Tag Archive: netflix

  1. The streaming wars part two: Pandemic

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    Until late 2019, Netflix was the undisputed king of the streaming sector. It had competitors, notably Amazon Prime, but its subscriber base, content catalog and accessibility were almost unrivalled. 2020 heralded the much-anticipated ‘streaming wars’, with many media companies such as Disney, NBCUniversal, ViacomCBS and AT&T releasing their own streaming services. The competition was always going to be fierce, and then coronavirus came along. The global pandemic forced billions of people indoors for weeks and months, and many turned to the streaming services – old and new – for entertainment. A lack of live sport also drove many fans into the arms of the streaming services.

    Strong Q2 performances

    The streaming platforms’ second-quarter results reflected the millions of new subscriptions, with particularly remarkable performances from Netflix and newcomer Disney+. For the big media companies, streaming performance was a bright spot in balance sheets dominated by bad news in the form of closed movie theaters, canceled sporting events and major advertisers slashing their TV budgets. But as the world slowly transitions into a post-pandemic landscape, can the streaming services maintain their success?

    Let’s start with a round-up of the major players’ performances over the last two quarters.

    Netflix

    Netflix had an incredible Q2, adding 10 million subscribers to end the first half of the year, to a total of 193 million subscribers across the world. That was on top of an unprecedented addition of 15.7 million subscribers in the first quarter of the year. However, Reed Hastings, Netflix’s co-CEO, warned that this kind of growth couldn’t last, suggesting that the pandemic had pulled subscriber growth into the first half of the year. He predicted that the platform would attract just 2.5 million new subscribers in the third quarter, a prediction which caused Netflix’s share price to plummet.

    Disney+

    Many argue that Disney+, The Walt Disney Company’s much-publicized on-demand streaming service, is the big success story of the pandemic. It is the biggest streaming launch on record, with a huge 10 million subscribers in the 24 hours following its launch, and more than 60 million subscribers by early August – four years ahead of their target of 60-90 million subscribers by 2024. This is particularly impressive given that they have yet to complete their global roll-out. Including Hulu and ESPN+, both of which it also owns, The Walt Disney Company’s streaming subscriptions now top 100 million.

    Peacock and HBO Max

    It is still early days for NBCUniversal’s Peacock, which is ad-supported, and AT&T’s HBO Max, which is the premium version of cable channel HBO. Peacock launched in the US in mid-July, and at the time of writing has attracted 10 million subscriptions – a third of its 2024 target. Meanwhile, HBO Max launched in late May and has grown the pool of HBO and HBO Max customers by 1.7 million in the first half of this year, to a total of 36.3 million subscribers. It is helping AT&T to mitigate the effects of cord-cutting, although there are signs that HBO subscribers don’t yet fully grasp what the new service offers, or how and why they should get it.

    Is brand-supported streaming the future?

    It is indubitable that the coronavirus pandemic has created extremely favourable market conditions for the streaming platforms, both new and established. But, as Reed Hastings said, it’s possible that it has simply pulled 2020’s – and possibly 2021’s – entire pool of new subscriptions into the first half of 2020. To date, the streaming companies have focused on the production of high-quality content to lure new subscriptions and maintain revenue. But content by itself isn’t enough – Quibi’s unsuccessful launch is testament to that – and, what’s more, supply far outstrips demand: consumers in the US subscribe to an average of three SVOD services. The streamers will need to find new ways to deliver increasing value to shareholders.

    There has been some concern amongst advertisers about the growth of ad-free streaming, but many industry players now agree that brand support seems almost inevitable. With ad dollars always wanting to follow eyeballs, there are potentially billions of ad dollars up for grabs. What’s more, the consumer data that the streamers own will be of huge value to advertisers, allowing the likes of Netflix and Disney+ to compete with that infamous tech duopoly, Facebook and Google. Horizon Media CEO Bill Koenigsberg told AdAge earlier this year, ‘if they [the streaming companies] go that way, if they will be able to allow us to unveil the walled gardens and provide data back, then that’s an enormous competitor to the Facebooks and Googles of the world in terms of the audiences these platforms are going to attract and our ability to engage with them’.

