The Future of Entertainment Content
Examining the current movie and TV content landscape and identifying key future value drivers
Entertainment is ultimately an attention business, and the competition for attention has never been fiercer with new entrants from tech firms and non-media brands jumping into content production. In March, Apple unveiled its star-studded content slate for its upcoming TV+ streaming service; it is also planning to release 6 Oscar-worthy movies every year. Walmart is reportedly developing original content for its upcoming Vudu-branded streaming service. AT&T realized its original 3-tiered plan for the upcoming WarnerMedia streaming service is perhaps not the best idea and decided to pivot to a simpler bundle that will include HBO and Warner Bros. movies and TV. Then there is Quibi, a mobile-first content venture betting on short-form video content from top Hollywood creators. On Wednesday, the company reported it has already sold $100 million in upfront ad inventory with six advertisers ahead of its April 2020 debut.
Of course, the incumbents in video content are not standing still either. Last month, Google and Amazon ended their rivalrous streaming video tension 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 nears 150 million subscribers globally. Hulu is ready to significantly ramp up its investment in original programming now that it is fully owned by Disney. Earlier this week, Amazon rebranded its free ad-supported streaming service Freedive, first launched in January, to IMDb TV and promised to it triple its content selection with thousands of new titles in the coming months.
Taken together, it is clear to see that the content industry is going through a seismic change, and with change comes a lot of opportunities for brands to try new things and connect with audiences. In order to identify the key trends and value drivers, we should first examine the shifting industry landscape.
Death of the Middle?
There is no denying that entertainment production is bifurcating between multi-million blockbusters and niche indies, resulting in many articles bemoaning the disappearance of the mid-budget movies that used to make up the bulk of box office revenue. While it is true that there is a “death-of-the-middle” effect happening in the film industry, looking closer at the entire entertainment content landscape, you will see that the death of mid-budget movies has been greatly exaggerated — they are simply moving from movie theaters to home entertainment in response to the shifting market economics.
On one hand, the U.S. entertainment industry is rapidly consolidating. Disney has completed its acquisition of the 21st Century Fox assets and now owns about 40 percent of the U.S. box office. Such a huge market share, buoyed by popular IP such as Marvel, Star Wars, and Pixar cartoons, gives Disney not only a great foundation to launch its own streaming service Disney+, 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 one day soon, tickets for a Disney movie on an opening weekend would be tied into your Disney+ subscription, or that Disney could work with theaters to launch its own version of MoviePass that’s tied to Disney+.
On the other hand, indie movies are seeing something of 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. Even though the majority of the box office is being dominated by blockbusters, these smaller studios are able to carve out a niche audience with their edgy, unconventional offerings and occasionally drive the mainstream cultural conversation in an outsized manner with Oscar-winning titles like Moonlight or breakout hits like Get Out.
Squeezed from both sides, it may seem like mid-budget movies are disappearing. In reality, however, the studios are still making those movies at a similar quantity, but their budgets are being slashed down to near-indie levels as the major studios become increasingly risk-averse, preferring to put their budgets into proven franchises and blockbusters over the kind of original movies catering to adult audiences. With more and more box office revenue coming from overseas markets, studios naturally respond by prioritizing content that will travel well internationally, and nothing travels better than visual spectacles.
In contrast, streaming companies like Netflix can operate globally by default, or at least have the option to easily expand internationally, so their niche content has a better chance at finding a sizeable audience at a global scale, thus justifying the investment. As a subscription service, it is far more important for Netflix to have something for everyone, instead of a few things for most people. This is why Netflix plans to “aggressively ramp up” on local productions in key markets, while Hollywood continues to double down on blockbusters that contribute to a homogenizing global culture. In a word, their different business models dictate the kind of content they choose to focus on.
As a result, the kind of mid-budget serious dramas that usually double as star vehicles are migrating to streaming services, either as a movie or a limited series. HBO’s Big Little Lies is one clear recent example, counting two beloved Oscar winners amongst its main cast before adding Meryl Streep for season 2. Other recent examples starring A-list movie stars include HBO’s Sharp Objects and The Young Pope, Amazon’s Homecoming, and Netflix’s Maniac. Add in the star-studded original shows from the upcoming Apple TV+, and TV is looking to rival movies in terms of star power and content quality. This applies to behind-the-camera talents too, with Steven Spielberg developing shows for Apple and J.J. Abrams reportedly choosing WarnerMedia over Apple.
