Yahoo Finance Gideon Spanier: Who will win as global broadcast players battle in streaming wars?
The demise of television has been wrongly predicted many times but streaming and on-demand viewing are changing the way we consume TV. We could be reaching a tipping point.
The pace of change is accelerating because a growing number of new and existing players are taking bigger bets in a high-stakes game to win control of the global entertainment landscape.
A blizzard of developments over the summer illustrates how fast things are moving:
Netflix, the world’s biggest subscription streaming service, said its user base passed 100 million and it recruited more big-name talent, including Shonda Rhimes, the US drama producer behind Grey’s Anatomy, and David Letterman, the chat-show king who is coming out of retirement;
Amazon won the live rights to ATP tennis in the UK after Sky’s deal ended and it hired another leading American TV executive, Robert Kirkman, whose credits include The Walking Dead;
Apple signalled that it plans to enter the video market by hiring two of Hollywood’s most-sought-after producers, Jamie Erlicht and Zack Van Amburg, who worked on Breaking Bad and The Crown; and
In a sign that user-generated content has its limitations, Facebook launched on-demand service Watch that will feature commissioned TV shows.
However, Disney made the most dramatic move. The world’s biggest traditional media company, the home of Mickey Mouse, Star Wars and the ESPN sports network, will stop licensing its content to Netflix in the US and will launch a direct-to-the-consumer, on-demand service.
The Disney-Netflix power struggle is significant because it reflects wider trends in media.
Broadcast TV is not dead. Time spent viewing traditional TV has dropped about 14% between 2010 and 2016 in the UK but it still makes up about 80% of our viewing. Cinema box-office admissions also remain solid.
But streaming and on-demand technology have empowered consumers, particularly the young. Three quarters of Britons aged 16 to 24 use subscription streaming services, according to Ofcom.
We can now watch what we want, when we want, in our homes and on our phones and we are willing to pay for it.
This has been a boon for the owners of original, premium content, chiefly high-end drama and live sport, which have never been in such demand.
But it has upended the business model of broadcasters and movie studios, which were used to controlling access to their content and profiting from advertising and high-margin DVD sales.
First, the new online distribution platforms won huge subscription audiences by aggregating a lot of library content cheaply. They also improved the user experience by allowing binge viewing and ditching the ads. (Amazon’s current UK marketing for Amazon Prime Video proclaims: “And it’s all ad-free”, an irony given the ad is appearing on broadcast TV.)
Now the online platforms are outspending broadcasters and film studios by hiring the best talent to make original shows and are using their audience data to decide whether to commission hits such as House of Cards and The Crown.
So far the war for content has been over drama but the online giants are targeting sport such as English Premier League football rights, which come up for auction this year.
All this explains why Disney has cut its links with Netflix. However, launching its own streaming site is a gamble. Disney may be the world’s most recognised entertainment brand but many media companies have struggled to sell content directly to the consumer. Record labels failed to create an alternative to iTunes and have let Spotify, Apple and Amazon lead the way in music streaming. Film studios have had little luck with Ultraviolet, an online platform for consumers to buy and collect movies. And book publishers have found it tough to get into digital distribution, although print sales have been surprisingly resilient.
Other TV companies must now decide if they will follow Disney and go direct to the consumer.
That could theoretically lead to a great “unbundling”. The consumer would no longer subscribe to a “bundle” of channels and programmes from one provider and could instead sign up to lots of rivals.
This is already happening to an extent. Netflix subscribers are more likely to have pay-TV such as Sky. They might subscribe to Spotify too.
But, taken to its logical conclusion, a great unbundling would be madness. Consumers like simplicity and lots of different accounts and direct debits would mean inconvenience.
Recent online history also shows that only a very small number of players with huge scale tend to dominate in any sector. That must be a worry for the BBC, ITV and Channel 4 which look pretty small globally.
The great streaming wars are already leading to consolidation. AT&T is merging with Time Warner and 21st Century Fox wants to buy Sky. Netflix is taking on more debt to fund its expansion.
As the stakes get higher, some companies will not be able to afford to stay in the game.
Gideon Spanier is head of media at Campaign
