Entertainment is ultimately an attentive business, and the competition for attention has never been fiercer with new entrants from tech firms and non-media brands jumping into content production. Apple unveiled its star-studded content slate for its upcoming TV+ streaming service in March; it is also planning to release 6 Oscar-worthy movies each year. Walmart is reportedly developing original content for its upcoming streaming service Vudu-branded. AT&T realized its original 3-tiered plan for the upcoming WarnerMedia streaming service may not be the best idea and decided to switch to a simpler bundle that will include HBO and Warner Bros. movies and TV. Then there’s Quibi, a first-ever mobile content venture betting on short-form video content from top Hollywood creators. The company reported on Wednesday that it had already sold $100 million in an upfront ad inventory with six advertisers ahead of its April 2020 debut.
Of course, the video content incumbents are not standing still either. Google and Amazon ended their rival streaming video tension last month by getting YouTube back on Fire TV while allowing Prime Video to work with Chromecast and Android TV. Netflix is still growing at an unstoppable pace as it is close to 150 million subscribers worldwide. Hulu is ready to significantly increase its investment in original programming now that it is fully owned by Disney. Amazon rebranded its free ad-supported streaming service Freedive earlier this week to IMDb TV, first launched in January, and promised to triple its content selection with thousands of new titles in the coming months.
Taken together, it is clear that the content industry is going through a seismic change, and with change there are plenty of opportunities for brands to try new things and connect with audiences. To identify the key trends and drivers of value, we should first examine the changing landscape of the industry.
The Middle Death?
There is no denying that entertainment production is bifurcating between multi-million blockbusters and niche indians, resulting in many articles complaining about the disappearance of mid-budget movies that used to make up the bulk of box office revenue. While it’s true that there’s a “death-of – the-middle” effect happening in the film industry, looking closer at the whole entertainment content landscape, you’ll see that the death of mid-budget movies has been greatly exaggerated— they’re simply moving from movie theaters to home entertainment in response to the shifting market economy.
On the one hand, the U.S. entertainment industry is consolidating rapidly. Disney has completed its acquisition of the 21st Century Fox assets and now owns about 40% of the U.S. box office. Such huge market share, bolstered by popular IPs such as Marvel, Star Wars, and Pixar cartoons, gives Disney not only a great foundation to launch its own Disney+ streaming service, but also unprecedented market power to negotiate with the theater chains and other parts of the value chain. Therefore, it is not difficult to imagine that tickets for a Disney movie on an opening weekend would soon be tied into your Disney+ subscription, or that Disney could work with theaters to launch its own version of Disney+-linked MoviePass.
On the other hand, indie movies are seeing a revival in recent years thanks to the emergence of new arthouse studios like A24 and STX as well as genre flick powerhouses like Blumhouse and Monkeypaw. Although most of the box office is dominated by blockbusters, these smaller studios are able to carve out a niche audience with their edgy, unconventional offerings and occasionally drive out – of-the-box cultural conversation with Oscar-winning titles like Moonlight or breakout hits like Get Out.
Squeezed from both sides, it may seem that mid-budget movies are disappearing. In reality, however, these films are still being made in similar quantities by the studios, but their budgets are being slashed down to near-indie levels as major studios become increasingly risk-averse, preferring to put their budgets into proven franchises and blockbusters over the kind of original films that cater to adult audiences. With more and more box office revenue coming from overseas markets, studios naturally respond by prioritizing content that travels well internationally, and nothing travels better than visual spectacles.
Source: StephenFollows In contrast, streaming companies like Netflix can operate globally by default, or at least have the option to expand internationally easily, so their niche content has a better chance of finding a large audience on a global scale, thus justifying the investment. As a subscription service, it is much more important for Netflix to have something for everyone, rather than a few things for most people. That’s why Netflix plans to “aggressively ramp up” local productions on key markets, while Hollywood continues to double on blockbusters that contribute to a homogenizing global culture. In a word, their different business models dictate the type of content they choose to focus on.
