Shapes & Ideas
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Shapes & Ideas

Content Crash — Part 3

To the victor go the spoils.

  • Pricing power to balance growth and margin
  • Leadership & vision that convinces shareholders to take a leap of faith
  • Deep pockets that enable them to play the long game
  • A well-established brand
  • Control over parts of the value chain
  • Owning the data & customer relationship
Ampere Analysis — The cost of COVID-19, May 2020

So who is in a good position to win in the long run?

Pure players with a globally recognized brand: this is the category of VOD services that have the scale, talent, money, technology and customer base to deliver a seamless experience, a well-balanced portfolio of premium hits mixed with original content and a sizeable library of diverse titles that offers something to everyone. Because of their broad international presence, they are the best positioned in the increasing powerplay of content negotiations and arranging for prominence on consumer devices. Moreover, they can spread the cost of technology, product, and marketing across multiple markets.

  • Appealing original content and aggressive strategic investing.
  • Strong pricing power in the market allowing them to increase subscription fees where others cut prices.
  • A huge subscription base across hundreds of territories allowing economies of scale.
  • A huge library of titles (currently 17000+ movies and 1900+ TV shows in the U.S)
  • Owning and controlling vital parts of the value chain (discovery, distribution, cloud services, payment,…)
  • The first year is free with any product.
  • Apple has huge marketing and brand power.
  • Very deep pockets and healthy financials.
  • One weak point: it is yet unclear if their content strategy/catalog will be strong enough to keep subscribers after 1 year. If it doesn’t attract users it will stop serving its function.

Who might catch up or even overtake the current leaders?

Big studios and right holders. The fight for talent and rights give the studios and right holders an envious starting position. There is more money than ever on the table. But they will have to make choices. Do they move from B2B to D2C? While that might sound obvious it does come with challenges:

  • It also requires a transformation from being a content-focused company with a distinctive creative culture to mastering technology and embracing the culture of digital products.
  • Retaining rights also means leaving money on the table. Relative stable income will be replaced by more volatile subscription revenues.
  • A huge marketing budget and adjacent experiences.
  • Not afraid of price-cutting until it hurts. The current bundle starts at 6.99 €/month (Netflix starts at 11.99 €/month)
  • The current growth (+54 million subs as of May 2020) goes beyond expectations (early projections were 60–90 million subs by 2024, recent ones see Disney hit 247 million subs in 2025!)
  • Weakness: Streaming is only 10% of their business and Disney parks are bleeding money in the Covid19 reality.
Apple TV integrates the majority of streaming services.

Who might lose the most in the years to come?

Traditional Pay-TV, commercial broadcasters and aggregators offering cable or satellite packages: Cord-cutting is a reality that will only accelerate in the years to come as consumers trade their expensive cable TV and satellite TV contracts in favor of lower-cost OTT subscriptions or ad-based online services.

  • Traditional broadcasters need to combine investments in their core TV business with diminishing returns with additional spending on digital properties that are not yet compensating with new digital revenue. Certainly, in Europe, it’s not realistic to expect broadcasters to compete on all these levels. While it’s clear that many of the current incumbents remain powerful players in the marketplace they might face an uphill battle to maintain that position online.
  • The effect of the international streamers, dominated by English series and movies, will be more pronounced in markets that are already exposed to a high volume of English language content. In other markets, driven by the local language and content, there will be less impact.
Recent headlines on Quibi’s rough start.

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