(Private Advisor, July 2019) Both will compete for a market so far commanded by Netflix where Disney has already announced it will set foot in half a year or so and Amazon and Apple are trying to reinforce their position.
Netflix has already acquired close to 150 million subscribers but recently lost to HBOMax its coveted “Friends” franchise. Nevertheless, it may feel comforted by the success of “Stranger Things 3”, the new Adam Sandler movie (“Murder Mystery”) and other titles that appear being highly appreciated on a worldwide level, according to Parrot Analytics. A drawback is that its market value will depend next year on how well it will be able to stand against several attacks by its former largest content providers, as well as curb production budgets when its bottom line starts really to matter.
Industry analysts feel exuberant about all these news, but strong doubts remain about the worldwide markets capability to sustain so many high rollers. Research shows an U.S. average of 2.8 streaming services per household and rather vague forecasts of “three to four” in the future. True, Quibi will appeal, according to MIP Trends, to mobile phone users, with content length in the order of 7 to 10 minutes, against giants such as YouTube reportedly urging its contributors to extend theirs to longer time periods in order to better charge them to advertisers.
Supermarkets know that it is better to showcase no more than six varieties of a product at a single shelf, because customers tend to get confused when having to choose among multiple options. From a customer viewpoint, streaming aggregators could be a solution to this, but it is doubtful that the major OTTs will allow potential customers to buy from a ‘wholesaler’ the best part of their programming instead of paying them a full fare subscription.
There is another unsolved issue: the major content providers currently obtain billions in revenue from linear pay TV. It is not difficult to foresee that the cable operators will want to re-negotiate, of course downwards, the fees they are currently paying, as soon as certain major product is withdrawn from their inventory or new attractive product is offered B2C, directly to the consumer.
The linear pay television future is not as bleak as pictured by the OTT business fans. Current research shows that, yes, teenagers despise the idea of sitting down to watch a show with family and friends, except when it's about sports. News, frequently quoted as another linear television asset, is subject to more competition from mobile media because most developments do not require the ample visual range that turns large-screen sets into the preferred device. The multibillion dollar question is: Will Centennials change their behavior with aging?
The current situation implies another threat to independent producers: the large streaming companies will commission most of the programming they are going to purchase, turning newcomer access to the jackpot even more difficult than nowadays. As explained in an earlier report, at this time only one in every 1,000 pitching proposals is being accepted. With a set of algorithms at work, the OTTs will demand precisely what they think they need, leaving little room for individual “out of the box” ideas.
The entire production market may have grown less than usually believed, at least for rookie producers. While the number of titles has increased, the number of episodes and more recently the length of each episode have been slashed. The vintage 23-episode seasons have been replaced in many cases by 6-to-8 episode orders, reducing the risk involved. If the content proves successful, a new series of episodes will be promptly ordered, but the decision depends on the immediate results. Binge viewing is part of the problem: a new series may become “classic” in a few weeks with no syndication options. This shortens abruptly the ‘long tail’ that was, time ago, one of foundations of the movie and television business prosperity.