news release, “We see DAZN as the future of digital sports broadcasting and the ideal home for ELEVEN.”

DAZN chairman Kevin Mayer adds to Watson’s comments, noting, “This deal marks an acceleration of our strategy to diversify our offerings and leverage our fantastic sports properties and our platform into new markets and business models.”

DAZN seeks to create a single destination for global sports information, retail, ticket purchasing, sports betting, on-demand media, non-fungible tokens (NFTs), and Web 3.0 innovations. The company launched its NFT marketplace DAZNBOXING.io in July and DAZN Bet in August.

Interestingly, ELEVEN supports the production, delivery, and distribution of live games for FIFA’s OTT service, FIFA+. Notable too is that DAZN now holds the world’s biggest portfolio of women’s football content, which includes UEFA Women’s Champions League, Liga F in Spain, the English WSL, and the Japanese Yogibo WE League.

Microsoft and Activision

Microsoft dramatically added to its game studio portfolio when it acquired Activision Blizzard for US$95 per share in January 2022 in a transaction valued at US$68.7 billion.

With 3 billion people (half the world’s population) actively playing games today, and fuelled by a new generation steeped in the joys of interactive entertainment, gaming is now the largest and fastest-growing form of entertainment, according to a January 2022 Microsoft press release announcing the acquisition. The purchase is aimed at accelerating growth in the company’s gaming business across mobile, PC, console, and cloud, and it will provide building blocks for the metaverse.

If the deal passes the scrutiny of competition authorities in Europe and North America, Microsoft will become the world’s third-largest gaming company by revenue, behind Tencent and Sony. It already owns 23 game studios, including Minecraft maker Mojang and Bethesda, creator of Fallout and SkyRim. Activision Blizzard brings franchises like Halo, Warcraft, and Call of Duty to Microsoft, which plans to launch these games into its subscription service Game Pass (which has surpassed 25 million subs).

“They’re [Microsoft] buying Activision to put Acti­vision titles and Blizzard titles on Game Pass and drive subscriptions without requiring people to buy a console or PC,” Michael Pachter, managing director of equity research at Wedbush, tells Yahoo! Fi­nance. “They have aspirations to be like Netflix. They’re looking well beyond 25 million subscribers, and they’re looking at 200 million households who can play games and pay them $15 a month. And I think it really has a chance of happening if they close the deal with Activision.”

Microsoft maintains that its principal interest in the planned acquisition is Activision Blizzard’s expertise in mobile gaming. The firm’s head of gaming, Phil Spencer, tells Bloomberg that “the biggest gaming platform on the planet is mobile phones,” an area in which Microsoft lacked expertise. Activision happens to own Candy Crush Saga. The 10-year-old game remains one of the most popular mobile games of all time.

With processing speeds on phones about to go into overdrive with 5G chips and 5G connectivity, it won’t be long before console-quality games are available on-the-go.

“There are [3.5] billion active mobile gamers. … And easily, 10% of them spend money over the course of a year,” according to Pachter. “So, you’ve got 600 or 700 million people spending money, more likely 20% … in mobile games, as opposed to a couple hundred million people who buy console or PC games.”

Virtual worlds like Minecraft could be anchor tenants of the metaverse, but Microsoft may also have its eye on another content stream. Its ad sales and ad serve partnership for Netflix is seen by some as a prelude to eventually swallowing a company that had lost well over half its peak US$300 billion market cap at the beginning of 2022.

Tata and The Switch

At the end of 2022, Tata Communications outlaid US$58.8 million for New York-headquartered video services provider The Switch. The deal gives Tata a strong foothold in the US M&E market and extends its live sports transmission portfolio.

The Switch supports delivery of broadcast, streaming, and social media, including for events such as Wimbledon, the CONCACAF Gold Cup, and the Melbourne Cup, and operates a cloud video services platform called MIMiC, which supports live-distributed IP video production. It has deployed 100-gigabit connectivity to serve customers in Miami, Los Angeles, and New York, with links to other nodes across the US.

“The Switch production infrastructure as a service model will allow Tata Communications customers to accelerate adoption of remote production from any event around the world,” says Tri Pham, chief strategy officer at Tata Communications.

With that, we’ll move on from media content company, service, and platform acquisitions to the major tech M&As of 2022.

Limelight + Edgecast = Edgio

With all the attention focussed on streaming content from the cloud in recent years, the industry’s next evolution is to combine cloud compute with processing at the edge. In order for real-time interactive media applications like mobile multi-player gaming, VR 360, and Multiview video to take off, building out the network edge is a must.

Traditional CDNs are still large data centre-centric; hence, there is the need to add an edge to their portfolios. Limelight did this in March, acquiring Yahoo’s Edgecast service for US$300 million and rebranding the combined entity Edgio.

Formerly, the media network division of Verizon Media, Edgecast claims its global edge platform delivers a capacity of more than 200Tbps, more than 300 global points of presence (POPs), and more than 7,000 ISP connections. It also has natively integra­ted cloud security, an edge video platform, and web applications.

