DTC Winners Need Quality, Quantity, Focus

Content Insider #595 – Jockeying

By Miles Weston

“Live
together, die together, works when you have to keep on fighting. Totally sucks
in real life.” – Nolan, “Defiance,” 2013-2015, Five and Dime
Productions

People
learn it in Marketing 101 – don’t mention your competition in your pitch and
certainly don’t knock them. 

When
you do you make the prospect think, “Gee,
maybe I should take a closer look at them.” or worse, “Darn, hadn’t even considered them … ‘till now.” 

And
yet, the boss just can’t seem to keep from poking fun at the competition; or
worse, saying they’re not even in the company’s marketplace.

You
know:

Apple
is like a mutant virus, escaping from the traditional structure of the PC
industry, but the industry will still eventually build up immunity – Stan Shih, Acer

            Google’s
not a real company. It’s a house of cards – Steve Ballmer, Microsoft

Television
won’t be able to hold onto any market it captures after the first six months.
People will soon get tired of staring at a plywood box every night – Daryl Zanuck, 20th Century Fox

We
think HBO is a very, unique asset of–in fact, as you think about where HBO
fits, I think of Netflix kind of as the Walmart of SVOD, HBO is kind of
Tiffany. It’s a very premium, high-end brand for premium content – Randall Stephenson, AT&T 

Neither
Redbox nor Netflix are even on the radar screen in terms of competition – Jim Keyes, Blockbuster

            What
the hell does the Nano do? Who listens to 1,000 songs? – Ed Zander, Motorola  

            There
is no reason anyone would want a computer in their home – Ken Olsen, DEC  

Netflix
is a little bit like, is the Albanian army going to take over the world – Jeff Bewkes, Times Warner

The
notion that [companies like Netflix] are replacing broadcast TV may not be
quite accurate.  I think we need a little
bit of perspective when we talk about the impact of Netflix – Alan Wurtzel, NBCU  

If you’re not afraid of someone … give ‘em a sign!

Okay,
so Netflix is the big gorilla in the room when it comes to streaming content.

They
may not have invented it, but they did perfect it and they’ve been expanding it
around the globe, proving that if you have the right amount of data and know
how to use it, you can introduce content critics may dislike but viewers can’t
get enough of.

You
also prove the stuff that’s made in the U.S. is liked by folks in France,
Japan, Australia and Peru—heck, just about all of the 190 countries where they
have subscribers.

Some
country officials thought they’d “penalize” Netflix by saying a certain
percentage – say 30 percent – of the content they show in the country had to be
made in their country.

Holy cow! 

People
in the U.S. and Canada actually like the video stories from Mexico, India,
Italy and New Zealand … anywhere when they’re properly dubbed or are close-captioned.

It’s
natural for folks in the M&E industry to keep a close eye on Netflix but
they aren’t alone in the expanding global streaming market and there are
opportunities for niche players as well.

The
industry was a reluctant partner with Netflix ever since they broke the home
entertainment mold – get a red envelope DVD in your mailbox or go to the corner
store for your rental or wait a year for the network to schedule it.

In
2007, they launched streaming video to your PC then OTT to your smart TV and
finally, to our kids’ smartphone.

Since
then, they’ve been investing (heavily) in scripts, content and global
expansion.

They
not only upset the natural order of things; but together, they turned OTT into
a huge and growing global market – $30B in 2015 and an estimated $65B in 2021.

While
the demand for high-quality, paid-for video service delivered OTT is growing in
every corner of the globe; the U.S. continues to be largest, growing from $8.3B
in 2015 to an estimated $23B in 2021. 

China
added $6.3B in revenue and viewing in the country will quintuple by 2021.

Of
course, Netflix didn’t overturn the cable and studio system all by itself.  It had the help of FAANG (Facebook, Apple,
Amazon, Netflix, Google) and BAT (Baidu, Alibaba, Tencent) as well as new
entrants including networks like HBO, Hulu CBS, ABC and BBC.

Growing Offerings – The number of sources for viewing content on any
device continues to grow and consumers get to pick their options based on what
they’re willing to pay – SVOD (subscription), TVOD (transaction) or AVOD
(advertising).  

You
know, anyone who was looking for closer relationships with viewers went DTC
(direct to consumer).

Of
course, AT&T’s Stephenson had to crow about one of the jewels he got in the
Time Warner merger … HBO.

However,
the timing of his verbal positioning at IBC could have been a little
better. 

Walmart
(Netflix) racked up more Emmy nominations than Tiffany (HBO) in this year’s award
competition.

Big First – 2018 marked an important first for Netflix when it had
more Emmy nominations than the quality content leader and took home the same
number of awards. 

That hurt the old ego!

Then,
when the awards were announced, the premiere cabler and streaming giant tied
for the number of Emmy’s they took home – 23 each. 

Even
before that – right after the merger – John Stankey, WarnerMedia CEO, told HBO
it needs to be more profitable and change direction.

That’s
difficult because Netflix spends 4X what HBO does for fresh content.

Regardless,
Stankey and Stephenson want to focus the brand on battling Netflix globally for
subscribers. Or, put differently – deliver quantity, not quality.

Netflix
has 130M subscribers in 190 countries while HBO’s numbers are more difficult to
determine because many are part of cable bundles in the Americas and not really
well known globally.

Doesn’t Do Average – Filmmaker Alfonso Cuarón is on the set of his newest
film, Roma. The Mexican film academy announced it has chosen the film by the
Academy Award-winner as its bid for a best foreign language film
nomination. 