    The big streaming platforms have huge tech capabilities which will allow them to create new ad models, formats and partnerships to drive revenue. However, they will need to prioritise consumer experience – part of the appeal of the streaming platforms is the low ad load, or total lack thereof, particularly for US viewers who often sit through more than 15 minutes of ads per hour on primetime TV. Brand partnerships will need to enhance rather than disrupt the consumer’s experience.

    A key moment in streaming

    While the streaming sector has been one of the few winners of 2020, it is far from certain that this success will continue. As the world continues to emerge from lockdown, the economic ramifications of the pandemic are becoming clear. Many countries, including the US, are in recession and unemployment is rising dramatically. Consumers will be looking for ways to make savings and non-essentials such as streaming subscriptions may well be among the first thing to go, particularly as restrictions on other parts of life ease. Netflix, Disney+ and their competitors will need to work hard to retain consumers and maintain their profit.

    Image: Metamorworks / Shutterstock

  2. What does TV fragmentation mean for US marketers?

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    ECI Media Management’s US Business Director, Victoria Potter, looks at the changing TV landscape and explores the ramifications.

    This week, eMarketer released an article stating that this year, there will be about a 3% decline in TV ad spend from 2018, and that trend shows no signs of slowing. By 2022, eMarketer is predicting that TV ad spend will drop below 25% of total us ad spending. Of particular interest is that, the typical “political year” bump that has been prevalent in previous years will not be as great in 2020, only accounting for about a 1% increase, followed by steady 1% decreases in the following years. Contributing to this decline is steady growth in cord cutters and ratings decline.

    Nielsen is showing steadily declining ratings over the past few years. In the desirable Prime daypart, C3 ratings have seen a 33% decrease from 2016 to present.  While ratings are declining, networks continue to show increases in pricing – with Nielsen reporting a 7% increase in spend during the same period. And, coming out of the latest Upfront, networks were seeing low-double digit increases, despite lower audiences.

    What does this mean for marketers? Linear TV still provides efficient reach build. However, the days of one-size-fits-all tentpole events are over, and not coming back. It is important to adjust the media mix to account for audience erosion and fragmentation.

    Connected TV increases

    Meanwhile, as we see Linear TV spend decreasing, another eMarketer report out this week predicts Connected TV spend will reach around $7 billion, a 38% increase vs. 2018, and projected spend of over $14 billion by 2023. Connected TV is defined as TVs, smart TVs and TVs hooked up to the internet via a set top box, game console or similar device.

    A reminder: the day is still 24 hours long

    The amount of new content available is staggering: Hollywood Reporter stated in June that 2019 was on track to top the 2018 year-long high of 495 scripted series. To add to the proliferation of streaming services already available (Netflix, Amazon, Hulu), this month sees the launch of Amazon TV Plus and Disney+, the latest, but not last, entries into the streaming world, with PeacockTV (Comcast/NBCU), and WarnerMedia (HBOMax) to follow next year. However, the day is still only 24 hours long, meaning that all the new content is vying for the same attention, creating more fragmentation. It leaves many asking – what will the new TV ecosystem look like? Subscription services are currently ad-free, but there’s a big question on how much of an appetite consumers have to create their own “bundles” with so many standalone options. While cord-cutting was once thought of as a money saver, it is now a trade-off between the channels in the cable bundle vs. a personally curated streaming bundle.

    How do we measure it all?

    With the myriad options available to advertisers and consumers alike, the question becomes – how do I evaluate my reach across platforms? Many companies are proposing their solutions, most recently Roku and Innovid, which launched a combined solution currently being tested by several Innovid and Roku clients.