According to a June 2022 Business Wire article, “Edgio now delivers about 20% of the world’s internet traffic from instant-loading websites to high-demand content for 20,000 leading digital companies such as Amazon, Sony, Microsoft, Verizon, Disney, TikTok, and Twitter.”

The article quotes Edgio CEO Bob Lyons as saying, “In a world where digital workloads and their consumers are increasingly distributed, the ability for companies to deliver exceptional digital experiences requires them to more productively build faster and safer solutions for their customers at the edge.” Lyons adds, “Edgio now boasts the most complete edge-native web application and API solution, best-in-class streaming, and delivery capabilities – all running on the world’s most performant globally scaled edge network. These unique capabilities create a robust platform for growth and profitability.”

Devices and Xilinx

Announced in 2020 and completed in February 2022, Advanced Micro Devices’ (AMD) US$50 billion purchase of Xilinx gives it the firepower to compete with Intel and Nvidia. Together with the US$1.9 billion swoop for Pensando Systems in May, the chip maker hopes to grow its business in cloud, high-performance computing, and data centres. Notably, around the same time, Nvidia ducked out of its plan to take over UK chip giant ARM—an AMD partner—after failing to leap regulatory hurdles.

In a company press release from February 2022, AMD president and CEO Lisa Su notes, “Xilinx offers industry-leading FPGAs, adaptive SoCs, AI engines and software expertise that enable AMD to offer the strongest portfolio of high-performance and adaptive computing solutions in the industry and capture a larger share of the approximately $135 billion market opportunity we see across cloud, edge, and intelligent devices.”

The synergies between AMD and Xilinx are especially important in AI and the data centre. “Xilinx will also further AMD’s exposure to automotive, 5G infrastructure, and general embedded systems,” Forbes reports. “The Pen­sando acquisition gets AMD into the Data Processing Unit (DPU) market for networking and enhances AMD’s system expertise putting it on a more even footing with Intel and Nvidia.”

AMD still lags behind Nvidia with respect to AI software, the analysis reckons, adding, “but with the addition of Xilinx and other partnerships, such as Microsoft Azure, the company hopes to catch up.”

Dolby and Millicast

Also in February 2022, Dolby acquired video streaming tech firm Millicast to flesh out its developer platform, Dolby.io. The Millicast engineering team, which has developed standards such as WHIP, will bolster the WebRTC engineering expertise of Dolby.io. WHIP enables WebRTC interoperability, the company says.

In the press release announcing the acquisition, Marie Huwe, SVP at Dolby.io, notes, “There is a growing demand to make online events as lifelike and compelling as being there in person. … Together, we expand the Dolby.io platform to make it even easier for developers and businesses to stream real-time content and immersive, interactive experiences that look and sound incredible.”

With Millicast, developers can stream the interactive events they build with Dolby.io, such as conferences and concerts, to audiences of more than 60,000 people with delays of less than 500 ms, Dolby says.

Telestream and Encoding.com

In September, Telestream claimed that adding Encoding.com to its portfolio would revolutionize cloud media processing workflows for M&E. Encoding.com tech powers VOD workflows for ingesting mezzanine source video, transcoding, adaptive bit­rate (ABR) packaging, DRM, and DAI triggers and caption conversions for clients, including Hollywood studios. Encoding.com claims to be the fastest cloud encoding platform available and even guarantees it with queue-time SLAs. So why sell?

“At Encoding.com we are at the orchestration level,” Jeff Malkin, former Encoding.com president and now VP of cloud revenue at Tele­stream, told Streaming Media last August. “We developed the engines ourselves to operate in the cloud but we were not operating at the data layer. Telestream operates at the data layer with proven tools that customers are already comfortable with. Vantage was already being used by the customers I was going after."

“I was selling against Vantage on-prem to customers. While customers understand the value of cloud—ease of deployment, efficiency of dynamically spinning up and down instances, SaaS cost models—they were weighing that versus all the powerful features that Vantage had that weren’t in the cloud,” Malkin said.

By adding Telestream Media Framework engines into the Encoding.com platform, Telestream hopes to offer more complex broadcast and post OTT workflows, both cloud and on-prem.

Look out for new technology Broadcast HLS in early 2023 that will help remove duplicate processes in broadcast workflows.

IMAX and SSIMWAVE

In October 2022, according to IMAX Corp., it acquired SSIMWAVE for US$21 million to “drive new, recurring revenue and grow its global leadership in entertainment technology.”

SSIMWAVE technology “optimizes” live and VOD for clients, including Disney, Paramount Global, and WBD. It has mapped the human visual system to patent “one of the most accurate measures of perceptual quality, which its AI-driven software applies to enhance video streams and files in real time.”

The purchase adds to a portfolio of non-box-office-related assets, including IMAX Enhanced, a remastering service to optimize films for at-home streaming viewing, and IMAX AI, a joint venture with visual effects firm Maximus that develops high-resolution video tech for streaming services.

