The Covid pandemic will shape the trajectory of every industry across the globe for years to come. The shock waves that propagate through 2021 will be both constructive and destructive. Zoom meetings, synchronised theatrical and streaming release dates, remote and virtual production teams, unused office space, and the tragic economic impact on families from lost jobs or deaths of wage earners. Although much of this will, we hope, soon be in the past, we may never go back to things the way they were, and a new normal will emerge both for businesses and individuals. Let’s examine some old and new trends for 2021.
Price of Content Flies Higher
The cost of content has been on a steady, and sometimes accelerating rate of increase for decades. NFL rights are predicted to jump 50 per cent or more during the next round of negotiations, while Disney Plus, after just one year into the service, will raise subscription fees by 14 per cent. YouTube TV rates are 85 per cent higher than when it debuted. Netflix has also announced another increase. These unstoppable price hikes will put pressure on aggregators and service providers to explore ways to create value wrapped around the content rather than relying just on the content delivery.
New Habits and Preferences
Experiences around interactivity, social engagement, and VR/AR have received more attention during Covid. 2021 will produce a lot of marketware and limited deployments to whet appetites and prove out new technologies. Live sports will likely draw the most attention. Bountiful sources of metadata will allow for interactive viewing, and rabid fan bases, fantasy leagues and betting will provide plenty of new revenue opportunities. We’ve already seen some solid progress in areas of intelligent sports recording services that allow viewers to pick the length of their highlight reel, or focus on a player or type of play. Social viewing has also seen a spike in interest from stay-at-home restrictions. Watch together features have been added to a number of streaming services. Expect more sophisticated social features, especially when merged with live sports. Ironically, the infrastructure to deploy new technologies at scale will also contribute to higher costs. Whether the market will be willing to pay for it is a key question 2021 might help answer.
Get Ready for the Content Cornucopia
As Disney and HBO/Warner push to add to their catalogues, including same day streaming with major theatrical releases, others will be forced to spend more on original or exclusive content too. Streaming will make content even more effective as a driver of secondary sources of revenue: personalised advertising, contextual metadata for deep exploration, AR/VR, gaming, social, and betting. Short form content from social influencers on YouTube, TikTok, and other platforms will become more mainstream as advertisers seek out niche audiences. On demand services will add “live” channels to capture impulse watchers and gain more visibility. One major question however is whether there are enough subscribers, ad revenue, and induced revenue to pay for it all.
Boom, Bust, Bust, Bust
There’s no stopping the non-stop rollout of new streaming services. And in this business, scale matters. But the combination of high prices for subscribers and high costs for content owners, will produce a few big winners and more than a few zombie services. The pandemic pushed the average number of streaming services per household in the United States from five to seven. Cord-cutting will morph into app-cutting as the pandemic growth spike ends and consumers pursue other entertainment activities outside the home. The second-tier players who don’t have predictable access to premium content or haven’t yet achieved necessary scale will be the hardest hit as consumers adjust their limited money and time budgets. Among the also-rans, subscriber counts could fall dramatically along with any hopes of profitability. First tier services like Disney Plus, Amazon, and Netflix will be among the last services consumers will drop and they will leverage their strong brands, quality content, and global reach to solidify their positions. Everyone else will need to develop alternative outlets to survive.
Content Aggregation, Meet Customer Aggregation
With the top tier Direct-to-Consumer players holding the few coveted slots in a consumer’s list of streaming apps, there is a growing need to bring content and consumers together. Aggregators like Roku, Fire TV, Apple TV, Android TV, Smart TVs and others, are a relatively easy way for apps to be distributed, but it is hard, and expensive, to buy awareness and stimulate active use. Traditional pay-TV operators are still an important distribution channel due to their ready-made subscriber base. With OTT friendly upgrades to their platforms, operators can offer more niche and local content that seamlessly integrates with their own live and on demand content. Operators can also help lower app churn through bundles and central billing.
Free? Make It Up On Volume
Content owners unable to rely on a pure Direct-to-Consumer model will look for distribution partners and offer favourable terms for aggregators. As advertising funded business models mature, expect to see more freemium services emerge. New broadband services built on 5G will look to differentiate themselves by bundling a free or freemium video offering. In doing so, the broadband service gains differentiation, and the content owners get low-cost access to a large group of subscribers associated with a sticky service. And viewers get easy access to content they love. Win-win-win.
Putting More Life in Live
Without cinemas, concerts or festivals due to Covid restrictions, content rights holders are improvising new ways to reach their audiences. Expect to see more focus on augmenting basic streaming with complementary interactive experiences. Not only do the fans want access, but the “stars” need the fans’ presence to really bring the thrills and excitement to performances and concerts. Sports leagues, including the NBA, have experimented with virtual fan experiences. And we’ve seen music artists stream micro-concerts to introduce new songs to their fans. Fans are able to send selfies and text messages to their favourite performers while on stage. These live group events can get bigger and more interactive with tiered “access pass” pricing.
A New Year
The high price of content is a fundamental and unchanging reality that cannot be ignored. But innovative technologies are enabling new services that can be wrapped around the content to create advertising and upselling opportunities, or simply to help justify the escalating subscription prices. In the end, it is all about helping people find and enjoy the content they love. Game on.