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December is a month of reflection, and as part of Adweek’s Year in Review coverage, we’ve asked the industry’s key movers and shakers to look back on what this year has meant for themselves and for the industry. Television’s top execs overseeing broadcast, cable and streaming have weighed in, as have TV ad sales chiefs and buyers.
We talked with several television and entertainment media analysts about some of the biggest shifts they expect to see in the coming year, how they will be evaluating some of the biggest reorganizations that took place across the media industry and the biggest question on the industry’s mind: which changes brought on by the pandemic are temporary, and which will have permanent ramifications across the industry.
Here’s what they had to share.
How do you anticipate the streaming and TV ecosystem will continue to evolve in 2021?
Steve Nason, research director, Parks Associates: From a consumer standpoint, I think we will finally start to see a tipping point in the number of OTT subscriptions that consumers have in their service stack. I had predicted that 2020 would be that year, but Covid-19 has only accelerated the trend, which has coincided with the launches or further integration into the market of services such as Disney+, Apple TV+, HBO Max, Peacock and an expanded CBS All Access. If the Covid-19 economic impacts continue to linger into the new year, consumers will be further tightening the purse strings and looking with greater scrutiny at their stack to streamline and keep only those they deem essential and foundational. The economic realities will further accelerate the adoption and use of free, ad-supported OTT services, who will play an even larger role in a consumer’s video portfolio into 2021.
On the industry side, I will be closely tracking several trends, including the continued dismantling of the traditional content windowing process and its associated beneficial impact on the subscription and transactional OTT space, especially in light of the recent Warner Bros./HBO Max and Disney announcements about new theatrical releases. That trend has so many interesting angles to it from the studio perspective to talent/production (directors, actors, crew) to theaters to VOD platforms to service providers, to consumers. I will also continue to track how many services are eschewing full partnerships with aggregation partners like Amazon and Roku to keep as much as revenue and user data in house as possible as HBO Max and Peacock have done recently. The push and pull of these types of arrangements are fascinating to watch and where they go from here will be really interesting in 2021, even among mid-size and smaller services.
Joe McCormack, media and telecom analyst, Third Bridge: Churn will be a key theme to watch both on the legacy and streaming side of things. Cord-cutting seems likely to persist with industry executives we have spoken to over the last several months pointing toward U.S. pay-TV households falling as low as 50 million over the longer term. Churn will also be important to measure for new streaming platforms as they pass their one-year anniversaries. It seems restarts in content production will be a key driver for churn minimization as some execs we’ve talked to believe consumers will expect one to two new pieces a content a month to justify continuing payment for services.
Dan Rayburn, principal analyst, Frost & Sullivan, conference chairman, NAB Show Streaming Summit: The changes we are seeing in the market with regards to how movies and TV shows are being packaged, windowed and distributed on TV, across theaters and via streaming services, will continue to change due to the pandemic. But movie theaters will come back, and people will still want to experience movies in person with others. Streaming and DTC services will continue to grow, but pay TV is not going to be replaced by streaming, nor is the movie theater experience. We have a lot of choice as consumers as to where to get our video fix, but we also have a lot of fragmentation and consumers will need to get three to five services to get all the content they are most interested in. There won’t be one winner, but rather many winners, depending on the type of content and business model.
Kevin Westcott, vice chairman and U.S. media and entertainment sector leader, Deloitte: We see growing competition in a maturing market for streaming video. Most of the major players have launched their streaming video services, spending heavily on content to attract subscribers. Some offer premium subscriptions, but we see a growing demand for free ad-supported offerings. Consumers have more options and are more empowered than ever, moving on and off services to follow content and balance their costs. The market is maturing but it’s also very dynamic. This can make it challenging for advertising to know where to spend among so many services. If streaming video providers can learn more about their customers, they can better match the right content and advertising with audience segments. In 2021, we expect customer insights to drive more innovation in targeting, pricing tiers and VIP membership.
Jed Meyer, independent media consultant: I expect to see continued evolution and growth in 2021 in the streaming and TV ecosystem. Look for additional players to enter and expand in the AVOD market. For example, we’ll see more focus on players like ViacomCBS’ Pluto, Amazon’s IMDb TV, and a likely ad-supported HBO Max. These platforms should present brands with new opportunities to engage with consumers and replace linear TV rating points.
After all the seismic media reorganizations in 2020, what signs will you be looking for in 2021 to determine whether these changes have been successful?
Nason: Obviously the most direct way to track success is how each of their marquee OTT services continue to perform in terms of subs/users, revenue, churn, etc., what new markets internationally they enter into, content they generate in-house or acquire and other partnerships they enter into to expand their reach. How they perform on the advertising front as well will be key, especially as ad dollars continue to leave in record numbers on the traditional media side of the house.