In an interview with The Hollywood Reporter, IMAX CEO Richard Gelfond says SSIMWAVE gets the large-format exhibitor deeper into TV and streaming content. “Many of our prior business efforts were to enter new markets on our own. With this one, we’ve acquired first-in-class technology with world-class clients, revenues, [and] proprietary technology [that] leverages our brand and our core business.”

Vbrick and Ramp

The enterprise CDN (eCDN) market consolidated in December when two of the biggest vendors became one. Virginia-based enterprise video firm Vbrick announced the takeover of rival provider Ramp. According to Vbrick’s announcement, the two vendors intend to offer “multiple video distribution modalities,” assisting with different types of network setups and delivering bespoke options and enterprise use cases.

Without an eCDN, every request for a video stream across an enterprise network will result in a unique session. In a scenario in which a CEO streams a live broadcast to a 10,000-person company, this could result in potentially as many as 10,000 unique sessions traversing the network. The job of the eCDN is to optimize these streams to minimize network impact and optimize video performance.

Boston-based Ramp claims its eCDN delivers bandwidth savings of up to 99.9%. An eCDN may also cache video content, again further reducing bandwidth consumption.

Paul Sparta, chairman and CEO of Vbrick, explains in a press release, “As video becomes more pervasive in the workplace, large organizations need proven and reliable enterprise video solutions with an eCDN that can optimize corporate network utilization and ensure great viewer experiences. Vbrick’s acquisition of Ramp consolidates the eCDN market’s best features and capabilities into a unified edge caching and multicast solution.”

Both companies experienced rapid growth after COVID restrictions as the corporate world adopted a hybrid return-to-office strategy. In August 2021, Ramp hit a record quarter, introduced new updates in the form of enhanced analytics, and announced a new Microsoft Teams integration.

In August 2022, Vbrick launched video platform as a service (VPaaS) for developers to utilize its cloud-native enterprise video platform. In November, it partnered with Pexip to offer a solution for securely managing and storing video content.

Enghouse and Qumu

Also in the enterprise video segment, in December, Canada’s Enghouse Systems announced that it is buying Minneapolis-based Qumu for US$18 million. The transaction was expected to close in February.

“The combination of Qumu’s video creation, management and delivery solutions with Enghouse’s video collaboration and streaming products strengthens the position of both companies in a competitive space,” says Steve Sadler, CEO of Enghouse Systems, in a news release.

Qumu makes live and VOD software for the enterprise and was previously known as Rimage. According to reports, the company has not posted an annual profit since 2011, and in 2021, lost US$16.4 million.

Among Enghouse’s clients is Americable International, which holds a contract to stream video to US military personnel serving in Japan.

Enghouse also acquired Espial Group, maker of a cloud-based video software platform, in 2019 and media processing developer Dialogic Group for US$52 million in 2020.

The State of OTT 2023

Streaming Media

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Netflix’s shock fall in numbers at the start of 2020 not only slashed the streamer’s stock price but spooked Wall Street into reappraising the whole SVOD enterprise.

Wiser analysts were not so hasty. Stepping away from the heat of Netflix’s net 200,000-user loss in Q1, sage commentators were chalking it up to streaming business evolution, not one that doomed the whole sector.

“[T]o read many of these [inexpert media reports], you’d assume that anything less than 100% penetration constituted abject failure on Netflix’s part,” TVREV’s Alan Wolk wrote at the time, “and that millions of new users would magically keep cropping up once that 100% figure had been reached.”

Netflix may have pioneered online pay TV on-demand with a model that every other SVOD chased. From April 2022, a pivot was required of every player, Netflix included.

You have to take this back a year to when video consumption and subscription services experienced phenomenal growth during the global pandemic. Sign-ups for monthly subscription services jumped more than 24% between 2020 and 2021. Many consumers who were hesitant to subscribe to Netflix, Disney+, Amazon Prime Video, and other providers prior to COVID finally came around as the pandemic dragged on.

After the pandemic highs, in 2022, SVOD subs plateaued across the board, particularly in North America, where saturation has been apparent for some time.

“Now we know that the streaming universe is a lot lower than analysts predicted, maybe closer to 400 million,” Deadline Hollywood reporter Dade Hayes told the NAB show in April. “The ceiling [is shrinking] on Netflix but also for HBO Max, Apple TV+, Disney+. Anybody who wants to be global has to reckon with, ‘How good of a business is streaming?’”

 

All Rise With the Tide

Yet with new services continually entering the market and, crucially, major players still only part of the way through their global expansion efforts, SVOD expansion is set for several years.

Omdia forecast 1.48 billion online video subs by the end of 2022, on target to reach 2 billion by 2027. Ampere charts 1.6 billion OTT subs this year, tracking to reach 1.7 billion by the end of 2023. Data from Digital TV Research predicts revenue from global OTT TV episodic and movies will reach US$243 billion by 2028, a rise of US$86 billion on 2022 revenues (US$157 billion), with roughly US$17 billion forecast to be generated in 2023.

According to the Digital Entertainment Group, the industry’s growth in 2022 was only marginally lower than 2021, though significantly lower than the growth rates in 2018 and 2019. Its numbers suggest viewers have slowed in adding more services, though they have not stopped.

