adserving, broadcasting, distributing, television, viewing

The Netflix Spark: Why the arrival of the SVOD platform heralds a more even distribution of the future for everyone

so yesterday as I was meandering along the freeway in Melbourne I heard the most startling comment on the radio. a contributor to the city’s 3AW station was talking through the highlights of the evenings TV schedule – and suggested that because TV was ‘out of ratings season’ there wouldn’t be much to watch that evening … she gave a special shout-out to Nine who “bless them, were treating us to a new episode of Person of Interest”.

that broadcast TV networks take their foot off the pedal whilst out of season in order to hold new content back for the weeks when ratings is once again tracked is one thing – but for it to be such a consumer-facing matter of fact took me by more than a little surprise. this after all isn’t an industry conversation or debate, but a public radio station – openly discussing the fact that a TV network was “treating” the audience by actually offering them something new to watch.

this rather startling starting point underlines the extent of the firestorm now fully smoldering in the Australian TV market – the spark for which came courtesy of Netflix. on November 19th, after months of rumours and speculation, Netflix finally announced (with timing naughtily designed to crash Nine’s AGM) that it would launch in Australia in March 2015. the response from local Aussie players had been in development for some time. in short:

  • Foxtel, who arguably have most immediate disruption to face, have revisited their pricing strategy across the board and in particular halved the price tag of Presto (their SVOD or Streaming Video On Demand service) to $9.99. in addition they’ve partnered with Seven West Media who will contribute programming to the service from next year.
  • Nine and Fairfax’s joint forces have combined to create the $100m SVOD service StreamCo – with the consumer-facing platform brand Stan. Stan has subsequently announced deals with CBS, BBC Worldwide, MGM and SBS (who will bring their world movies to the party).

all of which leaves us with a three horse race between Netflix, Presto and Stan right?

wrong.

in fact it’s barely the beginning.

there’s Quickflix, Fetch TV, the individual channel catch-up services, Ten have yet to pick a dance partner, the ABC’s iView and of course YouTube – which in July accounted for over 1.5m content streams, reaching almost 11.5m people (source).

taken together there’s increasing volumes of views being delivered to the 50% of Aussies who watch online content. the numbers are already big … according to Nielsen in July there were 2.7bn streams (and that was down on June), and time spent streaming is increasing – up to around 8hrs per person per month generating 6.5bn minutes of streamed content.

and Netflix is still three months away.

the impacts of all this will be significant; in the immediate term there is undoubtedly going to be a firestorm for views and scale – brace for plenty of press releases in the first quarter of 2015 about content deals, views and reach. in the medium term this will play out in a battle for content – with many shows already locked away in local deals, there will be fierce competition between the platforms as distribution rights cycle into play.

the long-term implications will be two-fold. firstly, with increasingly fragmented and diverse platforms and viewing services, advertisers and their agencies will increasingly rely on programmatic solutions to build reach quickly. in addition many advertisers and ad agencies will finally be forced to break out of the ‘advert’ model – using instead platform-neutral content strategies that can adapt to content and context more quickly – generating more relevance for brands’ comms. think native content in video form.

the second long-term implication will be the long-overdue radical shift in viewer expectations. more choice, more freedom to choose what we watch and where, how and when we watch it. this future has been a long-time coming, and has been with some for much longer than others  … as William Gibson so magnificently put it, the future is already here – its just not evenly distributed.

strap in people … because what’s coming is a radically more even distribution of the future – a future in which the idea of being “treated” to a new episode of Person Of Interest by a network, may by as incredulous as the very idea of tuning in to a broadcast network in the first place.

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broadcasting, distributing, mediating, television, viewing

Begun, The Distribution Wars Have: How CBS vs Time Warner is only an opening salvo in the long hard battles to come

so that’s it. we’re at war.

as day three of the CBS / Time Warner stand off dawns, both sides are maintaining that they’re in the right … meanwhile three and a half million Americans are going without Hawaii Five-0.

oh the humanity.

for both sides the equation is clear … for CBS, how much do I need to extract from TW (and other distribution points) to cover with margin the cost of content. for CBS, how much can I justify paying for content given the revenues I can generate via people paying for access to the channels on my network? what else is clear is that we can expect many more of these battles to come.

there are two constants … content and people. and its the changing and evolving relationships people have with content that’s causing disruption, instability, and war: War between the factions that create content and those that distribute it. the current siege of Time is only the current battle in the early years of a war that has a long way to go.

the origins go way back and the early battles have already been played out. battles like the UK’s independent production sector versus the country’s commercial channels, or the ongoing rumblings between music labels and Spotify. and at the start of last year Rupert Murdoch – via Twitter obvs – dramatically accused Google of being the ‘piracy leader’ of silicon valley.

the war will only get hotter from here on in. to understand why you need only follow the money. PWC’s annual Global Entertainment and Media Outlook 2013-2017 uses like-for-like, 5-year historical and forecast data across 13 industry segments in 50 countries to compare and contrast regional growth rates and consumer and advertising spend. this is the picture it paints for the coming years:

“Consumer demand for entertainment and media (E&M) experiences, fuelled largely by the adoption of broadband and connected devices, will continue to grow and we expect this growth to follow a similar trend to GDP development across the forecast period 2013-2017. However, given the shift towards digital media — typically lower priced than its physical counterpart — we anticipate spend to lag behind GDP growth.

