The Ripple Effect Of Streaming Video

The media industry continues evolving, especially in recent months. There has been an inordinate number of streaming video announcements recently, coinciding with the launch of the annual new broadcast season.

An already crowded streaming video landscape is going to become even more congested and will present more competition with traditional television. Over the past few months the following initiatives were either announced or reported:

• Fresh off its $85 billion acquisition of Time Warner, AT&T unveiled plans to launch a streaming video service designed to compete with Netflix and the previously announced Disney initiative (whose name was recently announced as Disney +). WarnerMedia has one of the largest film and television libraries in the industry and will access content from HBO, Turner and Warner Bros. AT&T is also reportedly in content talks with Comcast the owner of Universal Studios for their new streaming service. The video service (along with Disney’s) is scheduled for a 2019 launch.
• Viacom is expected to announce a new direct-to-consumer streaming service in the near future. The media conglomerate recently launched MTV Studios to create online video content
• Hollywood executive Jeffrey Katzenberg and Meg Whitman announced the newly renamed Quibi (formerly NewTV), and struck agreements with four prominent movie producers. It’s reported Quibi (for quick bits) has received nearly $1 billion in funding from Disney, Fox, NBCU and Alibaba. Quibi, with its short-form content, is expected to compete with Facebook and Instagram.
• Retail giant Walmart is ramping up its video offerings on Vudu. Walmart acquired Vudu in 2010 and has struggled to keep pace with Netflix, Hulu and main rival Amazon. Walmart announced a partnership with MGM to produce original and family-friendly content. The first programming is expected to launch in early 2019.
• Apple has plans to offer original television shows and movies at no charge to Apple device owners. Apple owners will have a pre-installed TV app in devices that will include both Apple-owned free content and a subscription service from other providers. It’s reported Apple will invest $1 billion in content and has agreements with several production companies. The service is expected to launch in early 2019 in the U.S., and 100+ global markets later in the year.
• Snapchat has launched Snap Originals, reportedly a dozen original and serialized programs of different genres from prominent producers made exclusively for the Snap app. Each episode will last about five minutes and will be designed for mobile devices. Snap also expects to compete with Instagram’s IGTV and Facebook Watch.

These companies are all expected to compete with existing a la carte networks, vMVPD (Multichannel Video Programming Distributor) services and SVOD (Subscription Video-on-Demand) providers led by Netflix. eMarketer forecasts that in 2018 streaming video will reach $27.8 billion in ad volume, +30% from 2017, while television ad volume is projected to remain relatively flat.

Speaking of television, the networks began another new season in September. The influx of competing video services has been taking its toll. Although the upfront ad marketplace was stronger than in recent years, the increase in CPMs were primarily offset by continued audience erosion. Ad Age reports that of the 66 returning television shows in 2018-19 only 12 increased their ad rates. Television viewing, as measured by Nielsen, continues to drop, especially among young viewers as they watch more content on other screens. As a result, a growing number of television shows now have a median age of older than 60, falling well outside the 18-49 demographic many advertisers target. As television ratings continue to drop, cord cutting is not slowing down– 24% of U.S. households no longer have a cable/satellite subscription, up from 16% just two years ago.

What will this mean?

After 50 years the television upfront model may be scaled back or disappear entirely. TV ad buying based on programs and demographics will be replaced be data-driven, audience-based buying, with data being provided by advertisers, smart TV’s, OTT providers and return path data from MVPD’s as well as content providers. As a result, expect some advertisers to take their media buying in-house and not share their first-party CRM data with their agency partners.

Not surprisingly, there will much more video content. With Disney, WarnerMedia, Viacom, Apple, Quibi and others developing their own streaming service, the cost to license video content will rise. Hence, it will be more efficient to produce and own content. The number of original scripted shows last year was 487; that figure could double by 2025.

Also, with some video providers offering a premium/ad-free tier (such as Hulu and CBS All Access), it will become more challenging for advertisers to reach the younger video viewer. Additionally, expect older viewers to watch less television content and more streaming video as it becomes more mainstream.

There will be pressure on audience measurement companies to increase their sample size to meet the challenges of the expanding and fragmented video landscape, to effectively measure audience-based buying and all video screens. If the miscalculations from “walled gardens” of digital media is any indication, advertisers will prefer an independent third-party to measure audiences.

If successful, just these handful of video streaming announcements can impact a number of business models. – Forbes