Data from Hub Entertainment Research confirms that US consumers continue to expand their SVOD services. The company says 50% subscribe to three or more of the big five SVODs (Netflix, Hulu, Prime Video, HBO Max, Disney+). Ampere figures for stacking are a little higher. Europe still has plenty of stacking headroom, with Kantar estimating the market can take an additional 1.6 SVODs per household on the current average figure of 2.6. By comparison, US households tend to pay for 4.2 SVODs (as of Q1 2022). Kantar puts this at 4.7 streaming services per US household.

The video streaming market could exceed US$750 billion by 2031, according to new data from Future Market Insights (FMI). Demand will rise at a 25% compound annual growth rate (CAGR) over the next 8 years from a mere US$61 billion in 2020, per the report. Also according to the report, the market was worth more than US$73 billion by the end of 2021, with increasing demand for mobile devices driving much of the growth.

If the global streaming pie continues to grow, what has changed dramatically are the business models that are needed to bake it.

As restrictions eased and consumers reacclimated, many faced the financial burden of paying for a surplus of monthly subscriptions. Viewers pivoted to free ad-supported services integrated with their connected TVs such as Tubi, Philo, Pluto TV, Samsung TV Plus, and others. As this adoption continued to accelerate, even the larger subscription-based stalwarts began to jump in. Despite historically being opposed to ad-based offerings, Netflix and Disney announced a significantly lower-priced subscription tier largely offset by advertising revenue. AppleTV+ is also planning an ad-supported launch in 2023.

AVOD Grows FAST

If the thoroughbred SVOD business model came unstuck in 2022, the business of streaming entertainment matured to embrace the rise of AVOD and free ad-supported streaming television (FAST) channels. In some cases, ad tiers were retrofitted alongside paid services.

The US is the biggest AVOD market, home to platforms such as Pluto TV, Roku, Tubi, and Amazon Freevee. “Between now and 2028, AVOD revenues from TV series and movies will grow faster than SVOD,” according to Simon Murray, principal analyst at Digital TV Research. “AVOD revenues will reach $91bn by 2028, up by $52bn from $38bn in 2022. SVOD revenues will climb by $29bn between 2022 and 2028 to $132bn.”

Digital TV Research also projects the domestic market will grow by US$19 billion to US$31 billion by 2027, by which time global AVOD revenues will hit US$70 billion. The US will account for 46% of the global total by 2027, up from 39% in 2021. “The US has the world’s most sophisticated advertising industry by some distance, plus AVOD choice is greater in the US than anywhere else,” Murray says.

Multiple factors drove the rise of AVOD, the flipside of which is the SVOD blip. One reason, outlined by Ampere’s Guy Bisson during VoD Market Day 2022, is “actual or pending saturation of SVOD in key markets,” which means free business models were “already playing a pivotal role in the transition of viewing to streaming in both a hybrid-service and an aggregation model.”

The global economic downturn continues to amass pressure on discretionary household budgets. In this environment, free or ad-supported content becomes more attractive to cost-sensitive consumers and helps avoid forcing existing customers to cancel.

For SVODs looking to combat churn, the equation shifted from customer acquisition to customer retention. Offering different price points is a tactic being pursued by every SVOD, with Netflix launching its own ad tier in November 2022. The goal is to increase revenues to sustain multibillion content costs without cannibalising the existing subs base.

Another reason is that online video advertising has been accelerated by COVID. One researcher predicts the global digital ad market will hit US$786.2 billion by 2026, although “television-equivalent” online video ads represent just 7% of total online video ad revenue, according to Ampere.

The arrival of Netflix’s ad-supported service and Disney+ Basic is predicted to grow the whole TV advertising market. Netflix itself expected to have 4.4 million unique viewers for its ad platform by the end of 2022. It also estimates that this tier could reach a global audience of 40 million within a year and generate US$1.9 billion in revenues by 2027—in Western Europe alone.

Virtually everyone agrees that Netflix’s ad play will be successful. Ampere believes that Netflix in Western Europe will experience an increase in average revenue per user (ARPU) that’s 4.9% higher in 2023 than without the ad tier.

The question is whether getting into advertising changes a company that has closely guarded its own data and prided itself on forging a distinct path in the cutthroat world of entertainment.

Lindsey Clay, CEO of UK commercial broadcaster body Thinkbox, says, “Advertisers expect the same standards set by the rest of the TV industry: a high lev­el of transparency, targeting, and being able to track what happens plus a regulated, trusted environment in which ads are pre-cleared in the knowledge they will be aired in a brand-safe content.”

While Netflix has been highly secretive with its first-party viewership data, it did sign up to Barb’s audience measurement services in the UK. Barb—which is owned by the UK broadcasters—began reporting Netflix’s daily viewing at both a service and a programme level from November 2022. In the US, Netflix participates in Nielsen’s streaming yardstick, The Gauge, and will eventually be part of rebranded measurement tool Nielsen One. Netflix has also partnered with DoubleVerify and Integral Ad Science to measure its views and traffic that began Q1 2023.

