Three ways streaming services have already changed TV foreverChris Sutcliffe 17th May 2018
Everyone knows by now that the broadcast business model has been fundamentally altered by the rise of digital streaming. Digital ad-spend has overtaken TV ad-spend in the US and UK, and by many accounts US television ad-spend is in a state of permanent recession (it is expected to bounce back slightly in the UK).
More than that, though, over-the-top (OTT) services have disassembled the bundles upon which lucrative television deals were built. Sports content, for instance, was once the foundation upon which most cable and satellite bundles were built, in what Stratechery’s Ben Thompson called last year as “the last pillar to crumble” in the traditional pay-TV model.
But OTT services, and people’s expectations about on-demand media, have finally reached that pillar: Among all the many skinny bundles that don’t include sports, there are individual subscription services like the WWE Network, and even efforts to create the ‘Netflix for sports’. The Guardian reports:
“Last month Amazon struck a $130m non-exclusive streaming deal for NFL matches, alongside NBC and CBS, and in the UK it has deals for the US Open tennis, ATP Tour (previously on Sky) and is still in talks with the Premier League over two potential packages of streaming rights. Disney is gearing up to launch a streaming service based on ESPN content.”
Consequently, every man and their dog is reportedly prepping a streaming service of their own, though the reality is that the market will really only bear one or two huge Netflix-like services, while the others will likely be much more specific, genre- or studio-based services. In the UK, for instance, the three biggest terrestrial broadcasters (BBC, ITV and C4) are reportedly working on a combined streaming service, which Digital TV Europe’s Kaltrina Bylykbashi notes would allow them to compete with Netflix in terms of content. It would have the dual benefit of appealing to a broader audience than any of them could reach on their own and also reduce the ad-based broadcasters’ reliance on a volatile ad-market.
So while the prize is being among the rarefied few OTT services who can compete with Netflix, broadcasters are having the way they approach content creation fundamentally altered too.
Pay to play
Broadcasters and networks who have previously focused on creating programming for a single territory and then exporting that content are now choosing to commission content specifically to appeal to other countries. HBO, for instance, is commissioning shows specifically from creatives in Spain and Scandinavia to boost its proposition overseas. Bloomberg reports:
“HBO said introducing homegrown programs often leads to a surge in subscribers. From 2001 to 2004, for instance, the channel saw 16 percent subscription growth in Latin America. In 2004, HBO unveiled its first international scripted series, the Argentine detective show “Epitafios.” Over the next four years, subscriptions in Latin America grew by a whopping 53 percent.”
In part that is due to restrictions on entertainment imports from countries like France and Canada, which require a certain proportion of any broadcaster’s content to be produced within those country – if the streaming services don’t play ball, they don’t get access to those audiences.
The strength of a streaming service is in its catalogue of movies and shows – that’s why Netflix makes headlines every time it reiterates its investment in original content. It has reportedly set $8 million towards exactly that in 2018. However, its on-demand nature and its corollary decision to throw most of its shows up in one go rather than in a traditional week-by-week publishing strategy means that its content has effectively all become evergreen and undifferentiated.
As the former head of strategy for Amazon Studios, Matthew Ball, points out, that has fundamentally altered both the appeal of individual shows and the longitudinal value of each show. His argument is that the digitalisation of television means that shows are never ‘dead’ in the way that a completed series used to be on linear television. Instead, content that can be and is discovered afresh by audiences over the course of years can be resurfaced, remixed and is evergreen in a way that is entirely new.
He uses the example of the sitcom Arrested Development, the lacklustre fourth season of which has been remixed and re-edited 5 years after the fact by Netflix to promote its upcoming season.
8/ There are two important drivershere. First, content monetization is no longer hyper-concentrated on an initial airing (TV) or transaction (album purchase) – value is maximized by sustaining engagement over time.
— Matthew Ball (@ballmatthew) May 13, 2018
Additionally, as has been known for a few years now, OTT services have vast amounts of user data that allow them to commission shows based on what they know users are likely to be interested in. The go-to example of this was House of Cards, which was commissioned on the basis that Netflix knew that a significant portion of its viewers fell into the centre of a Venn diagram of enjoying the British original, the works of David Fincher and films starring Kevin Spacey (it was a different time).
On that basis, the potential of huge partnerships like the BBC, ITV and C4 collaboration suggest that even more shows will likely be commissioned based on audience data directly, rather than by eyeballing audience surveys and blunt viewship figures. Netflix itself, for instance, is doubling down on its sci-fi and fantasy content based on its disproportionate popularity among its audience in the first quarter of this year.
That’s all to say that, while OTT dominance is the goal of many of the new entrants into that space, the broadcast landscape has been fundamentally altered by streaming already. Audiences’ expectations have changed – and the way television is commissioned and delivered needs to change as a result. The broadcasters and the content creators who are set to take advantage of that are those that understand the medium is more fluid than ever, and that a fire-and-forget publishing strategy is no longer the way to monetise audiences in the long-term.
Martin Tripp Associates is a London-based executive search consultancy. While we are best-known for our work in the TMT (technology, media, and telecoms) space, we have also worked with some of the world’s biggest brands on challenging senior positions. Feel free to contact us to discuss any of the issues raised in this blog.
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