    It can be difficult to navigate the changing video landscape – to determine the right balance between scale and targetability. Here is some advice from ECI Media Management’s experts:

    • Establish clear Reach and Frequency goals, and put in place a standard for measurement
    • Be clear about target(s) and ensure your agency is prioritizing goals when putting together plans; keep fragmentation in mind and make sure your media mix is broad enough to adequately reach the audience, building reach and not just frequency.
    • Ensure you account for transparency within your agency agreement, as more media dollars are allocated to principal agreements.
      • Most of these principal-based buying situations are done as a service to clients, offering flexibility. However, a lack of transparency requires a great deal of trust, as clients do not fully know where, or even when, their ads are running.

    Image: Shutterstock

  3. Is Netflix ready for the launch of rival platforms?

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    Make or break for Netflix

    A couple of weeks ago, Bank of America Merrill Lynch told clients that Netflix’s Q3 figures, out later today, would be ‘make or break’ for the streaming platform, and would indicate whether it would be able to effectively compete with new rival platforms from the likes of Disney and Apple. It’s been a difficult few months for Netflix – its share value has plummeted by nearly 30% in the last three months, and subscriber levels fell short of the company’s own guidance in Q2. Whether those subscriber levels have recovered will be of particular interest in the Q3 results – and investors will be looking for signals that they can retain that recovery as competitors launch their streaming platforms.

    Who are the competition?

    So what does the competition look like for Netflix? Apple and Disney are launching their streaming services next month: Apple TV+ on 1st November, and Disney Plus on 12th November in the US, Canada and the Netherlands, with other markets in the months afterwards. This makes strategic sense, particularly for Disney, as it can piggyback on the marketing for its big-budget holiday-season films, and Netflix has shown over the last few years that it gets its biggest viewership in the last couple of months of the year. WarnerMedia’s HBO Max and NBCUniversal’s streaming service will be launching in early 2020. So Netflix’s battle to keep its subscribers loyal – and grow its customer base – starts now. Convergence Research Group, which tracks the streaming industry, predicts that its 47% share of the streaming market in 2018 will decrease to 34% by 2022, as reported in an LA Times article.

    Original content will be increasingly important

    This decrease will in part be down to the fact that Netflix will be losing some of its most watched shows to its competitors: ‘Friends’, for example, will go to WarnerMedia’s streaming service in early 2020, while ‘The Office’ will be shown by NBCUniversal from January 2021. With adults spending only around 30% of the time they spend with Netflix watching Netflix Original content, it looks like this could have an effect on Netflix’s subscriber numbers.

    However, Bank of America Merrill Lynch told investors that he believes Netflix will have time to ramp up production of original content while its rivals work on building their subscriber bases. This will means that Netflix will need to continue its huge investment into original content – this year it is estimated to have spent around $16 billion dollars, and Pivotal Research Group estimates that this will have climbed to a giant $35 billion by 2025. This needs to be funded from somewhere and Netflix’s capacity to raise subscription fees – its fallback option to date – will be stymied by increased competition. Netflix could also consider increasing its debt, introducing ads, investing in innovation (such as the ‘Bandersnatch’ episode of ‘Black Mirror’, where viewers could choose what the main character did next), or harnessing the vast wealth of data they have on what people like to watch, and where.

    A core part of the streaming bundle?

    Netflix’s choppy year has made investors a little nervous, which is why so much rests on the figures that it is releasing today. But many think that things will be ok. Mark Mahaney, lead internet analyst at RBC Capital Markets, for example, told CNBC that most people will want to use more than one streaming service, and it’s likely that that will mean Netflix plus another – Netflix will be a core part of the bundle. He believes that Netflix has the scale advantage and better brand name, content, global distribution and partnerships than its competitors, which bodes well for the future. Time will tell!

    What does this mean for advertisers?

    TV is still a crucial medium for advertisers, but with viewers having more and more ad-free options from the new streaming platforms, it will become increasingly difficult to reach their hearts and minds. What’s more, they are likely to be less forgiving of higher ad loads on the ad-funded free-to-view channels. This means that the most effective media channels will likely become more expensive, and the wise ones may well have fewer, higher impact ad spots for which advertisers will pay a premium. Furthermore, the growth of addressable TV will allow for more targeted and therefore more engaging ads, and lower levels of rejection by the consumer.

    Image: Shutterstock