It’s All TV Now

As the streaming business model changes from pure SVOD into premium plus ad-supported options, the way platforms measure performance has to change too. The shift toward focussing on “time spent” is now underway using metrics more familiar to broadcast TV.

“Subscriber numbers increasingly look like a vanity metric for a streaming platform,” says Tal Cha­lozin, CTO and co-founder of online ad company Innovid. “But in advertising-based video on demand [AVOD], these are not the most useful numbers for marketers because not every viewer delivers equal value to either the platform or the advertiser.”

Deloitte also expects VOD to be bonded permanently to advertising. According to Paul Lee, global head of technology, media, and telecommunications research, “[I]f we were to look at the last 30 years of television, you’ve always had the combination of pay TV and advertising-funded television. Those two sources of revenue are absolutely vital.”

In parallel, the content mix of a streaming entertainment business is changing too. Turns out that movies and scripted TV are no longer differentiators. That doesn’t mean just adding true crime or anime to the mix. It means bundling a combination of live sports or gaming and music plus FAST channels. This creates an aggregated content mix much like the cable of old.

The winners in the streaming wars will be those companies that diversify into news, sports, or video games or preferably a mix of the lot, according to former cable network chief turned industry consultant Evan Shapiro.

“It is glaringly clear that having movies and TV shows are now, simply, table stakes,” Shapiro states in a report for Publishers Clearing House (PCH). “They are not at all a differentiator: Every service has them. In streaming TV, scripted and non-fiction TV are an expensive, hit-driven, share-shift model. Consumers of all ages and incomes will sign up for them, to binge something. But if that is all you have, they will not stick around.”

Trends increasingly favor the tech giants. “It’s no surprise that the two streaming players with the most data—Apple and Amazon—are both heavily invested in bundling numerous genres of services,” Sha­piro adds. “It makes perfect sense that Microsoft, who already offers gaming and productivity products, is getting into business with Netflix—and the likelihood of a bundle for all of them is high.”

Netflix has also been making significant investments in games and interactive content. Its latest nonlinear piece of content produced with branching narratives, the heist drama Kaleidoscope, premiered on New Year’s Day.

Amazon offers a mix of films, TV, sports, audio, and gaming as well as free home delivery. PCH’s study calls this “key to the lifetime value, low churn, and high revenue-per-user of their huge Prime membership.”

Even Paramount+ offers TV, film, sports, news, and local content. It created a bundle with Walmart that specifically caters to the most price sensitive subscribers.

“Playing across genres and needs is now key to true lifetime value for your subscribers,” insists Shapiro. “Content services who want to acquire and keep subscribers every month, with low churn, must provide more than one kind of content, and/or offer more than one type of service.”

In an ad-supported market, streamers need to speak the language of TV marketers and agencies in order to stand out. That includes better in-app cross-promotion of content. “Historically, TV broadcasters devoted a great deal of advertising time to promos for their own programming, across any channels owned by that particular broadcast company,” advises Cha­lozin. “Streaming services will need to take that cue … to keep viewers from hitting the home button. They should consider … interactive formats such as QR codes and … personalized messaging, relevant to factors such as demographic and time of day.”

TikTok Takes the Crown

The ascendant online video firm of 2022 is TikTok. The ByteDance-owned company now commands more attention per user than Facebook and Instagram combined. As reported by The Wall Street Journal, TikTok has 1.6 billion monthly active users—more than Twitter, Snapchat, and LinkedIn together.

TikTok has eliminated the burden of consumer choice with a continuous stream of videos curated for you, according to Scott Galloway, professor of marketing at NYU Stern, blogging at Medium. As he puts it, “Consumers don’t want more choices, they want more confidence in the choices presented. Its content is a continuous stream of videos where the decisions are made for you,” he adds. “Your only choice: what not to watch.”

TikTok may bill itself as a social media company, but it is really all about video streaming, and to that extent, it is not just Meta but all SVODs that are threatened by it. In April 2022, Forbes valued ByteDance at US$360 billion; the same month Netflix tanked from US$300 billion to US$80 billion.

TikTok’s ascent to the top was financed not with monthly subscriptions or cable packages, but attention. Specifically, the attention of Gen Z, who also views the platform as far cooler than anything from Meta.

On TikTok, the average session lasts 11 minutes, and the video length is around 25 seconds. Galloway points out that this generates huge amounts of data—way more than even Netflix can pull in. The platform’s “video-based social media,” with the ability for users to interact with the content (generating more and more data), is the killer app.

TikTok’s content production model also upends everything we thought we knew about how content that audiences want to see gets made. The film and TV industries still employ relatively few people in relatively few locations (London, Hong Kong, Mumbai, Los Angeles) compared to TikTok, where over half of users create and post their own videos.

“The world’s largest reserve of talent also has a near-zero cost of extraction,” says Galloway. “The top eight U.S. media firms will spend $115 billion on original content [in 2022]. … TikTok produces its content for almost nothing.”