As a result, the kind of serious mid-budget dramas that usually double as star vehicles migrate to streaming services, either as a film or as a limited series. HBO’s Big Little Lies is a clear recent example, counting two beloved Oscar winners among its main cast before adding Meryl Streep for season 2. Other recent examples featuring A-list movie stars include HBO’s Sharp Objects and The Young Pope, Amazon’s Homecoming, and Netflix’s Maniac. Add original star-studded shows from the upcoming Apple TV+, and TV looks to rival movies in terms of star power and content quality. This also applies to behind – the-camera talents, with Steven Spielberg developing shows for Apple and J.J. Abrams reportedly chose WarnerMedia over Apple.
Catch your favorite Oscar-winning movie stars on streaming services Part of this is because it is becoming increasingly difficult to stand out in the over-saturated TV space. Consumers today are often overwhelmed by the explosion in content when choosing content to watch. Therefore, streaming services are eagerly raising their content budget to take over the kind of prestigious dramas that are being squeezed out by the movie market and count on name recognition to bring in the eyeballs. This is not just happening to the content of TV either. On the film side, Netflix is gunning for the Oscar for Best Picture that Roma missed out on with Martin Scorsese’s The Irishman, while Amazon Studios is preparing to push The Goldfinch (adapted from the eponymous Pulitzer-winning bestseller) and The Aeronauts (directed by Tom Harper and stars two Oscar winners) later this fall. Typically, these movies would only get a limited theatrical release to qualify for awards, meaning that the majority of the audience will likely watch these hopeful Oscars on a smaller screen.
In conclusion, it is not so much middle death, but rather a middle migration that moves with the behavior of the audience. If your movie isn’t an exciting event that makes it worth going to the theater and buying an increasingly expensive ticket (especially when compared to a monthly subscription) to see with a crowd, then why should a consumer forget the comfort of their living rooms to see it? Sooner or later, most of these movies will end up on a streaming service they already subscribe to anyway. For example, Hulu and FX are teaming up to take over streaming and linear rights for Lionsgate theatrical films starting in 2020, and we expect to see more deals like this between streaming services and production companies. Most audiences for mid-budget movies have changed their consumption habits, which is why the production and distribution of those movies are also changing.
Given the technological disruptions that push up the entertainment industry’s dynamics, there is no doubt that opportunities also come with challenges. It is up to entertainment brands to adapt to the changing times and capitalize on some of the emerging entertainment space value drivers.
Super Bundles As subscription fatigue sets in, more and more consumers will question the value of adding new streaming subscriptions to their monthly bills. Netflix wants to be “all of TV” in the future, and thanks to their head start and clever use of data, they can just pull that off. As for other media companies that are late in launching their own OTT services, such as Viacom and NBCU, chances are they will have to rely on ad-supported models to compete with paid subscriptions, not to mention all other smaller players such as IFC or AMC. Because of their limited library sizes and lack of popular IP, stand-alone services from these late-comers are unlikely to compete with the likes of Netflix and Disney+ for top consumer consideration — surveys have shown that most people are willing to subscribe to 3 to 5 paid streaming services. Therefore, some sort of bundling of these smaller streaming services seems inevitable.
But the real wild cards here are the three companies that don’t really need to make money directly from content: Disney, Amazon, and Apple. Video content is one piece of their larger ecosystem for these three massively successful corporations. In other words, content services serve as an important draw that can bring consumers into the fold, but the main profits come from elsewhere— for Disney, it’s theme park tickets and merchandise sales; for Amazon, it’s Prime subscription and the money you’ve spent on Amazon.com; for Apple, it’s their hardware products. As we detailed in our piece on super bundles, these three companies have the assets and ability to build their own bundles that go beyond simply streaming media services to include other types of subscriptions as well (and in Amazon’s case they have already started). Notably, Walmart is in a similar boat, but its digital ecosystem is nowhere near as strong as these three, so it may have to partner with other streaming services if it were to build its own super bundle.
