Letter from FIPP CEO James Hewes: Streaming turns into a river

We haven’t covered OTT streaming services much at FIPP but their increased interaction with publishing businesses – and of course their ever-growing popularity – means we mustn’t ignore them any longer.

Last year, we added video and audio streaming services to our quarterly Digital Subscriptions Snapshot report, and the story of their growth and scale is compelling.

Globally, Netflix remains the leader, having exceeded 200m subscribers, although their growth is clearly slowing and will likely continue to in the face of ever-fiercer competition. Amazon Prime Video is nipping at their heels, with around 150m subscribers, followed by two Chinese services, Tencent Video and iQiyi. To put this into context, the largest publishing brand, the New York Times, has only around 7m subscribers.

Indeed, although less pronounced that in the broader internet, an East-West divide is emerging in streaming services, with 6 of the top 14 services originating in India and China, although both Netflix and Disney have significant subscriber numbers in India. The two dedicated Indian services in the chart, Alt Balaji and Eros Now, have grown consistently at more than 10% per quarter since launch, faster than any Western service bar Amazon Prime Video in the same period.

There is only one clear winner in the growth stakes though, the House of Mouse. Disney+, launched just 15 months ago, has expanded from a US-only offering to covering more than 50 countries. Its base has grown at around 25 per cent per quarter and, having already attracted 100m subscribers, it’s on course to pass Netflix by the end of 2021. When you add in stakes in Hulu and ESPN+, Disney has a direct relationship with at least 150m consumers worldwide.

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Content is… well, you know…

So what’s driving that success? Well, it’s a story familiar to anyone in the media industry – it’s the content, stupid!

Having started as sophisticated video library services not owned by the creators of the content they carried and having found this a frustrating proposition owing to the conflicting demands of licensing content from studios, the OTT market has evolved into a race to acquire attractive intellectual property.

Streamers are becoming the new studios, in a race to produce exclusive content, preferably either around a brand with consumer recognition, or containing a few stars prepared to cross the aisle and work in what is effectively television.

To be fair to Netflix, they realised this earlier than anyone. Their slate of original programming has grown consistently year-on-year and they have “over 500 titles currently in post-production or preparing to launch on our service” [source]. They were also one of the earliest off the block with a big-name tie-in, launching a raft of series based around Marvel properties, including highly acclaimed productions such as Daredevil and my personal favourite Jessica Jones.

Whether by accident or design, the 2009 acquisition of Marvel by Disney ultimately put paid to that relationship and, perhaps unwittingly at that stage, laid the ground for Disney’s success in the streaming world.

Combined with a rapid recovery of rights to their content library from services like Netflix, Buena Vista’s finest have put themselves in a position to dominate the streaming world for decades to come.


Wait! Did Disney just win the streaming wars?

All this culminated in the 2020 Disney Investor Day, which was not so much a parking of their tanks on Netflix’s lawn as blowing out the kitchen windows and demolishing the garage. The studio announced 52 new projects covering Star Wars, Marvel, Pixar and other properties. The sheer breadth and ambition of their commitment is a new blueprint for streaming services that are serious about continued growth in their subscriber base over the next ten years. (If you’re interested, you can see the full presentation here.)

Lucasfilm projects announced at 2020 Disney Investor Day (source: Disney)


The ability to tie their production slate around 3 or 4 well-know master brands is a huge advantage for Disney, as is the nature of those properties. Consider a series like The Mandalorian, which will have seen Gen X Star Wars fans sat on the sofa watching with their children, ensuring Disney have bridged the generation gap for a property that is now almost 45 years old.


So how did they do it?

Disney’s blueprint for winning the streaming wars has three key aspects :

  1. Acquire intellectual property that has broad fan appeal and which can generate new video assets – with Marvel and Star Wars, Disney has full control of the key mass-market entertainment properties of our age.
  2. Back these acquisitions with aggressive investment in new content. Other players may have similar slates in terms of the volume of content their producing but none is able to marry this with such a strong suite of brands.
  3. Recognise that consumers do want a ‘Spotify for video’. Disney has recognised that, for streaming operators owning their own content, windowing serves no purpose. Netflix has never been able to supply the comprehensive, always-available library of titles consumers want and, recognising this, Disney undertook a multi-year process to recover streaming rights to all their TV and movie properties. This has enabled Disney+ to become the single home for all their content, now and forever.

The forthcoming launch of Disney’s ‘Star’ channel within the existing service will bring a host of new, more adult-themed content to the service, including shows such as Lost and Desperate Housewives.

Contrast that with the position the other major services find themselves in :

  • Netflix – has a huge slate of programming but lacks a portfolio of unifying brands. Can build new multi-season franchises (such as The Crown) but much harder to market these to consumers. Will Netflix end up as the Yahoo of streaming, the early market leader that failed to stay on top of the game?
  • Amazon – paid big money to acquire the TV rights for a new Lord of the Rings show, on top of big investments to acquire the ex-Top Gear talent but beyond this its slate seems and it’s clear that it’s underestimated the sheer volume of brands and content required to make Prime Video genuinely sticky.
  • Apple – incredible how a business that’s so good at making and marketing hardware can be so bad at streaming and subscription services, all of which so far (Music, News+ and TV+) have failed to achieve a premium market-leading position. Trying to build a service around original programming is laudable but it requires a more significant content investment than Apple has made so far.

Interestingly, it was announced recently that one of the last remaining standalone sources of IP – MGM – is up for a sale for a reported $5bn. For an Amazon or Apple, this would seem to be a logical “short cut” to growth – can you imagine what one of these would do with a property like James Bond?


What does this mean for me?

So what does all this mean for publishers? The thirst for original programming is not going to go away, indeed it’s critical for the future success of streaming services. As the pool of available IP gets ever-more thinly spread, attention is starting to turn to the publishing world as a source of content and ideas.

One of the last events I attended before the pandemic struck was a gathering of mostly digital publishers in the US. I was struck by the succession of CEOs sitting on stage, telling the host that their focus was on securing deals with Netflix or Amazon for their content. The combination of a lucrative source of additional revenue, particularly for properties that extend to multiple seasons, and the raised profile that results, you can see why this is an attractive prospect, particularly for organisations that might be sitting on large volume of relevant content.

Overall, it’s clear that we’re not even at the “end of the beginning” of the streaming story. There will clearly be consolidation at some point, not least because consumers probably won’t pay for more than about 2 or 3 services. The recent failure of Quibi also shows that the market probably isn’t ready for anything too innovative at this stage. Nevertheless, related industries such as ours should increase their efforts to engage with streaming services, as potentially important new source of revenue.


Our new D2C Global event

With all this in mind, I was delighted to be able to announce the launch of our new event, focused solely on direct-to-consumer business models, such as streaming. D2C Global will take place in June and will look at all aspect of the D2C space, with examples not only from the media world but from the broader market.

We’ve also announced a series of innovation-focused webinars, taking place across March, April and May, all taking place under the Digital Innovators’ Summit brand. The traditional DIS event won’t take place this year for obvious reasons but this webinar series will highlight all the latest innovations in our industry, as well as launching this year’s edition of the Innovation in Media World Report. You can learn more about how to attend or partner with both events here.

Have a great month.

James

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