“The company’s payout to top creators ‘is a rounding error,’” Engadget notes, “at $200 million per year. …And when your total addressable market is 1.6 billion users, your 15 seconds of fame on TikTok can be lucrative.” Galloway calculates that 9.6 trillion minutes were watched on Netflix in 2021. Impressive, until compared to the 22.5 trillion minutes viewed on TikTok.

“For creators who are in it for more than just expressing themselves, the real TikTok money comes from brand endorsements,” says Galloway. He adds, “The top creators make as much money as a Fortune 500 CEO or an iconic Hollywood actor.”

Economic Headwinds

SVOD fatigue was far from the only factor hammering wallets in 2022. Those pressures were exacerbated by Russia’s war on Ukraine, which propelled energy prices up across the globe, stoking steep inflationary rises on the price of even basic goods. While the travails of a streaming business are trivial compared to the horrors meted about by Putin’s aggression, there’s no denying the impact of such geopolitical forces.

“Heading into 2023 and beyond, there is general consensus that economic headwinds will intensify, meaning consumers will increasingly seek out free streaming video options,” concludes JW Player in its end-of-year survey.

In response, broadcasters are strategising their best path forward. Of those surveyed in November 2022, 74% believe streamlining operations and removing friction are top priorities.

Along with improving operational efficiency, JW Player notes that broadcasters are also prioritising three top objectives: increasing their existing audience base, improving viewer engagement, and growing revenue through advertising. “Ultimately, those that leverage an end-to-end platform to tackle these initiatives stand the best chance of success in 2023 and beyond.”

There were no major OTT casualties in 2022, although consolidation remains on the cards for 2023. Netflix’s partner in its ad-supported venture is Microsoft. With Netflix’s US$127 billion valuation of December 2022 way south of its US$300 billion market cap a year earlier, some analysts expect this foot in the door to blossom into full acquisition of the streamer. Unlike Google, Amazon, and Apple, Microsoft does not have a video content service, and after buying gaming company Activision, it could turn to Netflix next.

Sidebar: Major Streamers in Numbers

Netflix’s travails continued in Q2 2022, when subscribers dipped by 1 million, but business picked up in Q3, when the company added 2.4 million net new paid subscribers to reach 220.67 million paid subs (of which it has 73.28 million in the US and Canada). It projected 4.5 million net new subscribers in Q4, with an anticipated boost from its ads tier.

As of December 2022, the number of Disney+ subscribers reached 164.2 million. When combined with its other DTC subscription services, Hulu and ESPN+, the figure tallies around 235.7 million, surpassing Netflix for the first time.

The number of Apple TV+ paid subscribers was estimated to be around 25 million as of March 2022. Additionally, there are around 50 million users worldwide who access the SVOD via promotions, as the service is available for free for 1 year with the purchase of new Apple devices.

Warner Bros. Discovery reported 94.9 million active sign-ups in Q3 2022 (combining Discovery+, HBO Max, and HBO)—on track, it says, to reach more than 130 million by 2025.

NBCUniversal (NBCU) streamer Peacock added more than 2 million paid US subscribers in Q3 2022 to surpass 15 million. When factoring in bundles and free viewers, NBCU CEO Jeff Shell says Peacock now has 30 million active accounts.

Amazon Prime has at least 200 million members worldwide, but how many of these are active Prime Video watchers is not clear. Like Apple, Amazon may be using video as a loss leader to drive revenues across its e-commerce business.

 

AV in Italy: Tailored applications

AV Magazine

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A new cycle of political stability could provide the basis for strong market growth in Italy allowing companies to invest in new processes and technologies. Adriano D’Alessio, country manager for Lightware judges the prospects for pro AV in Italy “effervescent”; Massimiliano Carlesi of HYPERVSN says the market is “solid and resilient”; and Gianluigi Cravedi, CEO at local distributor, Ligra DS calls it “positive and enthusiastic”, particularly for SIs.

“AV integrators started to merge and grow last year here, which means that there are huge opportunities right now,” says Emiliano Faccioli, who heads up local sales for Crestron. “End users are working with quick fixes and buying commodities when equipping rooms for virtual meetings, but I’m excited for the gradual shift we see towards well thought-out, accessible AV installations.”

Peerless-AV’s sales director, Stefan Krüger is confident that Italian pro AV will return to its pre-Covid level this year: “As we look toward 2024, we expect significant growth with more projects in the pipeline and demand for our key product lines.”

Datapath’s regional sales boss, Carmen Jerez is also “very optimistic” regarding Italy’s prospects noting that many companies are “reorganising, re-evaluating and re-starting investments that were slowed or directly stopped” under Covid and the recent political hiatus.

“In terms of business development, it is the most powerful country in the Southern Europe region,” she says, putting Italy ahead of Germany, France and the UK. “Italy represents a great opportunity to promote pro AV and bring growth to our company in the medium and long term.”

Recovery plan
The state’s €750 billion National Recovery and Resilience Plan (Piano Nazionale di Ripresa e Resilienza, NRRP) – of which about half is in the form of grants from the EU – is the most significant funding pot, of which roughly €31 billion is allocated to education and €19 billion to the research sector.

