July 2018 – and specifically the past seven days – will, I believe, go down in history as the fundamental moment in which streaming established itself a dominant global technology.
A bold prediction perhaps, and a moment that feels considerably less dramatic than the tipping points of mass adoption experienced with the mobile phone or World Wide Web, but one that will indelibly imprint itself on how consumers, businesses and societies reshape their thinking and output.
So what happened this week? Well, a number of things:
Ofcom, the British media regulator, released a report
The World Cup concluded
Netflix wiped $25bn dollars from its value
Not necessarily the most obvious indicators of a global technological tidal wave, but on further inspection, perhaps so.
First, Ofcom’s report, which stated that, for the first time in the UK, subscriptions to streaming services like Netflix, Amazon Prime Video and NOW TV had overtaken those to the so-called “Pay-TV” providers, such as Sky and Virgin. The fallout of this was the first dip in revenues Pay-TV companies have experienced in years.
Pay-TV is still streets ahead of the stream-only VOD (Video On Demand) providers, generating £6.4bn in the UK to their £895m, but the gap is closing. We’re already seeing this from the rapidly-shifting viewing time statistics of the British population, with TV viewing time declining, streaming time increasing, average age of TV viewers increasing and number of web-enabled devices per household growing at pace. This evolution is ongoing.
Next, the World Cup. An argument against streaming’s future dominance had always been its inability to compete with terrestrial television on the coverage of live global events. They don’t get much bigger than the World Cup, and this year, after France, Gareth Southgate and M&S waistcoats, streaming was the most significant winner.
In the UK alone, a record-breaking 3.8m viewers chose to watch the BBC’s coverage of the England vs Sweden quarter-final through a streaming device. Internationally, a staggering 486m attempts were made to stream the first 20 World Cup matches alone, with 6.9bn minutes of football viewed across 59m unique streaming applications.
Finally, Netflix – the world’s leading streaming platform – posted its quarterly figures, missing its customer acquisition prediction by one million, wiping out close to 15% of its value – around $25bn.
On the face of it, Netflix’s shortfall could read as a sign that streaming has hit its peak. However, looking into the data, a broader story emerges. For the first time, international customers accounted for more sales than US customers, as the brand – and concept of media streaming – lands and expands in new markets across the globe.
Further, some of Netflix’s slowing growth is down to the rise of streaming competitors. Amazon Prime Video achieved the 100m subscriber base Netflix achieved over a decade in a single year. The BBC iPlayer, an international streaming platform under the Halo of “brand BBC” is a growing force in VOD, with exclusive access to content adored around the world. Disney is planning to launch an internet version of ESPN, its sports network, from next year, with Apple investing more than $1bn in original content.
All in all, quite a week for streaming. But what does it mean for consumers, and, by extension, the companies trying to woo them?
The ecosystem that media streaming continues to build around itself is one that offers incredible opportunity. From production houses and content creators to device manufacturers and streaming application designers, the net effect for consumers will inevitably be increased choice and far more competitive pricing. The likes of Amazon Prime, NOW TV and Netflix will no doubt look to emulate the mobile phone industry of the late 1990s and early 2000s; undercutting each other in order to secure invaluable customer loyalty before the market becomes saturated.
The Pay-TV giants, Sky and Virgin, who have built their success on the “quad-play” offerings of TV, broadband, mobile and landline, will likely be pressured to decouple their catch-all packages to compete on content. Viewers with spending power in 2018 prefer high-quality Video On Demand to a package of 200 channels that many rarely watch.
Production studios will increasingly be able to market exclusive entertainment in competitive pitches, fully-aware of the potential for their content to drive subscriptions, much in the same way companies bid billions of pounds for Premier League football rights. (The current deal, running from 2015 to 2019, saw Sky and BT spend £5.14bn, up £2bn from the previous auction five years earlier).
One step removed from the broadcasters are the companies who depend on the advertising slots they provide. In a world of premium content, adverts don’t exist. Indeed, TV advertising revenues have declined 7% year-on-year. That poses future challenges to broadcasters and advertisers alike, and will further challenge the advertising industry to find cut through in alternative ways.
Consumer technology hardware manufacturers will build their products around the viewing habits of streaming audiences. Panasonic smart TV remote controls already host a bespoke Netflix button, with deeper integrations and partnerships across mobile, desktop, wearable and tablet form factors inevitable, given the rapid move away from TV viewing.
Of course, disruption of this scale to a global past-time like TV viewing – the UK watches 90-95 billion minutes of TV per week – throws up significant short-term challenges. For one, the viewing audience splits between the pre and post-streaming generations. Over-54s now contribute more than half of all broadcast television viewing in the UK, meaning terrestrial broadcasters looking to satisfy the masses increasingly have two distinct masters to serve, broadening their appeal whilst also seeing TV licence revenues decline (with 788,605 people cancelling theirs in 2017) and production budgets slashed.
Streaming looks set to grow and grow as a significant platform in our lives, joining the internet and global mobile phone network as the digital landscapes through which we will increasingly live our lives.
And as the internet and mobile industries have demonstrated, the biggest opportunities, for businesses and consumers alike, could well come from the global ecosystems and partnerships streaming will continue to create, and that offers a fascinating new frontier to a new wave of innovators and entrepreneurs.
So, stay tuned.