Subscriptions Rise, But Advertising Falls! Surreal
Abhishek Pandey, Senior Consultant for Business and Digital Transformation, writes on how today’s exceptional situation calls for fresh perspectives and creative solutions on the part of the Media and Entertainment Industry.
THE PANDEMIC BRINGS A WINDFALL
Few economic sectors have fared well during the Covid19 crisis. Interestingly, the media and broadcasting are among them. The need for information has never been more pronounced and the time available so critical. So has been the demand for general entertainment with individuals and families held captive inside their houses, around the world, by the great lockdown.
This pandemic has been a rare blessing for the OTT players. While social distancing forced every member of our society to make sacrifices from a physical dimension, the virtual world came in like a breath of fresh air. Where the options for entertainment are available at the flick of a switch or a shout out to Alexa, the sacrifices are not as harsh. While the segments that rely on social gatherings like films, theatres, live events, and theme parks have been affected adversely, the public adhering to the Advisory on Social Distancing has led to an increase in consumption of content on other mediums – such as television, digital streaming platforms, and gaming platforms.
Reportedly, viewership across several digital entertainment platforms in India has increased significantly. Globally online streaming has jumped over 30% as compared to the pre-Covid-19 era, Netflix added more than 15.8 million new paid subscribers during Q4, and the average viewing time went up by 1.5 hours per week. These numbers indicate a very significant impact on the media business.
While the outbreak has had a lot going for the industry, this might just be a small high before the tip breaks. With the spread of Covid-19 and various government advisories to avoid crowds, several films and television industry bodies have called for the cancellation of shooting and production activities, leading to a crunch in episodes for daily shows. This includes shoots for films, TV programs, and shows for digital formats.
Each production company is likely to lose anything between the US $ 1 to 2 million on a show depending on fixed set rent, electricity, maintenance, and employee salaries. Some fiction makers do have some bank of episodes to last for the next week or so but after that, the re-runs will start. Seen as an expenditure and not an investment, the advertisers are getting cautious about television and streaming media now. The biggest impact will be on advertising revenue for the TV industry that is likely to see a 70-80% pullback given that broadcasters will have no new content to show beyond the end of May and will subsist on re-runs.
Even though it’s a great time to grab eyeballs given that people will be home watching TV, advertiser purse strings will get tightened. Technological infrastructure has a crucial role to play in the OTT growth story. This was supposed to be the year of superfast wireless 5G.
Instead, providers are battling to keep the creaky old internet online. While in most of the developing world, cities boast robust telecom and electricity distribution infrastructure, the situation is not as rosy in smaller towns and rural villages. As recessionary forces drive migrant workers back from cities to their villages, discretionary spending will take its knocks, which may force some decline in viewership and subscriptions in the short to medium term, and dent the euphoria.
THE MISSING POT OF GOLD AT THE END OF RAINBOW
With the stopping of all sports events, the sports content business has also taken a heavy toll. If sports stadiums are forced to close their doors for the long term, they could lose their allure to broadcasters.
Consider the case of Hotstar, India’s largest streaming platform. Hotstar created a new benchmark in the industry when it recorded a total of 300 million viewers logged on to their platform for the Indian Premier League in 2019. This year, Hotstar was expected to ring money bells to the tune of ₹ 4 billion just from advertising revenues. Disruption to live sports has negatively affected many businesses built around it, such as television, live streaming, sports betting et al.
Live sporting events may resume by the second or third quarter without live crowds, Bundesliga, the German football league has already started since the 16th of May, and many other European football leagues have made announcements to restart sans spectators. The influential NBA took a major step toward getting back on the court with the league’s Board of Governors approving a 22- team format for restarting the league season in July at the Disney campus near Orlando, Fla. Would the sports competitions be as good, or as popular, without the live atmosphere that fans create? The answer is anybody’s guess.
While these developments augers well for the industry, the delay will put significant financial pressure in the short term. The IMF forecast sees the global economy contracting at a 3% annual rate this year followed by a 5.8% rebound in 2021. This translates to a deeper recession than the 2008-2009 financial crisis. This will naturally have a direct impact on the pocket of viewers which may result in a sharp decline in-stadium attendance as well as streaming subscriptions.
UNLOCKING THE PLATFORM POSSIBILITIES
The use of streaming media by consumers surfaced a divisive opinion, but that’s in the past. Gen Z is quite different in its world view. These digital natives have never experienced the pure analog world, and also got the advantage of growing up with digital technology in every aspect of their lives. Gen Z spends more time on social media than any other generation, so it’s to be expected that social media would affect them more than any other generation.
For example, a recent survey notes that 42% of Gen Z’ers believe that social media has a direct impact on how they feel about themselves, and 39% say that social media directly affects their self-esteem.
Many experts foresee that Gen Z, a highly resourceful and influential lot, will accelerate cord-cutting and push many media companies betting on linear TV into an existential crisis. Echoing these insights, says LC Singh, Founder and Vice Chairman at Nihilent, “If you’re not taking advantage of their love for self-expression, then it’s time to start.” A platform approach, today an already established business model, which uses technology to connect people, organizations, and resources in an interactive ecosystem in which amazing amounts of value can be created and exchanged, can be the vehicle to deliver on the social strategy. For media businesses, the great lockdown provides a once-in-a-lifetime pivot to take entertainment firmly into the social realm.