“Both are intended to strengthen educational services offered throughout Italy from kindergarten to higher education,” reports Marco Bolzonello, Atlona’s regional sales manager. “The biggest challenge is to educate the decision makers – particularly at public universities where they have plenty of capital to spend – how to properly invest in AV technology that will upgrade ageing installations in classrooms, conference rooms and lecture halls. It is time to retire VGA connectivity, which can be challenging to communicate as it is still a very common technology in Italian educational facilities.”

Although universities shifted back to in-person teaching post Covid, they know they need to adapt to hybrid learning facilities. “AV-over-IP is key here,” says Faccioli, “and also software codecs dedicated to e-learning will need to be integrated in the physical classroom.

“We’ll see a lot of movement coming from the EU recovery fund because of how hard Covid hit us,” he predicts, “not only from a human perspective, but also economically, Italy will receive a large sum of money which has to be used to promote innovation and growth.”

PNRR funds are targeting green and digital development across the country. Green projects, says Kruger, “will be a priority over the next eighteen months following soaring energy prices, higher than most other European countries.”

 

Bolzonello says this funding will require expertise to develop smart cities, decrease pollution in city centres (as in Milan) and propose green projects to relaunch the agriculture in the countryside. “We believe that AV technology will play a major role in supporting these initiatives,” he adds.

A recent Atlona installation was for Luxottica, a premium luxury and sports eyewear company based in Milan that needed its AV systems connected with HDBaseT extenders. Bolzonello says it helped in this instance that Atlona is owned by Panduit, a global IT and network infrastructure company, with its Italian base in Milan.

Since the pandemic, the number of Italian businesses that have adopted hybrid workspaces has shot up from 20 to 80 per cent. That makes improving AV and UC technology both in the office and at home vital in the long term.

“By digitising AV systems, the business is sending a message that they are thinking of the employee while it also provides the employer with technology that improves productivity,” says Bolzonello.

Hospitals are investing in video-over-IP too, to connect surgery rooms with lecture halls, for example. “Now students can sit in the lecture hall and feel like they are standing next to the surgeon, seeing everything the surgeon is seeing thanks to a pixel-perfect, zero perceivable latency images,” says Faccioli.

D’Alessio reports customers are looking for cableless and plug-and-play solutions, especially in the corporate and government market: “The idea of having an old-school control system is over,” he says.

In and outdoors
For other vendors the biggest growth areas are outdoor DooH and indoor LED. “Outdoor signage is getting bigger and brighter and must be outdoor rated for reliable 24/7 operation,” says Krüger. “They also need to offer low power consumption with energy efficiency being high on the priority list for Italian buyers.”
There’s some disagreement as to whether Italy exhibits any difference in terms of AV use to the rest of Europe, but considerable agreement that Italy contains within it distinct regional strengths. It’s a touch contradictory.

For instance, Ross Video’s local sales manager, David Mosca finds no major differences between the country and its neighbours while highlighting, “ease of use” as a key consideration for its products “as operators don’t have a broadcast background. Therefore, a unified touchscreen interface with customisation options is essential.”

D’Alessio says Italy is basically divided into two macro regions: the north for the corporate market and the centre-south for military and government. “Italy changes from the north to the south and from customer to customer. You must adapt to every solution and to the different view of our customers about our solutions.

“There are also specific areas for cruise ship manufacturing like the Italian North-East, and for yacht manufacturing in central seaside areas. The rental and staging markets change across the territory. Milan is more live events-driven, whereas Rome is more focused around TV.”

Milan, Turin, Florence and Rome are major hubs for Italian TV stations (Mediaset is in Milan, RAI in Rome) with plenty of installers, equipment rental services and maintenance technicians. “Separate from the main AV verticals such as corporate, education, government and hospitality, AV tech and activity will be high in the museum, naval and aerospace sectors,” says Bolzonello. “In cities like Venice and Naples, we will see a rise in luxury AV installations, such as onboard yachts.”

Mosca elaborates on the cruise ship industry – “an emerging market for video production as customers in this sector expect access to high-quality video.” Ross’ Ultrix platform has been installed on various cruise ships to manage video signals.

“The superyacht sector is also growing,” he adds. “Many builders are based in Italy and the cost of investing in advanced AV solutions is not a concern for these high-end clients.”
Bolzonello says, “Italy can feel like a very different country depending on the regions to which you travel. There are diverse regional needs birthed from historical, geographical and political climates.”

He spots an opportunity for SIs and distributors to “share professional installation experiences and the benefits of modern AV and IT technology that have taken hold in one territory with potential customers in other areas where the technology has not yet taken hold.”

Krüger picks out Milan as the main hotspot for AV where the DooH market is growing “with more installers adopting and integrating new technologies across all applications.” In contrast, Rome is more restricted, because of its historic centre and UNESCO World Heritage listing.

Yet Rome is the powerhouse of decision making. “Most of the money coming from the EU recovery fund will be used for government infrastructure,” reports Faccioli. “Which means that the decisions will be made in Rome, and then implemented all over the country, mainly in healthcare and education.”

