M&E Journal: The Evolving Television Supply Chain: Everything is Changing… and Always Will Be
By Tom Anthony, Senior Product Manager, Content and Licensing, Vistex –
Anatural consequence of advancing technology is the ability to get your content delivered to your end consumers faster and more directly. Today, the skills and technology to establish, run and enhance new platforms is much more accessible as well. The producers and owners of all that content are naturally seeking ways to maximize their revenue from that content, and cutting out as many intermediaries between production and consumption is one path to that objective. Easier access to SVOD platform technology and multi-channel networks like YouTube and Vimeo are providing shorter paths to consumers.
Disney announced that it will not renew its film output deal with Netflix in 2019, opting instead to setup its own SVOD service, which will carry the Marvel and Star Wars films. Disney is also looking to establish streaming and VOD platforms for ESPN. These moves will remove a few more intermediaries from the company’s supply chain.
The major networks are also doing their best to keep their content-to-consumer supply chain all in the family as evidenced by the continued trend to pick up and renew shows almost exclusively from their own sibling studios for the TV up-fronts earlier this year.
Consumers are changing
How do we “connect” with the world? Media, whether it be news, sports, weather reports, or television entertainment, is a primary conduit for that connection. Earlier generations seem comfortable with more aggregation (cable TV and Netflix subscriptions), while traditional TV viewing continues to decline as younger generations are finding satisfaction from the wide variety of sources and formats available to them.
We’ve also seen how consumers are moving away from the single aggregator model provided by the traditional multichannel video programming distributors (MVPDs). Given advances in technology and the desire by content creators to go more direct to consumers, the volume of SVOD providers is now exploding, and consumers can’t seem to get enough.
Advancing technology continues to provide more options to content providers and content consumers. Younger generations of viewers adapt more readily to those options, and the content supply chain continues to adapt to their evolving usage patterns. Younger viewers are quicker to adapt to devices other than the TV in the living room.
With easy access to services like YouTube, Vimeo and Go90, short-form content is taking off in a way not seen before. Millennials and Gen Z consumers are much more willing to watch TV on their phones, and short-form content works very well there.
As we all can see, cord-cutters and cordnevers are also changing the market. Traditional pay TV subscribers are on the decline. It’s still early, but this trend will continue and accelerate as technology proficient consumers mature and expand as a percentage of the overall market. And the number of U.S. homes with Netflix recently surpassed those with subscriptions to major cable companies.
The rise of the virtual MVPDs that don’t require the same distribution facilities as the traditional MVPDs is also creating opportunities for many people tired of paying a large cable bill.
The linear distribution model is still strong. We will still want to watch our live sports, news and weather, but the viewing of our scripted and reality programs on demand is becoming our default.
Aggregation is still key
Though content producers are searching for ways to get their content to consumers with fewer intermediaries, aggregators continue to provide the right mechanism for broad distribution. There is value to distribution and aggregation. There is a point where consumers won’t want to subscribe separately to multiple services to get the content they care about. They’re more likely to pick a few and adapt what they watch.
Consumers want to pay for what they watch, but managing too many sources isn’t sustainable. They also have a “digital budget” that includes their internet service and mobile phone plans. Expensive broadband will likely impact how much content they can afford, and how much they rely on ad-supported content instead of subscription based. Ultimately, consumers will be practical and find the balance between ala-carte and all-you-can-eat. At some point, they will want to choose a few aggregators, a few specialty providers, and call it done.
Content producers, distributors and aggregators will need to watch how that balance evolves, and place their offerings in context to determine how to advance in the market.
Everyone is evolving
Many traditional aggregators have now evolved to be content producers and suppliers as well. Netflix, Amazon, Hulu, HBO, Showtime and Starz all have made major moves into original content. It’s not clear yet where the mix of this original content and aggregated third-party content will end up. There is certainly more quality scripted content available from a wider variety of sources than ever before.
Interestingly, in a horizontal integration move, Charter recently merged with Bright House and Time Warner Cable to form the second largest cable operator in the U.S.
The major networks and studios in the industry are also creating new platforms for their content:
CBS created CBS All Access.
Disney is creating its new movie and sports platforms for release over the next couple of years.
HBO created its new HBO Now direct offering.
NBC-Universal continues to develop SVOD offerings, with an NBC SVOD service in the works.
Fox is even open minded about an independent SVOD offering, independent of its stake in Hulu, though it seems to be more focused on its existing distribution platforms for now.
Production and distribution is being driven by technology. While the larger players in our industry are integrating and shortening the supply chains, there is also an explosion of production companies, platforms, apps and distributors driven by the much lower barriers to entry allowed by advancing technologies.
And, if all that weren’t enough, traditional technology companies Apple and Facebook are now entering the fray with lots of money to purchase content or build production capabilities or both.
So where does that leave us? It’s too easy to get wrapped up in keeping up. Consider the following trends:
Vertical integration, and consolidation in general, seems to continue among the larger players in the industry, yet the proliferation of content producers is ramping up as well.
Technology is lowering many barriers to entry to many new companies.
New distribution and aggregation models are unsettling long-term delivery and pricing models.
Producers of content are looking for ways to connect more directly and deliver to their viewers.
Consumers are adapting and simultaneously driving the changes taking place in the market.
Managing exploitation and derivative rights continues to be a stumbling block as the supply chain evolves. It’s common to be able to watch a linear broadcast on one device and not another. We saw the frustration of many viewers earlier this year when the Golden Globes was aired on NBC, but could not be streamed due to NBC’s lack of online streaming rights. There are many cases where live sports can be viewed on one device but not another in the same home.
Rights management needs to evolve with the supply chain to keep these types of inconsistencies and frustrations to a minimum.
Thoughts for the future?
For a long time, we have all seen that the television supply chain has been in flux and is evolving exponentially.
That is certainly the case today, more than ever. We cannot expect anything different going forward. Media companies today need to ensure that they have excellent operational processes and data for managing their agreements, rights, content, and distribution; but they also need to develop excellent capabilities to analyze their own data, along with developments in the marketplace, to effectively plan for the future and how they will respond to, or even drive, the evolution of that marketplace.
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