The State of Media & Entertainment Video 2015
Hedging their bets against such a future, major companies snapped up MCNs (multichannel networks) in 2014. AT&T and the Chernin Group bought a controlling interest in Fullscreen, Disney acquired Maker Studios, and AwesomenessTV (which had been acquired by DreamWorks) acquired Big Frame. That led to new ventures, with online personalities expanding into movie and merchandizing projects. It seems that YouTube is a talent pool for bigger studios to tap into. That probably won’t change in 2015.
Finally, 2014 ended with a bold streaming entertainment experiment, although not one that anyone had planned. Sony Pictures was forced to pull its Kim Jong-un assassination comedy The Interview from theaters in the face of terrorist threats, but then reversed itself and released the movie in 300 independent theaters and online. Debuting on Christmas Day, the movie took in more than $15 million online in its first 4 days. Standing up to a dictator was clearly good businesses, and viewing the movie became a patriotic gesture. But will The Interview’s success lead to more mainstream day-and-date online movie releases in 2015?
2014 ended with a bold streaming experiment, though not one that anyone had planned. Sony Pictures’ The Interview took in $15 million online in its first 4 days after it was released on the same day it hit theaters.
What to Expect in Media and Entertainment in 2015
Streaming Media needed a little help gazing into the crystal ball and predicting what will happen in media and entertainment in 2015, so we called on two of the industry’s best analysts: James McQuivey, vice president and principal analyst at Forrester Research, and Greg Ireland, research manager at IDC.
The big topic as we move into 2015 is 4K video, so let’s start there.
Streaming has a lock on 4K video, for the time being, Ireland notes. While the high bandwidth requirements might look like a deterrent, he doesn’t see it that way. The power users who will want to be first in line for 4K already have strong bandwidth to the home. Still, don’t expect too much from 4K this year.
“I see 2015 as another transition year where more equipment will be purchased by consumers,” Ireland says. “More content will ramp up. Streaming services will lead the way in terms of distribution. The ecosystem as a whole I think will wrestle with transitioning all the way from production through distribution and monetization and carriage, trying to figure out is there a distinct business model associated with 4K or is this just something that consumers are eventually going to expect, and better to start this transition as soon as possible than be caught behind.”
The push to 4K was never driven by consumer demand, McQuivey points out. Viewers put a premium on access, he notes, and want to get the content of their choice on the screen of their choice. If the content isn’t 4K, or even HD, that’s not a problem. So whatever happens with 4K in 2015 won’t happen because viewers are clamoring for it.
Where we really need a crystal ball is for those over-the-top (OTT) streaming bundles that will soon crop up. In addition to Sling TV, Sony will offer an OTT-only bundle in 2015. Will they kill cable? Spur cord cutting? Or even be cheaper than existing pay TV options?
Content is crucial to viewers, McQuivey believes, and content is where he sees these services failing. “We won’t see it succeed in 2015,” McQuivey says. “The smattering of content is going to make it so that these online MVNOs or MVPDs—pick whichever slightly inappropriate term you want to use—every single one of them that will arise will be hampered by lack of access to really great content. People will look at it and say, ‘Well I get these 30 channels but not these.’”
On the other hand, Ireland sees price as being the sticking point. While the Sony bundle might have all the channels people want, it also has to be priced competitively to be an attractive option. If it’s missing key channels or costs too much, it won’t find many takers. Dish’s lower-priced option might have a better chance at success.
“I think the skinnier services—such as what we’ve heard about from Dish—have a much better opportunity in the near term in that they’ll be lower priced, targeting specifically folks who are already not pay TV subscribers that may be itching to get traditional programming that’s associated with pay TV distribution that typically wouldn’t be available over-the-top,” Ireland says.
The number of U.S. households that aren’t pay TV subscribers is growing by more than 1.5 million each year, Ireland adds. That’s an incentive to broadcasters to create their own OTT offerings, such as HBO and CBS are doing. While they have to be careful not to disrupt their traditional distribution channels—and the advertising revenues that come with them—they want to reach those cord-cutter or cord-never households.
“I think all programmers should be and will be considering this strategy,” Ireland says. “As we head into 2015, I wouldn’t call it a tipping point, but we’re at this interesting place in the market.”
Mobile viewing grew at a fast rate in 2014, and that will certainly continue. But as it does we’re all going to run into an issue that doesn’t yet have a solution: data caps. Solving that will be a prime challenge for 2015.
“I think many in this industry view mobile consumption as a big game changer,” McQuivey says. “It can increase the amount of time we’re engaged with video content. It can increase the number of places in which we can be engaged with video content, but there needs to be a solution then to that connectivity piece, perhaps increased deployment of Wi-Fi on the part of our broadband service providers.”
The biggest player in streaming entertainment is, of course, Netflix. It picked up several international markets in 2014, and McQuivey doesn’t see it getting any serious competition in 2015. While he praises Netflix’s rollout strategy, he thinks that the cost of creating premium original content will eventually bring Netflix down. While Netflix is currently able to cherry-pick the best-produced content for its originals, he says, eventually those costs will mount, Netflix will create lower-budget content, and quality will suffer.
“2015 is not the year that Netflix has to pay any of these pipers, but after 2015 these mounting costs will start to feel very, very heavy and I think create another opportunity for Netflix to be an acquisition target, which it hasn’t been for a while because of its high stock for the last several years,” McQuivey says. “Beyond 2015, the economics of being Netflix will bring the stock price down and start to make it the acquisition target that many people have expected all along it would become.”
Finally, what will happen with TV Everywhere in 2015? Due to complications in getting rights, and getting subscribers to authenticate their connections, TVE has been a slow starter. Will 2015 be its year?
McQuivey believes viewers will see a shift in TVE in the near future. At the moment, cable or satellite companies try to get subscribers to use their apps to access TVE content. Soon, the individual broadcasters will try to get people using their apps instead. That way, they can collect valuable viewing data.
“They need that data,” McQuivey says. “They need to start having a direct relationship with the customer. They’re going to start pushing viewers to their own apps, recognizing that that’s a kind of audience fragmentation and it will be hard to do for many of those brands. If they are able to get you to log into their apps so they can see your data, it will be tremendously valuable for them in making decisions going forward.”
Going forward is what this is all about. Check back next year to see if real life meets or—hopefully—exceeds our analysts’ expectations.
[This article appears in the 2015 Streaming Media Industry Sourcebook.]
Viewers opened their wallets to skinny bundles and SVOD services last year, and there's more where that came from.
Now that the skinny bundle is finally here, what's next? Look for more bundles, more niche OTT offerings, and lots more VR in the year ahead (but—sadly—no a la carte plans).
All eyes are on Netflix, but it's facing more competition than ever. The OTT space is booming as new niche offerings appear on a weekly basis.
Broadcast is moving to an IP-first, software-defined video infrastructure, and in the process reducing costs and creating new editorial opportunities.