This is the first in a series of articles focused on individual sectors of our new tech-transformed world of media and entertainment (M&E). Let’s first start with video - television, movies and mobile - its current state, and where it’s going.
ACT I - SETTING THE STAGE
Change and transformation. Accelerating. That’s the story of our brave (and frequently daunting) new world of M&E. Tech titan and new media mogul Meg Whitman recently underscored that point to me in my recent interview of her for Forbes. “You have nanoseconds to adapt now,” she cautions M&E execs.
How many of you would have predicted just a few years back that eSports - kids watching other kids play video games (frequently even in large stadiums) - would become an entirely new $1 billion M&E mega-opportunity that will double in size in the next few years? eSports is a new M&E sector that is going “straight up,” says Whitman unprompted. “I’ve never seen anything like it.” Now 77% of young males regularly watch others play video games according to new media company Whistle, demonstrating rapid industry transformation right before our eyes.
And if you think that’s something, chew on this. Now, about 50% of the world is connected to the Internet and, hence, to each other. But by 2025 - in just five years - many expect virtually the entire world of 8 billion to be connected, thanks to 5G. Just think what that will do to the diversity of stories created and shared in all forms of media? But wait, there’s more. Noted futurist Ray Kurzweil believes our heads will be in the clouds - literally, our brains connected to the Cloud to harness its power - by 2040. Elon Musk, a man who seemingly faces no boundaries of space or time, agrees with Kurzweil but believes 2040 is too conservative. His new company Neuralink uses a series of implanted chips to connect our brains to decidedly non-human and accelerating computational power. And Musk plans to begin human testing this coming year. Yes, in 2020! What will that do to the M&E business? What will that do to our lives?
ACT II - TODAY’S VIDEO WORLD & WHERE IT’S GOING
In terms of video, let’s first start with television. But what is “television” anymore in a world where Netflix and other subscription video on demand (SVOD) services increasingly blur the lines separating traditional notions of movies and television? And how do you separate “movies” and “television” from the overall world video, period? These are fundamental questions in today’s tech-transformed M&E world in which bright lines simply no longer exist.
The State of “Television” Today
Let’s at least try to differentiate television and movies as best we can from other forms of video by focusing on their traditional viewing platforms. Analyst firm Digital Global Research pegs the aggregate global “television” market at $265 billion as of 2018, a number that includes traditional broadcast, cable, satellite, and now also the new SVODs. Within this massive and massively growing overall domain, consumers no longer just “cut cords” and increasingly shift their consumption to SVODs. Now, an entire new generation of digital natives - so-called “cord nevers” - never sign up for cable and satellite packages in the first place. Why would they? New tech-driven media giants like Apple, Amazon, AT&T, Facebook and Google now cater to their every whim and spend billions to drive frequently mobile-first premium video content - our new form of “television.” Heads down. Solitary. Shareable.
The “Great Streaming Wars” dominate the headlines in today’s “television” world. And deservedly so. Yes, Netflix has always faced competitors. Amazon Prime Video and Hulu being two of those. But never like this. Now Disney+ and Apple TV+ battle it out to take Netflix down a peg or two (or several). And AT&T’s HBO Max and NBCUniversal’s Peacock soon enter this M&E battle royale (both launch during the first half of 2020). Each of these behemoths is essentially betting the farm to “win” - i.e., capture and keep our eyeballs and subscription dollars. But can they all scale and be massive winners in this increasingly overrun space? Of course not! 2020 is a major test, and Disney+ looks like a pretty good student so far. Disney+ signed up 10 million subscribers in its first 24 hours (yes, 1 day!), using a shockingly low $6.99 monthly price to bully its way and break through into the market. Apple TV+ followed suit with an even lower price point ($4.99 monthly), but significantly lower results as well.
Expensively produced, exclusive content is where the biggest bets are placed amidst these SVOD wars amongst giants. Each hopes to woo us into its magic kingdom - and away from the others - by giving us our own “must see TV.” Our next Game of Thrones. That’s why Netflix spent an eye-popping $15 billion on content this past year, a number that continues to escalate with each passing year. Apple spent a relatively paltry $6 billion by comparison and has relatively little to show for it so far. Meanwhile, Disney+ can sit back and relish its entirely unique position amidst the content noise. Disney’s “evergreen” content crown jewels and beloved franchises have no equal in the marketplace (not even close). Its Star Wars, Pixar and Marvel holy triumvirate, not to mention its beloved Disney princesses and new Fox and friends (Avatar, X-Men, The Simpsons), are the envy of all others. Disney’s content is king, and its global multi-tentacled marketing machine doesn’t hurt.