There is no dearth of success cases, for instance, uninterrupted.com, which positions itself as a collaborative movement creating everything from short format content to feature length films to interactive experiences; and we are looking to join athletes, brands, and creators in generating more empowerment, more storytelling and more inspiration. Started by Maverick Carter and LeBron James, Uninterrupted.com even went on to launch Nike sneaker and e-commerce store, taking the media company’s brand-building into a completely new direction.
Another interesting case is that of Wave, which operates about 130 different channels, ranging from highlights to profiles that are sport-, team-, or player-specific.
Together, by the end of 2019, they generated more than two billion views per month from its over 38 million followers. The company, wearewave.com, states its ambition as “using social media to become SportsCenter for the Gen Z audience”. Wave collects and curates its content from a global network of contributors, a mix of paid creators and athletes submitting content for their promotion. The company produces upwards of 750 pieces of content a day. “We put up a piece of content about some 14-year-old football star, and this contributor will go from having 15,000 followers to 50,000 in two days,” says Verne. “The benefit for them is visible brand building, creating awareness from a wider audience, whether it’s fans, football coaches, or brands.
LC Singh recalls his conversation a few years ago with a top executive at Pay-TV media powerhouse on changing consumer habits. “I was convinced that the future of entertainment was going to be personal but many were skeptical. As luck would have it, the Pay-TV executive found resonance, he says and we quickly agreed to experiment with the concept of building a community of talent. Today, we are headed on the path to taking entertainment into the social realm for the broadcaster Nihilent’s tumbhi.com, the underlying social platform engine, has come of age and will be a compelling proposition to any media businesses to resist.”
CHANCE FAVOURS THE PREPARED
The economic rebounds projected for 2021 paint a promising picture globally. According to the IMF, China and India, two of the fastest-growing economies will rebound at 9.2 and 7.4 percent respectively. The world output will rebound at over 5 percent and thus absorbing a significant part of 2020 negative growth. However, this drastic decline and rise will entirely change the way people consume media.
Businesses can’t leave things to chance but will have to consciously design their rebound strategy. We set out a few priorities for sectors across 4 horizons, as a broad blueprint for planning. The first horizon, ‘Survive’ is about managing the turbulence, and seeks to address the immediate challenges that Covid-19 represented to businesses, their customers, workforce, technology, and business partners. The second horizon, ‘Stabilize’, seeks to assess recent business performance and address near-term challenges and the lockdown’s economic knock-on effects. The third one, ‘Revive’ seeks to create a detailed plan to return the business to scale quickly as the Covid-19 situation evolves and its impact becomes clearer. The fourth wave, ‘Reimagine’ seeks to accelerate business growth by adapting to the new normal, by studying what a discontinuous shift looks like, seizing the opportunities through innovation.
The media broadcasting and streaming businesses will have to get back on the design board to sail through this pandemic and carve out a new strategy for the post- Covid-19 era. Taking the first-principles perspective to a business built around consumers, Minoo Dastur, CEO at Nihilent says, “We as businesses, should judiciously explore every single unmet and unarticulated need and be quick to present the consumer with a compelling alternative. While Nihilent’s approach presented above will provide reasonable guidance to companies, we set out targeted actions below.”
Review the marketing bill – OTT industry globally was a heavy spender on print and outdoor media. Lockdown has forced the marketing teams to come back and find alternate avenues to promote their content to reach a maximum number of the target audience. Analytics will play a major role in enabling and supporting these decisions.
Change the packaging – Almost all OTT platforms have a mix of local, regional, and international content that has been produced and packaged to suite its target audience. But with an evident delay in obtaining fresh content, OTT platforms will have to find a way to make existing content more appealing to a newer set of audiences which may not have been its primary target due to barriers imposed by the original language of the content. While some platforms offer subtitles as a way to bridge this gap, but there is an urgent need to relook at this strategy and move beyond subtitles. Technological advancements in the field of natural language processing will come in handy to quickly turnaround the problem into an opportunity and ensure there more for its viewers. The objective here should be to focus on maintaining if not increasing the daily and monthly active users.
Concept testing – Major OTT players have cut the budgets for some of their leading shows. Mirzapur, one of the top-grossing shows on Amazon had a significant budget cut for its second season. A similar suit was followed for a few other shows as well. While this is a desperate attempt to squeeze as much as possible to make up for other shortfalls, the approach is still reactive. OTT platforms will need to adopt a more proactive approach to save big bucks. Capabilities will have to be built around testing content before it is produced full-fledged. Not only production, but marketing efforts will also need to be thoroughly tested to ensure that messaging catches the eye before the money is spent on marketing the content.
Imagining the 5G Future – The fifth-generation network promises high throughput to peak at 20 GB for downlink and 10 GB for uplink along with and latency as low as 4 m/s. It is projected that 82% of all IP traffic on the 5G network will consist of video content (streaming and video conferencing). This efficiency will open a world of possibilities and give rise to new formats like infinite endings, infinite Ad creatives, and dynamic Ad insertions. OTT players will have to keep this paradigm shift as their key focus area to build a robust infrastructure that will enable smooth delivery of quality content and service for their customers.
We believe that there is no limit to the possibilities, other than our thinking, ambition, and vision for the future of media broadcasting and streaming. With luck, these disruptions will just be temporary.
Beyond this, the industry is in uncharted waters.
Can streaming businesses further accelerate cord-cutting by leaning on the consumer’s preference for mobile devices?
Abhishek Pandey is an expert on the millennial mindsets, with a gift for spotting early trends shaping the cultural fabric of this influential generation. He excels in scouting and leveraging digital technology tools, switching between a tinkerer and a growth hacker at will, especially as it pertains to media and entertainment.