One of the best ways to predict what will happen in the future, especially the near-term future, is to look back. Not back a year, or five years, or even ten, but 20 or 30. Why? Because, like most things in life, trends in the media entertainment industry go in cycles. Of course, the players and the technology change, but the strategies and the synergies re-surface again and again.
Take one of the key emerging trends that looks set to continue throughout 2017: vertical integration. It was big in the 1990s and with potential deals like Time Warner and AT&T and mooted combinations like Disney and Netflix it will be big again in the late teens of this century. Now, just as then, it’s about the alignment of content and distribution as well as the combination of new with old. The distribution has changed. Reaching the OTT home is now so key that old-world media players want in.
On the other side of the fence, the globalisation of OTT services like Netflix mean the value of content, specifically direct ownership of content, soars. That’s why a combination between Netflix and a major content owner will be of interest to both parties. Perhaps even more interesting, though, is the potential for combination of Amazon and a major studio. Vertical on the face of it, the content plus retail aspect is a new, but interesting scenario.
So do I think Netflix will be sold in 2017? No. I think there will be a lot of noise, but we will probably have to wait a year or two more for an actual deal. When it does happen, it will be between Netflix and a content owner rather than a distribution player because Netflix’s real value is in its global reach and customer base. Amazon, though? It could surprise us yet in 2017.
There are also other platforms that could find themselves the target of vertical integration strategies with old-world media, particularly the digital native majors not already snapped up. Snapchat anyone?
Consolidation is also likely to continue in the channel space, particularly between free and pay-TV channel groups, this trend may well be accelerated by the geo-political changes in Europe and the US, the full force of which will begin to be felt in 2017.
When it comes to content, 2017 will see an ongoing push away from the traditional premium drivers of top-league sport and blockbuster movies. Original, high production-value drama will continue to out-perform, despite noises from the US that there is a bloated drama production bubble about to burst. But other forms of content that satisfy those classic ‘niches of scale’ will continue to ascend. Indie moves, digital native entertainment formats that make the crossover to mainstream TV (another major trend for the year) and eSports will all be key.
So while 2017 will not be a year in which a brand new Netflix-style disruptive force enters the industry – I’d say we’re looking at a 2020-plus timescale for that – it will be a year in which some major structural re–alignments take place throughout the media value chain. Those will likely all fall into place just around that time that something we haven’t even thought of yet surprises everyone and throws the industry back into disarray.
By Guy Bisson, research director, Ampere Analysis