The Multi-Billion Dollar Fight for Your Attention
Exploring the impact of digital release strategies on the industry’s major players.
Movie releases are evolving by the day. The neat sequence of in-theater runs, video-on-demand rental, DVD sales, and TV licensing has been wholly upended by the lightspeed development of streaming. We’ve broken down the trends that put us here — including the COVID-19 pandemic and intense platform competition — and examined the successes and missteps of the latest blockbuster to premiere simultaneously in theatres and on HBO Max.
It’s time to zoom out. Let’s take a look at the major players in today’s industry and explore how innovative release strategies create opportunities and headaches for each. One important note: many companies don’t fall neatly into these categories. Thanks to our good friend vertical integration, megafirms like Disney are streaming platforms, film studios, TV networks, and production houses all rolled into one.
Theatres: AMC, Regal Entertainment, Cinemark
Traditional movie theatres have taken on the brunt of the pandemic’s effect on the industry. Total domestic box office declined 81% last year for a grand total of only $2 billion as major chains reduced capacity and film releases were delayed. The macro trends paint a similar picture: increasing at-home viewing and faster digital release windows. Chains are in danger of being left in the past. A potential strategy is to refocus moviegoing around “events”: blockbuster releases that can draw huge crowds. Theatres can offer experiences — food service, VR demonstrations, Q&A sessions, themed social events — to bring customers back when it’s safe. Simply playing a movie won’t cut it anymore: there have to be additional draws to pull people out of their homes.
Streamers: Netflix, Hulu, HBO Max, Disney+
The butcher of bundles, the cancer of cable, the Venus of valuation — it’s Hasting’s hellion and media’s new mistress — streaming. In just the last 18 months no less than six new streaming services have entered an already jam-packed ecosystem. There’s almost no limit to how much these companies will spend on content in the fight for market share. Amazon has pledged to dole out $9 billion in 2021, while Netflix is forecasted to spend $19 billion — roughly equal to Botswana’s GDP. NBC, Fox, and CBS will likely spend $2 billion alone on NFL Sunday packages. It makes for suspect economics, but in the eyes of Mr. Market these streamers can do no wrong. After the debut of Paramount+, ViacomCBS saw its shares soar 12%, and Discovery’s market cap jumped 37% in January after releasing its streamer. Granted, new streamers have thus far been successful at driving tens of millions of new subscribers, but high churn remains an endemic problem.
Ultimately, it will come down to (1) how many subscriptions the consumer is willing to pay for, (2) which platforms are successful at pulling in viewers with premiere titles, and (3) who has a strong enough library to keep those new customers subscribed.
Television Networks: USA, FX, BET, TNT
If you’re a cord cutter, you may be surprised to remember just how many movies are available on cable television. Networks have traditionally paid fees to license movies, with larger prices for more popular movies and lengthier licensing periods. Those films were once a significant draw for channel surfers. That position is now weakened by streamers and by exclusivity: the ability of a channel to be the sole destination for a film. While cable rights are often conferred only to a single channel, they’re almost never made fully exclusive to that channel. Why wait for a commercial-filled version of Bad Boys starting at 3:35 PM when you can just rent it from Amazon Prime? Cable networks that previously relied on films are increasingly looking towards sports as a more reliable draw of live viewership. As film licensing loses its luster, the move to live sports is a wise choice.
Gatekeepers: Roku, Apple TV, Amazon Fire TV, Xbox
TVs are still the dominant medium for in-home viewing of shows and films, and connected TVs (or smart TVs) are the hardware that most streamers operate on. Connected TVs are the app store, and Netflix is the app. While we typically think of inter-streamer competition when we talk about the “streaming wars,” there is an equally fierce battle raging between the streamers and their operating systems. For one, platforms like Roku are extracting increasingly large rents from streamers. After a seven-month standoff, HBO Max finally launched their app in Roku, giving up a share of ad space in the streamer’s coming ad-supported tier. It took two-months before Roku allowed a Peacock app, only after NBCUniversal gave Roku ad inventory and agreed to license library content for the Roku Channel.
The gatekeepers aren’t content to just provide a neat shelf for streamers. Being the central hub for viewership creates opportunity. The firms can gather viewer data, offer their own content, and control ad insertion across apps. Warner Bros may bring customers to HBO Max with digital release strategies, but access to that service comes through a platform. Consider personal computers: today’s giants — Apple, Microsoft — established their positions by controlling the operating systems that software relies on. Access is everything.
Creatives: Directors, Actors, Producers
Evolving release strategies can create headaches for talents’ wallets. Relying on box office numbers in contracts isn’t sufficient anymore. Creatives would be wise to ask for viewership-based incentives that boost their pay when a movie has success on streaming platforms and VOD services. Despite the industry’s upheaval, there is still a massive appetite for content. Creatives will continue to be in high demand, but they’ll need to stay tuned to how customers reach their product. Take Quibi, for example: the failed platform paid top prices for the rights to their content, which have since been sold to Roku. Those productions will find a second life and, in cases like The Office, can build an even greater fanbase after their initial run. Owning a slice of the underlying IP can protect creatives from being tossed around without their fair share.
Measurement Companies: Nielsen, Comscore, Antenna
Ratings firms have been the unrecognized engine of the media industry for the past century. Understanding how many people watch a piece of content is key to setting prices for advertisers, choosing which productions to finance, and predicting long term trends. Nielsen has been the dominant provider of TV ratings for decades, but the growth of DTC streamers has changed that dynamic: companies now control their own viewership data. That creates issues of transparency and opens the door to fraud or, let’s say, gentle massaging of the numbers. Some companies, like Antenna, have found success with a combination of sampling, surveys, and innovative technologies that automatically recognize content. The best path for measurement companies to maintain relevance might include government regulation that forces periodic disclosures in the interest of fair competition. Expect these firms to start hanging out in D.C.
Consumers: You!
Here’s the great news: the biggest winner amidst this chaos is the consumer. Digital release strategies make it easier and cheaper to watch high-quality movies. There are more shows, more podcasts, more content being beamed into your eyeballs at every conceivable moment.
Remember that your attention is the most valuable commodity in the media ecosystem. We’re in the driver’s seat. Companies are fighting tooth and nail for our time and money. Our choices will dictate success and failure over the next few years, and it’ll make for some great content in the meantime. Isn’t that the whole point?
By Alec Winshel and James Ostrowski