The global E&M market will grow at a CAGR of 5.6% over the next five years, generating revenues in 2017 of US$2.2tn, up from US$1.6tn in 2012. Within this overall figure, all three sub-categories — advertising, consumer spend on content, and access — will continue to grow, but at varying rates.”

Source PWC Global Entertainment and Media Outlook 2013-2017

two really – really – important points. one, because of the shift to digital media, spend on E&M will lag behind GDP growth – the pot is shrinking in relative terms. two, whilst spending is anticipated to increase, the future isn’t evenly distributed:

“Consumer spend shifts from content to access: The rapid growth in spend on access means that there will be a shift in the share of overall global E&M spend from consumer spend on content (from 47% of the market in 2012 to 41% of the market in 2017) to consumer spend on access (from 24% of the market in 2012 to 30% of the market in 2017).”

Source PWC Global Entertainment and Media Outlook 2013-2017

shift is spending, in real terms, away from content and into access to that content (spend on advertising is holding stable). we’re getting used to paying not for content, but instead for access to that content. whether its Spotify versus iTunes, or HBO’s Emmy and now Cannes credibility, it’s the distributor-networks that are currently strategically placed to gain the most.

but the thing is that the really big changes haven’t even started yet … there’s still a ton of inertia in TV advertising investment – big brands still, I think overly, rely on TV networks to get 30″ messages in front of people. reach is important, but its a necessity not a strategy for communications planning. brands have played for a long time now in being content creators, but they’re only just learning the power of being their own distributors …

new deals, new bargains, new negotiations … emerging between people and how they get access to content. if the old currency was attention through broadcast interruption, then the new currency is data through increasingly direct connections with people. the war was heating up without most major brands shifting even the smallest fraction of resource from broadcast advertising to creating and distributing content directly to people. the dual consequence – more competition for time spent with content and further reduced ad revenues – will see more than the three-day siege of a cable company.

there will be winners and losers, but perhaps the most notable victors in the coming war will be brands. marketing teams that successfully establish and then maintain direct relationships with existing and potential customers by creating and – crucially – distributing compelling and entertainment content.

cry havoc people … the dogs have slipped.

featured image via AP, and the following for no other reason than because I can 😉

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broadcasting, content creating, distributing, experiencing, phdcast, popping up, television

PHDcast 02.08.13 – its not the ooh laa la edition of the PHDcast as we talk TV, The Power Inside and Magnum Pop-Up

Player not working? click here to listen on Audioboo

morning PHDcast listeners. Nic was in the hot seat this week for the not-the-ooh laa la edition of the PHDcast. bien sur 😉 … awesome job Disco

much of the debate this week was in and around TV watching – how it’s changing and what the implications are, especially for brands. I wrote about some of the aspects of this in my post on Friday, but it’s worth dwelling on a point Stew makes at the twenty minute mark around people watching programmes not channels. I think that’s true but I also think its not quite as clean cut as that, and as the CBS / Time Warner stand-off enters it’s second day – leaving 3 million American’s without shows like Hawaii Five-0 (I know) – it’s clear that there is much more to come as the distribution wars heat up.

also on the cast we got round to talking about the Magnum Pop-Up Experience hitting Sydney. following the success of the store in other cities, the ground floor of Westfield in Sydney’s CBD has for the last three weeks been the latest place to get the pleasure pop-up. you get to design your own magnum … white, milk or dark chocolate plus plenty of toppings, all for a mere $7.

as I say on the cast, it’s a phenomenal example of a brand pulling the trick of landing marketing that gets people to pay for its own existence. and the fact that people are queuing up for it is proof positive of the indulgence for which the brand is known.