McCormack: Reorganizations at legacy cable networks and studios seem largely driven by streamlined decision-making around content monetization. Early indications are that this has allowed for more wholesale shifts in distribution as seen from the day and date simultaneous release of Warner Bros. films on HBO Max and Disney greatly increasing the films it releases via Premier Access. A big theme seems to be whether new decision-makers can navigate Hollywood business affairs. While Warner Bros’ decision initially seemed quite positive for its HBO Max service, some caveats to consider elsewhere include whether exhibitors expand relationships with Amazon, Apple and Netflix via theatrical releases, or if WB’s films are even allowed to move day and date under contract. A risk seems to exist in that production companies could pull those films and license them elsewhere, though it remains to be seen how either exhibitors or production partners will react.
Rayburn: As an industry, the only sign we should be looking at to determine success is profit and loss of content creation, licensing and distribution. While the number of subscribers of a streaming service and viewers for shows on pay TV matters, if the business can’t become profitable at scale, that’s a problem. Many companies won’t turn a profit in the next year or two as they are spending billions and betting on the future, but that future is not far off. It’s going to need to show profitability within the next 2-3 years.
Westcott: Consumers are carrying more subscriptions and becoming more aware of the costs. So, we’re watching trends in ad-supported tiers for paid streaming video services, as well as the continued growth of free ad-supported services. This could drive more innovation in digital advertising and targeting while offsetting the rising costs of content. We’ll also look to see if churn stabilizes for the streaming video industry, to see if providers are able to innovate in services and content that keep more of their subscribers around for longer. We might anticipate more M&A from large streaming providers seeking to turn subscribers into members with perks and rewards across a portfolio of entertainment experiences.
Meyer: The new media organizations will need time to gel and execute their strategies in 2021. Look for divestitures of non-core assets to fund investment in content and broader OTT strategies. Signs of success will be continued innovation (e.g. shoppable formats, opportunities to engage consumers, etc.). Signs of challenges will come in the form of additional reorganizations.
What changes in the streaming/TV ecosystem will fade at the end of the pandemic, and which changes do you think will be permanent?
Nason: The incredibly high levels of service uptake and consumption will not fade, but slow down. That rate cannot and will not sustain at that level post-pandemic. This onslaught of huge broad-based services launching will slow considerably, as well as many of the big players that are already in the market save for a handful. (New services from Discovery and BBC, to me, are not in that same category, though they will be large and formidable enough in their own right.) But the launch in succession of huge SVODs that we saw this year and end of 2019 will not continue. If anything, there may be some consolidation further to make the ones already in the market even bigger (think Disney+ swallowing up ESPN+/Hulu, ViacomCBS integrating the Showtime OTT service, etc).
I think the meteoric rise of ad-based OTT services during Covid-19 will continue in earnest, especially as many of the players delve deeper into exclusive and original content realm and expand their footprint internationally. While theaters may rebound at some point to a respectable level, I think the home will continue—as it has during Covid-19—to be the central place that most consumers will prefer to watch new movie releases, especially those folded into an existing OTT subscription. Obviously, the continued erosion of the traditional pay TV market will continue as behaviors, revenue, org restructures and everything else relevant shift online. These providers will continue to diversify as aggregators and service providers digitally in order to stay competitive and viable.
McCormack: Content production disruptions are the most obvious temporary effect that came with the pandemic. While there seem to be limits around any streaming platforms’ ability to “catch up” on content, it is expected that content spend in aggregate will continue to grow rapidly. These increased expenditures make an already challenging break-even equation more daunting for streaming platforms that are, excluding Netflix, losing hundreds of millions of dollars. More long-lasting effects seem to include consumers’ preference toward OTT viewership resulting in marketers looking much more closely at connected TV advertising. Questions remain regarding just how large the CTV market opportunity actually is—so far, a large percentage of streaming viewership is ad-free and Hulu, Peacock, Tubi and others have meaningfully lower advertising minutes per hour than cable networks.
Rayburn: Between Q4 2019 and Q4 2020 we saw streaming services from Apple, Disney, HBO, Quibi and others launch, which were planned before the pandemic. The pandemic didn’t create new services in the market, it simply gave content companies new ways to distribute video when theaters closed and more access to consumers time, since many were now spending more time at home. When the pandemic ends—and it will at some point—consumers will go back to movie theaters. In addition, every single streaming service, live or on demand, has raised prices and continues to do so. As these services get more expensive, consumers are going to be a lot more selective on where they spend their money and what content is most important to them.
Westcott: It’s very difficult to say. We’re amid a seismic transition onto streaming video platforms. At the same time, it’s unclear how—or if—revenues will shift from pay TV and theatrical to streaming. We’ll certainly be watching to see how many consumers return to theaters after a vaccine is widely available. Theatrical revenues are very important to for licensing movies across platforms and timeframes. Competition between streaming, theatrical and pay TV will probably strengthen, but this should also drive a lot of innovation and a deeper understanding of customers.
Meyer: The move by consumers to streaming is not temporary; it will likely emerge as “the new normal.” Consumer engagement with tentpole events and sporting content will become the wildcards. Do consumers return to shows like the Grammys and Emmys?