Not
overly concerned, Netflix has a different goal … it’s lusting after an Oscar
this year.

Alfonso Cuarón’s Roma may just be its ticket to ride … great reviews and
eye-watering photography.  The
Oscar-winning director of Gravity is
a Spanish-language story about child-care workers in Mexico in the ‘70s and
covers all of the bases – race, class, feminism and U.S.-Mexico relations.

Roma’s Oscar race is a
melodrama all by itself because Netflix lusts for industry recognition, even as
it dislikes the conventional movie business.

The
feeling is a little bit mutual, but studios are still happy to have Netflix pay
them to produce their streaming offerings.

This go-around, Netflix is even considering
a limited theatrical release (one of the selection criteria) while still placing
special emphasis on its streaming subscribers. 

Cuarón feels Netflix is getting an
unfair rap in this issue. “Everyone
focuses on Netflix, but no one looks at the other side: the exhibitors,” he
said, referring to the industry term for theater owners. “They’re living in the ’90s. They need to be in the present.”

If Roma can take home an Oscar, it opens the door for other filmmakers
and stars who want to be in contention for an Oscar but still want to work
outside Hollywood’s conventional studios.  
 

In addition, Netflix has two other
Oscar contenders – The Ballad of Buster
Scruggs and 22 July.

But
one of the ‘90s folks is more than ready, willing and able to be in the
present!

Disney came to play.

Mouse that Roars – With the acquisition of 20th Century Fox, Disney
becomes that big kid on the Hollywood block as it cuts its relationship with
Netflix.  Disney Life will go over the
top DTC with one of the richest, broadest content libraries you’ll see plus a
roster of new work in development. 

First,
Bob Igor cut Netflix and ended the streaming relationship saying they were
going to set up their own DTC channel.

Igor
has a rich library and a solid set of studio efforts that we’re certain folks
around the globe would like to have sent direct to them.

In
addition, he and his team live and breathe content … and technology.

Not Just Kids – Disney Life will have content that appeals to everyone
– Marvel heroes, animated series and dramas as well as fresh and refreshed
content for the whole family.  And Igor
promises a very reasonable monthly cost. 

And
come on, who doesn’t like Mickey, Bambi, Snow White and the Marvel crusaders?

To
prove he was serious, Igor scooped up 21st Century Fox
entertainment.

The
move doubles Disney’s size/clout and gives it enough content and international
assets to attract subscribers … everywhere. 

Combined, the company owns 7 out of 10
highest-grossing films and accounts for roughly one-third of the U.S. studios
revenues.

Global Reach – With an annual offering of tentpole films and content
being produced around the globe, the addition of 20th Century Fox to
the Disney library becomes a major factor in the growing OTT industry. 

The big question is, what happens to Hulu?

It’s a great streamer with a strong following and a steady
focus on what viewers want.  The problem
is it’s jointly owned by Comcast, Fox, Disney and Turner (AT&T). 

Time will tell. 

Despite
all of the attention on the big hitters the global hunger for streaming content
seems almost insatiable.

Global Stream – Streaming services gained strong traction in the
Americas, which is “almost” reaching a saturation of content; but it is quickly
spreading around the globe to inform and entertain
people everywhere on their screens. 

That
means it is possible for organizations to not focus on the 7.7B people on the
planet, just the 5, 10, 20M people who want something special, unique,
different.

In
the packed IBC niche streaming service sessions, they discussed how
distinctiveness can work in their favor if they don’t lose sight of the unique
entertainment needs of the audience.

There
are folks out there who have – AVOD or SVOD – Netflix, Amazon, Disney, etc.;
but don’t want to spend hours browsing and then simply settle for something to
watch.

What
is missing in the fire hose service offerings are things like award-winning
foreign language drama; local market curated films/series; horror, sci-fi,
comedy, romance, documentaries and historical content. 

You
know, a single place you can go to and know BAM! you can binge to
your heart’s content.

If
AT&T’s Stephenson is looking for a Walmart (other than a Walmart that is
working on a streaming service), he should really keep a wary eye on YouTube.

Seen, Unseen – While adults may initially choose streaming services
like Netflix, Amazon, Hulu and HBO, teens and tweens grew up with YouTube
content.  The Alphabet- (Google) owned
site has deep, ad-filled pockets and plans to keep the money flowing in.  And, they’ll add subscription service
offerings. 

YouTube’s
parent, Google, is the ad placement king that is making a bundle from Gen Z,
teen and tween viewers. They enjoy watching a broad spectrum of short/long
video — unpackaging, game play, makeup/lifestyle, guy/gal stuff and
dumb/dangerous stuff mixed in with good content like the TED channel.

YouTube
has billions of folks logging in every month to watch a sliver of the 300 hours
of content uploaded every minute. 

And
if you’re wondering where you can find VR content, they have hundreds of
thousands of hours of content just waiting for people to immerse themselves in.

Most
of the stuff is watched on smartphones but they also have 180M hours of viewing
on the TV every day as well.

They
could easily become the bloated bundle of the OTT world.

And
if kids start out with that as their DTC service of choice, we personally hope
someone will tell them as Nolan told Irisa, “Yeah,
I taught you that, you really have to stop listening to me. I’m an idiot.”

There’s
just too much good/great content being developed by experienced video
storytelling pros.

We’d
sure hate to see them miss it.