Magnum_pop-up Magnum_pop-up_2 Magnum_pop-up_3

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commenting, distributing, marketing, opinionating, promoting, retailing

Coles and Woolies’ Death Star moment: the beginnings of the brand rebellion in Australia’s Supermarket Store Wars

Tarkin and LeiaThe more you tighten your grip, Woolies and Coles, the more brands will slip through your fingers

my return from a rather long winter blogging break has been greeted with the glad tidings that some brands have finally chosen to take a stand against the big two Australian supermarkets.  Adnews reports today that Glenn Cooper, boss of Coopers Brewery has described Coles and Woolies as being the "killers of Aussie brands".  Cooper went further:

“Blatantly, Coles and Woolworths are not brand builders, they are brand destroyers … it’s harsh, but they are not about building brands, they are just about turning over quickly.”

SMH only last week reported that this is an opinion recently echoed by no less than Heinz' chief financial officer and executive vice-president Arthur Winkleblack.  in a briefing to US analysts on the company's first-quarter earnings, Winkleblack specifically name-checked the Australian supermarket sector and blamed them for an erosion of its margins.  sentiments echoed by Heinz' chairman and chief executive Bill Johnson:

''There is no doubt that in terms of retail environment, the Australian market is the worst market, and ultimately the people that will pay the price over there are the consumers because products will ultimately be devalued to address the price points that customers are asking us to address … So the consumer is going to ultimately be the big loser in Australia.'' 

the supermarket's argument is manifold and includes the rationale that this is all in consumers' interest – a Coles spokesman, in response to Winkleblack's comments, stated that "We agree with Heinz's comments that companies need to be competitive to ensure the best outcomes for customers."

but consumers don't benefit from Supermarket competition.  the concensus of an April opinion piece in the Sydney Morning Herald was that consumers – if they see any benefit at all – see it only in the short term.  Academic Angela Paladino commented that:

"Price wars squeeze out marginal players and change the composition of the market. Here fewer competitors seek to enter an unattractive market that is dependent on low price for success, and smaller competitors exit the market as a result of the inability to make a profit. Others may be taken over, for example the 2009 acquisition of Macro Foods by Woolworths. This has a long-term impact on consumer choice, with shoppers left in a market comprised of fewer players with greater power."

Nick Stance, Chief Executive of Choice agreed:

"The market shares of Coles and Woolworths allow them to negotiate hard with their supply chain. In fact many suppliers report they have little choice but to accept terms offered even if that makes their business barely viable … Sometimes the benefit of lower costs is passed on to the consumer through promotions, but promotions are temporary and do not in themselves create sustainable competition … The ''price war'' is a phoney conflict, not least because the big players usually match each others' prices."

there are only two winners in Coles and Woolies' Store Wars; and that's Coles and Woolies.  brands have and continue to exist at the mercy of these distribution Death Stars.  now Coopers and Heinz have come out of the supermarket closet.  it's just two brands.  but that's two more brands than a few months ago.

Coopers and Heinz's coming out is important.  brands standing up to Coles and Woolies is important, because the dominance of Coles and Woolies is hurting brands … not least in expectations of media investment…

I've sat in more meetings that I care to recall where there have been two invisible seats at the table.  in discussions where the spectre of supermarket's expectations for media investment loom large over marketers, marketers dependent on these two Death Stars for significant – and often increasing – distrutions volumes.

it's a sweeping generalisation to say that Australian brands are too dependent on the broadcast interruption model (of which TV spot advertising is the main solution) for their marketing needs.  never-the-less its a generalisation that I believe is true.  a reliance on this 20th Century marketing model isn't just down to the pressures and expectations of Coles and Woolies on media spends, but they sure as hell play a very significant part: too many brands over-invest in broadcast interruption because its what supermarkets want and expect to see on those brands' media schedules.  supermarkets' expectations are holding back brands' media innovation potential.

but the effect and influence isn't limited to consequences above-the-line (a term which I hate but I'll run with anyway).  prices are down.  great.  but its not the supermarkets funding this price decrease – it's brands.  manufacturers are paying for prices to be down with their below-the-line (ditto) budgets.  and because prices are down for good manufacturers will be paying for them to be down … for good.

Coopers_order
The Order of Coopers – owned and earned media curating a community for the brand

what is phenomenal in this context are the levels of innovation that do get out of markets and agencies' doors and into the world.  despite the vast majority of bought media investment being diverted to an outdated (and actually never that well proven model), Coopers – for example – have built a hugely utilised online site and community.  they are investing in owned and earned media that are building a community with direct links to their brand and business that side-steps the supermarkets' Death Stars.

brands, it would seem, are starting to have had enough.  the Supermarket's weaponary have become simply too powerful to ignore.  to paraphrase Senator Organa, 'the more you tighten your grip Coles and Woolies, the more brands will slip through your fingers'.

the rebellion, I very much hope, has begun.

full disclosure: I work as a media strategist for several brands that have distribution through Coles and Woolworths in Australia.  the above comments reflect my, and my opinions alone.  the advice and recommendations I make to brands take these – as well as other – opinions and considerations into account.

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