And that’s not all. New SVOD mega-contenders Disney+, HBO Max and Peacock don’t play nice with Netflix and others anymore. Now they take back their most valuable content jewels from Netflix - including Friends and The Office - in order to feature them front and center themselves (foregoing billions of dollars of licensing revenues in the process). So, we see content used offensively (billions of dollars spent to create it) and content used defensively (”take backs” of valuable television shows). That’s the new SVOD-driven television world order.
Amidst all of this, Netflix’s subscriber base continues to grow. But so do its headwinds. And Netflix monetizes its content only (via subscriptions), while virtually all of its new tech-born behemoth competitors simply use their content as marketing to drive fundamentally different, deeper and more flexible business models. Apple uses content to sell more iPhones and Macs. Amazon to sell more Prime memberships and shopping. Google to sell more ads. AT&T and Verizon to sell more wireless plans. Ultimately, one of these behemoths - or some other international behemoth like Tencent or Alibaba (remember, we live in a borderless world now) - will buy Netflix. Its brand, base, and engagement are invaluable. They ultimately just need to be part of a larger monetizing machine to justify stand-alone economic realities.
Where do “smaller” video players go in this goliath-filled world? They go “niche,” relentlessly focusing on passionate audiences underserved in the marketplace. That’s why British television focused SVOD BritBox can be successful, kid-focused Pocket.Watch can be successful, and user generated content-focused Jukin’ Media can be successful. They can’t be everything to everyone like the behemoths. Nor should they be. They can be just fine aggregating their respective “niche” audiences worldwide, because aggregated global “niches” can become plenty profitable.
The State of “Movies” Today
Does this SVOD shock and awe - that increasingly lures us into our living rooms to “Netflix and chill” - mean that theatrical motion pictures are dead? Of course not. We are social creatures after all, and we still crave communal storytelling experiences. In fact, perhaps we need them even more in this increasingly heads down, digitally-driven mobile-first age. Who wants to be scared alone watching It when you can share those It scares with others? Exactly! That’s why theatrical still fueled $41 billion box office worldwide in 2018 according to comScore.
But today’s SVOD realities have significantly transformed the theatrical motion picture business. Virtually gone from our local multiplexes are non blockbusters. “Smaller” indie films now essentially find their homes exclusively on those SVODs (which begs the question, have these films now transformed into “television”?). Our local theaters must adapt, just like all other sectors of the M&E business (not to mention ourselves). And I’m not just talking about adding leather recliners and sushi. Theaters must become destinations that cannot be replicated at our homes and offer 360-degree “experiences” (pre-show, at-show, and post-show). Theatrical business models also will change. MoviePass is one example. Remember that once flying high upstart and overall Hollywood disruptor? Its audacity enabled all of us to watch as many movies in theaters as our little hearts desired for a mere $9.99 monthly. Too good to be true? Apparently, yes (at least for now). MoviePass, well, recently passed away. But its Netflix-inspired subscription business model most certainly did not. That new model will find its home as part - rather than the whole - in the subscription business models of others that can withstand its economics. Netflix and Amazon are two prime suspects here. Each could bundle a theater subscription benefit as a feature as an upsell in its larger overall subscription offering.
Mobile & Social Video Today
Mobile today still remains focused on shorter form, less expensively produced video content on YouTube and other mobile-first platforms (a mass generalization, to be sure). But we watch more and more of our movies and television (whatever we call them) heads down on our small screens. The coming onslaught of 5G will accelerate that trend, and media mogul Jeffrey Katzenberg (together with his tech titan partner in crime Meg Whitman) plans to capitalize on it. The two icons soon launch their long-awaited mobile-first SVOD Quibi. And when they do, it will be unlike anything we have ever seen. Quibi will feature traditional Hollywood talent and video production, backed by traditional Hollywood budgets expected to range upwards of $125,000 per minute. Skeptics abound who question whether Quibi’s economics can pencil out. But one thing’s for sure - if Katzenberg can’t do it, no one can. Literally every single major Hollywood studio invested in, and will support, his vision. Quibi is a bold, fearless move that kicks off a new M&E decade that demands bold moves. This is no time for heads in the sand or deers in headlights. It’s time for lights, camera, and action!