All AV tenders in Italy are based in central Italy, confirms Jerez. She drills down further. North Italy, she says, represents the business centre “considered the engine of Italy in terms of finance and industry. Many technology companies in North Italy are open to AV opportunities.”

Datapath sold its first AETRIA control room software in Italy last November, via distributor AG Multivision, to the Rome HQ of US multinational, Kyndryl. Lombardia (Milan) is the home of multinational HQs for Tesla, Danone, Google, and Microsoft. Trentino has many German-speakers. Piedmont is strong in automotive (the Fiat-Group is based here). In this region ship construction is busy and requires simulators to train seafarers to sail them. Emilia-Rogmana is strong in pharma and medical as well as automotive (Ferrari-Fiat and Lamborgini-Audi are based here).

Central Italy
Central Italy represents the administrative and governmental hub. Banks are mostly headquartered in Rome. “Marche, Toscana and Umbria are very strong in shoe manufacture,” reports Jerez. “This area is strong in textile, fashion, luxury and tourism.” For example, HYPERVSN’s holographic activations have popped up in numerous exhibition spaces and retail environments in Italy. With Italian partner Hologram Communication for example the SmartV Solo and 3D Catalogue solution transformed a physical store of brand My Glam Boutique into a virtual shopping experience.

The south is particularly strong in agriculture, culture and tourism. Cravedi highlights Rome, Naples, Bari and Sicily as hotspots for AV applications related to tourist hospitality though clearly the whole country is a tourism and museum treasure trove.

“Italy is the number one country in the world in terms of cultural heritage,” claims Bolzonello.

As any tourist knows, says Mosca, “The pro AV market in Italy relies on major events to attract and retain visitors. The combination of delicious food, variety of landscapes, and favourable weather conditions make Italy a prime location for hosting a wide range of events throughout the year.”

Most notable as a universal characteristic of the Italian market is design quality. Several commentators tell us that design ranks highly in the eyes of buyers.
Architects, consultants and integrators want products that offer the aesthetics, source materials and functionality to match their creative projects.

 

Evan Shapiro: Streaming Habits Have Shifted… Here’s How (and Why)

NAB

Streaming is now a vital part of nearly all Americans’ content diets. Yet, what viewers choose to watch, and where, differs greatly based on age.

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According to the latest report from Publishers Clearing House Consumer Insights and analyst Evan Shapiro looks at recent American viewing habits. Based on responses from 16,650 consumers gathered in February, the report finds a substantial bifurcation of TV consumption along generational lines. Life experience — how we were raised to watch TV — still seems to influence how we consume TV now.

“For those under 45, streaming culture — bingeing, cancelling after a binge, streaming content for free — are TV norms,” Shapiro says. “Those over 45 years of age maintain many of the habits they had when choice and viewer control were not so abundant.”

Digging deeper: 40% of viewers under 45 say bingeing is their preferred way to watch series. Consumers older than 45 are most likely to choose their viewing method based on the show.

These habits seem to correlate to the number of services each group has: the younger a subscriber, the more services they subscribe to.

Forty-three per cent of Americans under 45 have three or more streaming TV subscriptions, while more Americans over 45 have zero premium paid streaming services (32%) than have three (31%).

Sixty-eight percent of consumers over 45 and 78% of those under 45 have one or more paid streaming services, leading Shapiro to conclude, “Paying for streaming TV is now normal entertainment behavior at all ends of the demographic spectrum.”

However, so is churning.

Forty percent of younger streamers say they occasionally or regularly sign up for a service for a specific show or movie, watch that content, and cancel before the next billing cycle. More than a quarter of older Americans also say they also participate in serial churning.

Movies remain the content genre subscribers value most. Together with premium episodic shows, these two content genres determine a large portion of subscription decisions.

That’s not to say that kids programming and live sports aren’t important, with around 15% of subscribers to each genre likely to be more loyal to their service provider.

According to this survey, Disney tops the chart of domestic streaming popularity, largely helped by Hulu, beating both Netflix and YouTube to take the crown.

Warner Brothers Discovery is in the elite tier, right on Amazon’s heels, and the combined Paramount+/Pluto TV is another streaming giant.

When it comes to free streaming services, this survey suggests that Tubi, Roku Channel and Pluto TV “appear to be reaching critical mass among younger viewers,” yet all are more popular than notable paid services like AppleTV+, ESPN+ and Discovery+.

Free streaming is now the top TV choice with consumers under 45, and second only to cable TV among viewers over 45. It is YouTube which is far and away the leading free video platform “quickly becoming the go-to channel on CTV for all ages.”

Shapiro writes, “What this data does makes clear is that subscribers are getting pickier, and nimbler in their leaps from one service to another. Bingeing has generated a growing wave serial churn, and the changing economics of entertainment have given consumers a vast content smorgasbord, which they are actively sampling.

“It is also clear that older audiences and younger see their content consumption and platform choices quite differently — at least for now. To keep customers from serial churning, platforms and publishers should respond with pricing and packaging flexible enough to serve all ages.”