An interesting side effect of the rise of super bundles is that your choice of entertainment content may be increasingly influenced by the smart home platform you choose. Whether you’re living in an Apple household, an Amazon household, or a Google household, you’ll soon start influencing what kind of content streaming device and services you choose, because everything is likely to come in a nice super bundle. Netflix is now the baseline for content streaming services for their massive head start to accumulate users and brand building, while Disney+ is likely to catch up quickly once it launches thanks to Disney’s massively popular IP. (Hulu could possibly get a big boost if Disney decides to bundle it into their subscription at a discount.) That leaves about one or two subscriptions for the rest of the content owners to fight over, and tech companies already controlling your home platform will like to be given favorite considerations. And that’s not even taking in-car streaming services right around the corner with the arrival of self-driving cars. In other words, the tech platforms we choose for our home will increasingly control our access to entertainment content at home and beyond with super bundles.
Branded Video Content
In response to the shift in audience attention to ad-free streaming services, many brands are beginning to experiment with high-quality content as a way to get past the paywall to reach the audience with a growing tendency to shun traditional ads. Airbnb’s branded travel magazine is included in Apple’s recently launched News+ subscription services, and the company is also reportedly setting up a content studio to produce a travel reality show that will form part of the Apple TV+ lineup. Similarly, Behr’s new campaign will pay $10 K for a “Color Explorer” to search across the U.S. and Canada for inspiration to create and name new paint colors, with the journey being documented and assembled into a branded reality series. 5B, a documentary about nurses who worked in San Francisco’s first AIDS ward, recently came out for good reviews. What you might not know is that this documentary is commissioned by Johnson & Johnson and partly created by UM Studio, our sibling agency UM Worldwide’s content studio.
Brands are exploring other forms of content to develop branded content as well. D2C shoe brand Allbirds is hosting a SiriusXM radio show featuring sustainable brands to double on one of its core brand values. Trader Joe’s recently launched a YouTube channel to showcase its branded content, most of which are recipes and videos that add to the customer experience it offers as a grocery store. On the wackier side, this year Skittles used its Superbowl ad budget to create a one-night Broadway musical with mocks of consumerism and brand sponsorships firmly in cheek with its tongue. Obviously, the outlandish idea of Skittles is closer to a PR stunt than a legitimate investment in content, aiming to cash in on the meme culture that drives much of our conversation about entertainment content today.
Meme Culture & Crowdsourced Creativity The way we talk about entertainment is largely centered around memes, the digital-native mode of communication on social networks. It could create a bottom-up effect pushing an obscure indie into mainstream consciousness. For example, TikTok memes made “Old Town Road,” a joke-y country-rap hybrid made by an unknown, into the biggest hit song so far in 2019.
Another recent meme-driven success is Netflix’s Birdbox, a mid-budget horror thriller starring Sandra Bullock released at the end of last year over the holiday season. Because of the prevalence of memes, over 45 million Netflix viewers watched Birdbox during its first week of release, which would give it a $413.4 million first week box office opening (going to a reported U.S. average ticket price of $9.18 in 2018). Befuddled by the sudden volume of Birdbox memes, some suspected that Netflix could produce them on its own as a marketing tactic when, in reality, the situation is probably more organic but complicated with multiple contributing factors.
This points to a new reality in entertainment consumption where a spontaneous kind of crowdsourced creativity is taking over and marketing for content owners. Certainly, some content is more meme-worthy than others, but the Internet hive mind tends to work in mysterious, unpredictable ways, so even something completely random might just catch on and find an audience. The fact that most consumers access content through subscriptions also eliminates the risk of choosing a bad piece of content, and the need to keep up with your peers and be “in the know” is usually more than enough for memes to drive people to content.
