Executive Trends: Jumping into the unknown

As will be seen next month at the LA Screenings in Century City, the television programming industry appears today fully focused on a multiple large-scale launching of a B2C (business to consumer) relationship to be started by Disney, followed by Viacom, Warner Media, Apple and other large players, plus already existing interlopers such as Amazon --which, true, plays another game, but also counts--, the telcos and other organizations around the world.

Discovery is the only major group managing at this time a different strategy: it looks at an ‘intelligent merger’ with its recently acquired Scripps, is opening new activity tracks within the established business, and has revamped its structure, with hubs in Brazil, Mexico, Colombia and Argentina and a concept different from its closest competitors. This approach frees the company from some of the dangers that may arise from the new status quo, which we’ll mention and should be taken into account when expecting a lot from the new brave world to come.

It is rather obvious that the frenzy about reaching directly the final user arises from two recent developments: on the one hand, the success of Netflix, which has reached close to 150 million subscribers in 1Q19 and is the first truly ‘glocal’ (global + local) organization in the industry. It has also shown remarkable flexibility: from delaying its launching in the Spanish market (reportedly because of the high level of piracy observed there) it has changed to turning it into a hub by building giant facilities there and driving local producers crazy with the success of “La Casa de Papel” and the visible chance of hitting more jackpots in due time. The most obvious problem is that there doesn’t seem to exist a market for five or six Netflixes.

On the other hand, what does exist is a market not reached by the cable and satellite linear pay television industry and a growing number of young people that cannot wait for watching the content they are now interested in. This demographic mix of several groups, usually called (incorrectly) “millennials” is known for wanting their desires being satisfied ‘here and now’, their mental structure having been shaped by access to mobile phones at extremely early age (*) and becoming inherently impatient as a result.

The TV industry tried to reach them through the “TV Everywhere” initiative, which failed because the different large groups could not agree on a common simplified access procedure, vs. Netflix offering, at the same time, a very easy access, expandable to multiple members of the family or friends. Now the studios are going after the “cord cutters” and “cord nevers” but the same roadblock remains: an average person, watching usually no more than six different channels (thirteen for a family of four) on linear TV, will have to subscribe to several OTT’s to obtain more or less the same viewing range.

How many? So far, analysts have not agreed on a figure, but 2-3 seems to be the most quoted range. The problem is that, if you have five or six OTT’s to choose from --don’t forget that Netflix will continue existing, and remain the front runner--, about half of the current majors will not be able to reach their goals. And, chances are that this will break havoc among them.

This will not be due to a technical problem. Any SmartTV or Internet access device will be able to handle a large number of sources as easily as today it now allows access to Netflix, YouTube, HBOGo and other applications. But you will have to sign up and grab your credit card if you want to watch a content held by a OTT you are not subscribed to. It will be a matter of impatience, the same that now plagues linear television. Question: Will the new online viewers be willing to switch among OTT providers less swiftly than they play videogames or type messages into their smartphone? It will be a different --and demanding-- audience, that will not accept the legacy mistakes made by the linear TV industry, such as filling the void between 24’ and 30’ by endlessly repeating boring intersticials.

The ‘bundle’ issue is another important matter: analysts believe that the major OTT’s will accept aggregators to skim their platforms in order to offer content from different platforms at a moderate price. Here we start dealing with the inter-platform relationship: each participating OTT will have to face the feeling that its “best” product is being offered by a third party to people who otherwise would have subscribed to the “full” service. So, some will think that such an alternative will actually diminish their subscriber count. And, don’t forget that everybody will be comparing its internal data against Netflix and the others. How do you keep a high profile against somebody that by that time may be boasting 160 million subscribers? Or, against one of your former colleagues that is now overperforming you?

Another question: How will these “skinny OTT bundles” be composed? If the platforms appear reluctant to have their best content being accessed through aggregators, the bundle appeal will be diminished. People will go for ‘the real thing’. So, the Add-on OTT’s may be a solution. But, to handle additional individual sales, you need to have an “agnostic” micro-payment system in motion, which does not exist today. Until this happens, probably through blockchain systems, it will be difficult to extract the full value of the audience the industry is now trying to reach.

(*) For more on this issue, see the White Paper prepared by Prensario for MIPtrends: “Storytelling for Millennials, Gen Z... and More!” by clicking www.miptrends.com/tv-business/storytelling-millennials