Halfway through a relatively momentous 2021, with the pandemic ebbing in at least some parts of the planet, several major trends have emerged, or re-emerged, and will help shape where the streaming-video industry heads going forward. The conflicts between those sometimes contradictory trends will shape the next stage of development in what’s clearly now the next generation of “TV.” Those trends are:
AT&T’s “Never mind” move to walk back its $85 billion 2018 Time Warner deal, shipping the dramatically restructured WarnerMedia off to the welcoming arms of David Zaslav and Discovery Inc. is actually a little bit of deconsolidation along the way to considerably more concentration. It will, pending government approvals, give Zaslav control over 200,000 hours of content, and already has scared the pants off competitors, who started looking for their own ways to get bigger. Amazon quickly found one, buying MGM, and Sony partnered up with both Netflix and Disney+ for outlets for its movies. Lots of other conversations have been ping-ponging about, no doubt even more so in this week’s annual Sun Valley media confab hosted by Allen & Co. Count on more deals, after what PwC said was a record 410 mergers & acquisitions in the media and telecom sectors in the first half of the year. More deals, that is, unless the next trend proves more impactful…
President Joe Biden named antitrust theoretician Lina Khan to the Federal Trade Commission, then made her chairperson. He followed that with a batch of Department of Justice nominations featuring lawyers with an antipathy toward the kinds of anti-competitive behaviors most strongly tied to the tech giants. That would be fine for Hollywood, except now half the town’s major players are trillion-dollar giants from Silicon Valley. And Biden isn’t the only one itching to make trouble for the big companies. Conservatives who believe they get treated badly by the social-media platforms would also like to make chop-chop in various legislative ways. Whether the fiercely partisan Congress can find some areas of agreement is another issue. In the meantime, Facebook won a major, if temporary victory when a judge threw out an antitrust case by the FTC and nearly 50 states. The FTC will get to refile, but the states won’t. The judge said they missed their shot to block the 2012/2014 deals for WhatsApp and Instagram by not saying anything then. Count on states attorneys general to be even more aggressive about interceding in big deals if they no longer get to have second thoughts. The push and pull tension between consolidation fears and antitrust fervor will likely continue for many months to come.
Now that pretty much all the media companies planning to launch a major SVOD service have done so (bringing to a close the last era of the streaming wars), companies are beginning to roll out their operations in more territories and continents. They’re following the Willie Sutton Theory of Revenue Acquisition: that’s where the money is, particularly with a very crowded menu of worthy competitors in the United States. Netflix holds a good hand in this regard, given that it has been operating in nearly every territory in the world for several years now. Netflix these days spends its time buying and building local productions, some of which, as Co-CEO Reed Hastings noted in the company’s last earnings call, have a chance to become a worldwide hit. This spring, that list includes France’s Lupin, Mexico’s Who Killed Sara?, Italy’s Generation 56K, Iceland’s Katla, and Spain’s Money Heist (now being remade in Korea). Other competitors are pushing into new territories, led by Disney with both Disney+ and the launch this spring of Star, a more general-interest service that features as both a “hub” within the lily-white confines of Disney+ in some overseas territories and a standalone operation in others. Other players are moving into English-speaking territories, Latin America, Europe and other potential opportunities. No territory has been more hotly sought after than India, with its 300-million-strong middle class and growing media consumption. But the Subcontinent – which was already complicated by religion, caste and two-dozen official languages – has gotten positively treacherous. As Netflix found out, Indian audiences want local content, not rehashed Hollywood franchises. Far worse, the Modi government has become very aggressive in trying to control media and social-media outlets. It banned dozens of Chinese apps after a bloody border skirmish a year ago, and now is cracking down on Twitter over perceived foot-dragging compliance with new content restrictions. India’s impossible to ignore as a vast opportunity for new customers as streamers search for growth, but the biggest market out there has become a minefield just as all the new services are getting their feet under them, and needing more subscribers to quell Wall Street concerns. All of which brings us to….
Transparency, Or Lack Therein
For any given streaming service out there, chances are outsiders know very little (at least from the companies themselves) about key issues such as churn rates, average revenue per user, or even net paying subscribers. Oh sure, companies are quick to trumpet big percentage gains in subs, without providing more detail. They might talk about an all-in figure that includes give-away deals with wireless carriers (or pretty much everything Apple sells), leftover subs from earlier streaming operations that haven’t been shut down yet, or other ways to pump up the volume. That worked last year, and into this one. But more investors and analysts are getting antsy for better detail about what’s happening with the streaming services. They’re getting more inquisitive about those telling second-level statistics, and are beginning to wonder if companies aren’t talking because the story is an ugly one to tell. That’s almost certainly case for the quietest mouse in the church, Apple. Cupertino has elevated the product pitch to a sublime art melding music, dance, obscure product features and high production values. But the total time Apple executives have spent publicly discussing TV+ since it debuted 20 months ago wouldn’t fill a full episode of Ted Lasso. Apple finally is going to start charging its original subscribers for the service, beginning this month. Perhaps now that TV+ costs something, the company will need to talk about what it actually has made, and how much it’s making. The success of TV+ won’t matter much to Apple’s mammoth bottom line (the Services unit it is part of now generates more than $60 billion in annual revenues, dwarfing the market capitalizations of companies such as Sony and ViacomCBS). But investors are going to care a lot more about CEO silences and pregnant pauses at several other streaming services if they can’t start delivering more detail, and demonstrate a winning, and affordably sustainable, strategy.
Back to the Future
The biggest trend shaping the industry in its next iteration: how will people watch video on TV going forward, and how much will they watch? The pandemic is eased enough in big markets such as California and New York that life is starting to look recognizably like the Before Times, plus a bunch of new things, like great home-entertainment systems and a facility with Zoom and apps. Universal had a great July 4th weekend at the traditional theatrical box office, its films grabbing the three top spots. But will people truly return to theaters in droves (the F9 box office gross topped $500 million worldwide after two weeks, but is anything else going to do that anytime soon?) In similar fashion, broadcast and cable are getting back some of the things that used to make them important, like live sports in something like normal seasons and times of year. Will that slow down the deluge of cord-cutting that hit during the pandemic, or are viewers now up to speed on the technical tweaks needed to zip between streaming services, and occasionally flit to those live channels they get in their cord-shaver package from an MVPD? The rest of July and August likely won’t be much of an indicator of new patterns of consumption, given the apparently inevitable arrival of the Olympics and Black Widow, and little else. But starting in September, as people actually return (or not) to offices and schools, we’ll start to see the first indications whether the pivot by media companies and advertisers to Connected TVs will continue to pay off. Will newly adapted viewers continue to rely on streaming services for most of their entertainment (and news and sports and first-run movies), or will many of them snap back to something closer to 2019? The pandemic accelerated a decade’s worth of shifts to CTV; we’ll see how permanent the shift is in what we can only hope will be a more routine Next Future.