Streaming won’t kill TV, but it’s going to make media buying harder
The new range of video streaming services will not kill TV, but will make it harder still for advertisers to reach mass audiences argues Paul Brooks.
In a world where everything changes, nothing changes! I remember a presentation back in 1998 with the opening slide posing the inflammatory statement “The death of Television.”
I cannot recall how many times I have been asked or presented that question in the last 17 years, but what I can recall is only last week I was asked it again by a ‘media expert’.
Let’s be clear: the likes of Netflix, Presto, Quickflix and Stan will not kill television, the same way that Spotify, Rdio and Pandora have not killed Radio. If anything, they will pose the biggest threat to video and DVD stores.
What they will do is fundamentally change the shape of the media landscape in a way that Australia has not experienced before. They will ensure that television and other publishers of content future proof and evolve their businesses – and quickly. It will be more evolution and fast paced change rather than the death of a media channel. The subscription video on demand channels will have a profound impact on the Australian marketplace, the extent to which will be a little clearer in six months’ time.
This is already a watershed year, it is now down to the Australian consumer to decide how far reaching the impact on the advertising and media industry these newcomers will have. If the content is right and the price is right, then consumers will like it – and ultimately advertisers will like it.
The battle begins
Australia Day 2015 marked the formal commencement of a battle for eyeballs and revenue streams with the launch of Stan – the joint venture between Fairfax Media and Nine Entertainment. By the end of March there will be four (localised) major streaming services available to the 23.7 million Australians with Netflix the last to join the war. We are already serial streamers, watching nearly 10 hours of video (desktop, phone and tablet) each month and this rises to 24.5 hours amongst 18-24 year olds.
What does this mean for consumers?
Choice, choice and more choice. This will ultimately drive greater competition in the already fragmented Australian media landscape. It should also mean less illegal downloading as great content becomes more accessible and at a reasonable price.
We have truly arrived at the age of what you want, when you want and how you want. In the US, that there is a 40 per cent overlap between streaming services, meaning many consumers are accessing a combination of two services to get their preferred content. We also know it will be the hero content such as Game of Thrones, House of Cards or Better Call Saul that will drive adoption and determine which one consumers sign up with.
What does this mean for advertisers?
There will be lots of eyeballs reading and observing how many eyeballs the streaming services will deliver. In the end it will come down to the economics; Netflix in the US, has so far maintained an ad-free subscription based model. That said, Australia does not have the luxury of a 317 million population to drive subscription revenue. Although currently none of the current services supports a commercial model, I expect this to change as the market learns and matures.
So what challenges does this pose?
Accelerated and scalable fragmentation will place mass reach under even more pressure. Once the services move from a subscription to advertising model (or hybrid) it will probably create a new trading model and currency, which the market will have to adapt to. Whilst it definitely won’t kill television, SVOD will have a huge impact on viewing which will ultimately put pressure on rates in the annual television negotiations. And ultimately, SVOD will create debate around measurement, posing questions around the value of the ‘streamer’ and the device content is viewed on.
Who will win the streaming war?
I
doubt that the Australian market can support three or more players and won’t be surprised to see some form of consolidation. The likely scenario is Netflix, a consolidation major player then probably a third major player which may or may not exist in its current form.
The revolution has begun and this certainly will not mark the death of television. This is not about being first; this is about the long game and getting the consumer experience right. Greater commercial success will then I am sure, follow.
Now…what to watch tonight?
- Paul Brooks is national head of investment & partnerships at Carat Australia
Another question worth raising is whether SVOD will facilitate “boutique” content providers who exist to fill audience niches like a World Movies service or someone who provides highbrow content? This also includes whether such providers would rely on advertising or purely subscription.
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Paul, what about the problem of people recording shows and zapping through ads, not to mention killing the goose that laid the golden egg ie: Reality shows that encourage people to jump onto social media during the ad break?
Surely the traditional 4 or 5 minute ad break as we know it, is on it’s last legs?
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You make some great points here Paul.
What’s interesting is that even if they don’t move to ad-funded models these services are likely to impact the violume and value of existing media from an advertising point of view. The simple fact is that more time is likely to be spent viewing content without ads, in many ways pushing up the value of those services that can deliver advertisers mass reach (or close to it) against brand safe content.
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I disagree with Paul on Australia not been able to support three or more players.
We’ve had three commercial networks for how long now in Australia not to mention the ABC and SBS, and besides I think a lot of people will end up taking out more than one subscription.
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Interesting conversation thread. I have just founded a tech-start-up in the Film, TV & Digital Media space called ‘Pitch Point’ which is currently in development. I’m gaining traction fast as it will allow content creators to effectively ‘pitch’ their work direct to the Industry. I’d love to get some feedback from anyone interested in hearing more!
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Most people (sample size 1) who record shows only zap through the first ad break, they then just view they show as it if was on tv…until they remember that they can fast forward the ads.
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I for one am excited about the idea of premium programmatic for SVOD aka PPSVOD
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@ David Henselin: The economics of FTA TV and SVOD are very different. Content and infrastructure costs for both are enormous. But at $10/month per subscriber the SVOD players are going to have to sign up (and keep) literally millions of customers. As with pretty much everything digital, volume and scale are critical to success. With a total population of 22m, Australia just doesn’t have the sort of scale to keep multiple SVOD players in business.
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@ David Henselin: The economics of FTA TV and SVOD are very different. Content and infrastructure costs for both are enormous. But at $10/month per subscriber the SVOD players are going to have to sign up (and keep) literally millions of customers. As with pretty much everything digital, volume and scale are critical to success. With a total population of 22m, Australia just doesn’t have the sort of scale to keep multiple SVOD players in business.
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‘I remember a presentation back in 1998 with the opening slide posing the inflammatory statement “The death of Television.”’
and it happened…
… these walking dead networks have nothing on their ancestors, but still trade on the mystique of a time when they were dominant.
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Hollywood isn’t likely to give up its current business model without a fight. Selling to a few streaming services rather than hundreds of mom and pop video stores that have to pay whatever price they are offered doesn’t sound all that attractive to film investors.
As for internet TV, where is the business model ? Cable has had minimal impact on FTA and it gets much more subscription revenue and is a virtual monopoly. Giving stuff away for free is not a business.
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