Sharing, of course, remains at the center of our mobile universes. After all, why not still try to feel connected with others - even if only virtually - when we are heads down and alone with our video content on the smallest of our screens? So it’s no surprise that every major social media platform now counts itself as being a new media and entertainment company. That means Facebook, Facebook’s “child” Instagram, Snap and others. They too now spend billions of dollars on original video programming to keep us glued to their screens (serving up ads and collecting our personal data all along the way). These social media giants haven’t found their video sweet spots yet, but it’s not for lack of trying. That trying continues apace in 2020.
The State of Television, Movies & Video Tomorrow
With this explosion of video content, we live in a new “golden age” for creators and storytellers that shows no signs of abating in 2020. So-called “Peak TV” remains far off in the distance, as our consumer appetites only grow amidst more choice and better experiences in a 5G-driven and platform-expanding world that increasingly moves toward visual computing and wearables. Content experimentation is the name of the game as more voices tell more diverse stories to newly expanded global audiences across new platforms. “Traditional” rules of the M&E content game are stripped away in the process. And that’s a good thing.
Creators no longer need to “fit” their stories into 30 minute sitcom boxes (which meant 22 minutes of content and 8 of commercials). Serialized “television” across SVODs and on our mobile “phones” can be any length the stories want them to be. Creators now enjoy the freedom to do the unthinkable - killing off lead characters with reckless abandon a la Game of Thrones, or offering entirely new storylines under the same banner a la Fargo (one of my personal favorites, since I come “from the land of ice and snow” and understand the true meaning of wood chipper). Creators and consumers win here, even as consumers desperately search for new ways to find the content needles they crave in the fast-growing content haystack. SVODs and other platforms find it significantly more challenging, as they desperately search for ways to break out, grab, keep and effectively monetize us.
Data increasingly takes center stage to drive success for the new tech-driven media giants. Netflix, Amazon and Facebook collect a ton of it, and use much of it to fuel their content choices. That data dominance only accelerates over time, leaving the traditional media companies searching for their own data answers. But remember, those traditionalists hold the upper hand when it comes to content. All of them - especially Disney - hold content treasures that the “new guys” simply can’t match. And don’t forget that proven content franchises like Friends come with passionate loyal audiences that will search them out.
“Upstreaming” of content also increasingly helps. Yarn is an interesting new media company that demonstrates the possibilities here. Yarn efficiently creates low-cost interactive text-based narrative content for a young mobile-first female audience. In so doing, Yarn efficiently tests which characters and storylines resonate with that audience. The company can then take the best of the best and place bigger and more expensive bets on those popular content elements - and can also license those successful elements out to other platforms (including traditional platforms like television) to monetize at a grander scale. And now those grander ambitions come with a built-in audience hungry to consume. Expect content “upstreaming” to accelerate in 2020 and beyond. Crypt TV - focused on the horror genre - is another new media company to watch here. It already delivers its mobile-first, audience-established characters and stories to television and theme parks, collecting sizable checks in the process.
And don’t forget about interactivity, which will increasingly permeate our viewing experiences. Consider this the Bandersnatch effect. Remember Netflix’s grand Black Mirror experiment which gave each of us the ability to drive the story forward the way we wanted? My Bandersnatch viewing experience was different from yours as a result. Bandersnatch points the way, and Netflix plans to do many more like it. Others will too.
ACT III - THE CONCLUSION
M&E’s tech-fueled transformation in the video sector is reshaping the very notion of “media” - and what it is. Case in point so-called “synthetic media” - content created by artificial intelligence (AI) rather than by human minds and actions. Startup innovator Synthesia makes it possible for international superstar David Beckham to speak nine different languages. Don’t believe me? Just watch this video. Yes, I know - Beckham is Beckham and can do virtually anything. But even he can’t do that! Synthesia, instead, enlists cost-effective and efficient AI to do the heavy lifting rather than a gaggle of expensive and slower moving earth-laden visual effects artists. Synthesia first maps Beckham’s face, and then pumps in different voices and languages into its AI-driven sausage factory, and - voila - its AI does the rest. Lips synch automatically to the sound. Sound to the mouth. Incredible. Soon, subtitling will be a quaint artifact of the past, enabling stories from anywhere on the planet to find new mass audiences. And that’s just one use case.
Imagine the possibilities, because they are coming. Much sooner than you think.