Part of this is because it is getting increasingly harder to stand out in the oversaturated TV space. With the explosion in content, consumers today are often overwhelmed when choosing content to watch. Therefore, streaming services are eagerly upping 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 TV content either. On the movie 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 gearing up 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 so as to qualify for awards, meaning that the majority of the audience will likely watch these Oscar hopefuls on a smaller screen.
In conclusion, it’s not so much death of the middle, but rather a migration of the middle that moves with audience behavior. If your movie is not 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 forgo the comfort of their living rooms to go see it? Sooner or later, most of those 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 to Lionsgate theatrical films starting in 2020, and we expect to see more deals like this between streaming services and production companies. The majority of the audience for mid-budget movies has changed their consumption habits, which is why the production and distribution of those movies are changing as well.
Given the technological disruptions that are upending the dynamics of the entertainment industry, there is no doubt that with challenges come opportunities too. It is up to entertainment brands to adapt to the changing times and capitalize on some of the emerging value drivers in the entertainment space.
As subscription fatigue sets in, more and more consumers will be questioning the value of adding new streaming subscriptions to their monthly bills. Netflix wants to be “all of TV” in the future, and they just may pull that off thanks to their head start and savvy use of data. As for the other media companies who are late to 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 the other smaller players such as IFC or AMC. Due to their limited library sizes and lack of popular IP, standalone services from these late-comers will be unlikely to compete with the likes of Netflix and Disney+ for the top spot for 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 those smaller streaming services seems inevitable.
But the real wild cards here are the three companies that actually don’t need to make money directly from content: Disney, Amazon, and Apple. For these three massively successful corporations, video content is one piece of their larger ecosystem. 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 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 capacity to build their own bundles that goes beyond simply media streaming 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 a super bundle of its own.
An interesting side effect of the rise of super bundles is that your choice of entertainment content may be increasingly swayed by the smart home platform you choose. Whether you live in an Apple household, an Amazon household, or a Google household will soon start to influence what kind of content streaming device and services that you choose, because everything will likely come in a nice super bundle. Netflix is now the baseline for content streaming services for their massive head start in amassing users and brand-building, while Disney+ will likely catch up quickly once it launches thanks to Disney’s massively popular IP. (Hulu could possibly get a major boost should Disney decide to bundle it into their subscription at a discount.) That leaves about one or two subscriptions for the rest of content owners to fight over, and the tech companies already controlling your home platform will like be given favored considerations. And that’s not even taking the in-car streaming services that are right around the corner with the arrival of self-driving cars. In other words, with super bundles, the tech platforms we choose for our home will increasingly control our access to entertainment content at home and beyond.
Branded Video Content
Responding to the shift of audience attention to ad-free streaming services, many brands are starting 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 be part of the Apple TV+ lineup. Similarly, Behr’s new campaign will pay a ”Color Explorer” $10K 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 the nurses that worked in the first AIDS ward in San Francisco, recently came out to good reviews. What you might not know is that this documentary is commissioned by Johnson & Johnson and created partly by UM Studio, the content studio of our sibling agency UM Worldwide.
Other forms of content are being explored by brands to develop branded content as well. D2C shoe brand Allbirds is hosting a SiriusXM radio show featuring sustainable brands so as to double down 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 how-to videos that add to the customer experience it offers as a grocery store. On the wackier side, Skittles used its Superbowl ad budget this year to create a one-night-only Broadway musical the mocks consumerism and brand sponsorships with its tongue firmly in cheek. Obviously, Skittles’ outlandish idea is closer to a PR stunt than a legitimate investment in content, aiming to cash in on the meme culture that is driving much of our conversation around entertainment content today.
Meme Culture & Crowdsourced Creativity
The way we talk about entertainment has become largely centered around memes, the digital-native mode of communication on social networks. It could create a bottom-up effect that pushes an obscure indie into mainstream consciousness. For example, TikTok memes are what made “Old Town Road,” a joke-y country-rap hybrid made by an unknown, into the biggest hit song of 2019 so far.