Smart entertainment brands should therefore learn how to lean into meme culture and encourage fans to share their remixed creations with the world, but not desperately enough to produce the memes themselves. Furthermore, as many people retreat from the increasingly toxic open social platforms into private social channels, some of the dynamics in how we monitor the spread of memes will inevitably change, but it could also reinforce the impact of meme culture on driving entertainment consumption.
Dynamic Formats As distribution channels continue to shift online, differences between different formats (movies, TV shows, mini-series, UGC / fan-made videos, and even video games) are beginning to blur, leading to dynamic experimentation in production, distribution, marketing and new consumer behaviors.
Film franchises are increasingly functioning like big-budget TV shows, with cliffhangers, cinematic universes and crossovers to create must-see events that attract movie-goers back to the theaters from time to time. Look no further than the end of Avengers for a recent example: Infinity War and End Game’s record-breaking opening weekend, or to a lesser extent, the success of the John Wick series. On the flip side, thanks to streaming services, TV series are becoming shorter, shrinking from the usual 22 episodes per season typical of network TVs to only eight to ten episodes. Some comedies on Netflix last barely 4 hours a season, making them perfect for binging and conceptually closer to a long movie, as far as the viewing experience goes. After all, if it’s all just video content consumed through streaming, what difference does it make if it’s a movie or a TV series?
Similarly, due to the introduction of interactive elements into video content, the distinction between entertainment video content and video games is also breaking down. Netflix’s Black Mirror: Bandersnatch and You vs. Wild series prove that interactive formats can work in both scripted content and reality shows. And the fad that Live HQ Quiz stirred up last year shows that there is an audience hungry for the kind of interactive live content optimized for mobile consumption. In addition, the video game industry is also looking at OTT streaming and subscriptions to lower the entry point and expand its audience. For example, Google’s upcoming Stadia game streaming service will integrate with YouTube and allow subscribers to launch games directly from a game demo or game influencer video they’ve just watched, further blending the two formats.
The lossof co-viewing is one side effect of audiences shifting to digital channels and nonlinear TV. There are few programs outside sports and other live events that can still command people to come together to watch them at the same time. As we explored in a recent piece, the end of Game of Thrones may just mark the end of the TV monoculture with which we grew up. With most people now having access to multiple streaming services and following the personalized content feeds to decide what to watch, there’s no wonder co-viewing going out of fashion. For the most part, live events have yet to enter the streaming age, as rights holders cling to traditional broadcasters. But as the standalone service of ESPN starts to pick up steam, that could change soon too.
It’s not just that we’re too happy to binge for us to watch something together. Other entertainment options such as video games, esports, and short-form videos on social media such as TikTok are increasingly competing for the same attention. Fortnite owner Epic Games recently acquired Houseparty teen group video chat company, presumably to make Fortnite more social. Considering the recent success with the live DJ Marshmello concert that attracted over 10 million concurrent players worldwide, maybe something like Fortnite could be the future of digital co-viewing? Facebook wanted to recreateTV co-viewing via VR spaces, while many others tried to recreate the co-viewing experience for the OTT era, and none caught on substantially. Maybe we’ve moved beyond the phrase of co-viewing as a society, content with watching things by ourselves at our own pace and schedule.
Entertainment is an intrinsic part of culture that is becoming increasingly global and digital-driven, so the content industry is naturally changing with culture as well. WIth audience shifting from traditional media channels to online channels, it’s not just distribution that’s up for grabs— formats and business models are also morphing and evolving accordingly. This is an exciting time for the entertainment industry, and the winners may look very different from what we have seen before. The future of entertainment content is diverse, dynamic, cross-platform, and immersive, with plenty of opportunity for brands to explore and participate.
This concludes our thoughts on the key trends that we believe will shape the entertainment industry’s future. If you want to learn more about them and how they apply to your business, please contact Josh Mallalieu, VP of Client Services, (firstname.lastname@example.org) and ask for the latest disruption report we have developed on this topic.