According to Wells Fargo, content spending among the nine leading media companies will reach a whopping $140.5 billion in 2022, a 10% jump year-over-year. This figure is predicted to increase to about $172 billion by 2025. As the ubiquity of affordable smartphones becomes universal, and consumers become more discerning about their preferences for video content, this war for attention, also called ‘streaming wars’, will continue to attract billions.
Linear tv’s loss is OTT’s gain
The decline of linear television and cable as we knew it has only accelerated over the last few years, fuelled by the rise of the ‘over-the-top’ (OTT) services. In 1998, 55 million people gathered around the TV to watch Titanic win Best Picture. In 2022, only 15 million tuned in to see the victory dance for the entire OTT industry when Coda, a film by Apple TV+, won the same award. Netflix has led this tectonic shift in consumer preferences for OTT with over 220 million subscribers, followed by Amazon Prime, which now has over 200 million globally.
The nine companies in the Wells Fargo analysis include Disney, Warner Bros. Discovery, Netflix, Comcast, Amazon, ViacomCBS, Apple, Lionsgate, and AMC Networks. Their respective streaming services include Disney+, HBO Max, discovery+, Peacock, Amazon Prime Video, Paramount+, Apple TV+, STARZ, and AMC+. While Disney leads the projected content spend at $33 billion, it includes live sports deals for ESPN and ESPN+ beyond the cost of producing content for both linear and OTT services. Just why Netflix is at the top with the entire $19 billion planned spend dedicated to content for its widely popular OTT service.
Source: Wells Fargo
Traditional video versus pure-play streaming
Traditional media companies including Disney, Warner Brothers, and ViacomCBS hope to leverage their linear television channels to cross-pollinate content to drive eyeballs. Netflix is focused on driving user growth in new markets with localized content for different markets besides the global hits like Bridgerton, now in its second season. Amazon has recently concluded its acquisition of the famed MGM Studios and is also doubling down on live sports deals with the likes of Major League Football. Unlike Netflix, Amazon and Apple are keen to leverage their content prowess to serve as a flywheel for their primary businesses in eCommerce and hardware, respectively. User growth has slowed down considerably following the pandemic-induced growth in recent months. Just why, Disney+ is releasing a lower-priced tier with ads, HBO is experimenting with pre-roll commercials. Netflix has been averse to the ad-supported model thus far and is now venturing into gaming.
News and live sports remain the last two pillars of linear television. According to Nielsen, they still account for more than 62% of the total video content consumption in the United States. CNN+, launched recently, is an attempt to leverage one of these pillars, which has thus far been part of the traditional cable or linear tv bundles. (Read more in Jonathan Bennett’s recent blog)
OTT Bundling is the future
The average American consumer is spending far more time watching video content, according to Neilsen’s inaugural “State of Play” report.[i] There is no mistaking consumer appetite for streaming content, as 72% of Americans say, “I love my user experience with video streaming services,” and 93% plan to increase their streaming options or make no changes to their existing plans. But the vastness of platform choice has become overwhelming for audiences. The frustration has many wishing for streaming content bundles, somewhat of a pivot from the days when many digital-first consumers were on a pilgrimage to cut the cord from the bundled content offered by cable and satellite services. According to the report, 64% have hopes for streaming bundles, while only 9% blatantly disagree that there’s a need for bundled services.
Our client Optus, a leading mobile carrier in Australia and part of the Singtel Group, offers such consumers a compelling alternative. Dubbed “SubHub”[ii], Optus’s new subscription management platform lets consumers manage all their OTT subscriptions with a single bundled app interface. Consumers can avail of exciting discounts on the OTT services, available exclusively with Optus, without having to manage multiple OTT subscriptions individually. Verizon offers something similar in the US called Stream TV.[iii] Mobile carriers are undoubtedly best placed to offer such OTT bundling services at scale, given their ability to negotiate tiered discounts from OTT services. More services such as SubHub and Stream TV are bound to appear in different parts of the world.