Another recent meme-driven success is Netflix’s Birdbox, a mid-budget horror thriller starring Sandra Bullock released over the holiday season at the end of last year. Thanks to the prevalence of memes, Birdbox was watched by over 45 million Netflix viewers during its first week of release, which would give it a $413.4 million first-week box office opening (going by a reported US. average movie ticket price in 2018 of $9.18). Befuddled by the sudden volume of Birdbox memes, some suspected that Netflix may be manufacturing them by itself as a marketing tactic when in reality, the situation is likely 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 doing the marketing for the content owners. Granted, 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 removes 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.
Therefore, smart entertainment brands should learn how to lean into meme culture and encourage fans to share their remixed creations with the world, but not desperate enough to manufacture the memes themselves. In addition, 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 strengthen meme culture’s impact on driving entertainment consumption.
As distribution channels continue to shift online, the distinctions between various 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 as well as new consumption behaviors.
Increasingly, movie franchises are functioning more and more like big-budget TV shows, with cliffhangers, cinematic universes and crossovers to create must-see events that lure movie-goers back to the theaters time after time. For a recent example, look no further than the end of Avengers: Infinity War and the record-breaking opening weekend of End Game, or to a lesser extent, the success of the John Wick series. On the flip side, TV series are getting shorter thanks to streaming services, shrinking down from the usual 22 episodes per season typical for network TVs to only eight to ten episodes. Some comedies on Netflix barely last 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 via streaming, what difference does it make if it’s a movie or a TV series?
Similarly, the distinction between entertainment video content and video games is also breaking down thanks to the introduction of interactive elements into video content. Netflix’s Black Mirror: Bandersnatch and You vs. Wild series prove that interactive formats can work both in scripted content and reality shows. And the fad that Live HQ Quiz stirred up last year proves 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 into OTT streaming and subscriptions to lower the entry point and expand its audience. For example, Google’s upcoming game-streaming service Stadia will integrate with YouTube and allow subscribers to launch games directly from a game demo or a game influencer’s video they just watched, further blending the two formats.
One side effect of audiences shifting to digital channels and nonlinear TV is the loss of co-viewing. Outside sports and other live events, there are few programs that can still command people to come together to watch them at the same time. As we explored in a recent piece, the ending of Game of Thrones may just mark the end of the TV monoculture that we grew up with. With most people nowadays having access to multiple streaming services and following the personalized content feeds to decide what to watch, no wonder co-viewing is going out of fashion. Live events, for the most part, have yet to enter the streaming age, as rights holders cling to traditional broadcasters. But as ESPN’s standalone service starts to pick up steam, that too could change soon.
It is not just that we have too much content to binge for us to watch something together. Increasingly, other entertainment options such as video games, esports, and short-form videos on social media like TikTok are all competing for the same attention. Fortnite owner Epic Games recently acquired teen group video chat company Houseparty, presumably to make Fortnite more social. Considering the success it recently had with the live DJ Marshmello concert that drew over 10 million concurrent players worldwide, perhaps something like Fortnite could be the future of digital co-viewing? Facebook wanted to recreate TV co-viewing via VR spaces, while many others have tried to recreate the co-viewing experience for the OTT era, and none has caught on in a substantial manner. Perhaps we have moved beyond the co-viewing phrase as a society, content with watching things at our own pace and schedule, by ourselves.
Entertainment is an intrinsic part of culture, which is becoming increasingly global and digital-driven, so the content industry is naturally changing with the culture too. With audience shifting from traditional media channels to online channels, it is not just distribution that is 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’ve seen before. The future of entertainment content is diverse, dynamic, cross-platform, and immersive, with plenty of opportunities for brands to explore and participate.
Thus concludes our thoughts on the key trends that we believe will shape the future of the entertainment industry. If you want to learn more about them and how they apply to your business, please reach out to Josh Mallalieu, VP of Client Services, (firstname.lastname@example.org) and ask for the latest category disruption report we developed on this topic.