In this month’s installment of our CMO series, Allen Ginsberg continues to offer insight into industry trends and highlights by discussing the rise of media apps and the impacts these developments have had over time. New to the series? Start from the beginning here!
In the last few years, the world of video content has been turned on its head.
Back in the old days, it was easy. There were three or four TV stations, strict government standards guidelines, and all programming was done by a few people in New York and Hollywood. We were told what to watch and, in general, we did!
When cable came along, programming was still controlled by the same people, but there was a lot more content to watch (especially sports- hello ESPN!), so we were happy. There were hundreds of channels; we could have our fill of travel, home remodeling, food and the Kardashians… and with HBO and Showtime, there were few (if any) guidelines on nudity, sex, and language.
Along the way, video recorders allowed viewers to decide when we wanted to watch. There was no need to stay home to see our favorite shows - we became our own programmer by shifting time and got our first taste of binge-watching. But we still had to live with the cable companies and their terribly overpriced packages. If you wanted ESPN, you also had to subscribe to the Soap Opera Channel. Too bad for you!
But technology saved us when high speed video came along. A consumer could be selective without a cable subscription, and you never have to worry about wiring cable into every room in your home. Consumers have flocked: we’ve cut cable with abandon. It’s projected that over 50 million homes will cut cable by 2021, with the number of “cable nevers” increasing as well (younger consumers who never had a cable subscription).
With the freedom of streaming, we began to select services that fit our needs. Netflix morphed from renting and mailing over 1 billion DVD’s to our homes to becoming the biggest streaming service in the world with over 140 million worldwide subscribers. Their services are only $10 a month with no annual commitment required – a far reach from the controlling cable packages of the past. In the beginning, Netflix licensed existing shows ("Friends" and "The Office" among the highest rated) but is now the number one investor in original programming with over $13 billion committed in 2019.
The changes didn’t stop there. The networks and other content providers realized that instead of licensing their content to Netflix and other streaming services, they could sell their shows directly to consumers.
CBS launched the first stand-alone consumer app, for five dollars a month and quickly signed up over three million subscribers. The app provided access to hundreds of old CBS shows, such as "I Love Lucy" and "Hogan’s Heroes". However, the app did not include most live sports, as networks like Verizon already created deals with groups, such as the NFL, for exclusive streaming rights.
Very quickly, all the networks wanted to get into the app game. With various mergers and acquisitions, the landscape took a few years to come into focus. Now that much of that work is done, we have many new apps that are here or about to be launched.
(HBO Max Icon)
Launch date Spring 2020. Pricing TBD, but will probably be in the $15 monthly range, which is about what HBO is selling for now. AT&T (having just completed their purchase of Time Warner) is launching HBO Max. While HBO started selling a stand-alone app a few years ago, the new app will be lower-priced and include Time Warner programs.
Time Warner is newly merged, combining HBO with the Warner Brothers TV Studio. The new company has announced fresh programming as well. And after cancelling their deal with Netflix, they will be launching the app with the perennial best repeat show of all time, "Friends".
Disney, having recently completed their merger with Fox, is launching Disney +.
Launching around Thanksgiving this year, the Disney app, expected to be priced around $6.99 a month, is projected to garner 70 million subscribers in the first three years. And given their volume of programing, this estimate is probably not a stretch. Programing includes "Star Wars", "The Lion King", "Toy Story", Disney Animation, and Marvel Studios. The library includes over 7,000 TV episodes and 500 movies.
NBCUniversal has announced that they will be launching a new as of yet unnamed app that will include a variety of NBC and other network programming as well as CNBC. Service is scheduled to begin mid 2020. The twist for NBC is that they are going to approach consumers with two choices: the app will be free with commercials and $12 for a commercial-free version. A variety of shows from NBC, Bravo, USA networks will be available as well as many movies from Universal Pictures. "The Office" is the biggest draw for repeat viewers, the number-two most watched show on Netflix.
(Apple TV+ Icon)
Apple is launch Apple TV+. The difference for Apple is that they have no programming to fall back on. Based on their recent press event, the App is scheduled to launch Fall 2019, but they have not provided pricing to date.
In terms of programming, Apple announced a deal with Reese Witherspoon and Jennifer Aniston (of debut drama "The Morning Show"), Oprah (of Oprah, Inc.), and Steven Spielberg (of "Amazing Stories"). Sofia Coppola, Ronald D. Moore, Kumail Nanjiani, and Damien Chazelle are also on the roster.
Netflix is still the behemoth in the group with over 57 million US subscribers. The service costs $12.99 per month for basic service but for a few dollars more, your adults’ children can be part of your service plan.
Netflix is losing its top two programs to HBO Max and NBC - "The Office" and "Friends". But Netflix continues to spend heavily on original programming. The company spent $13 billion on original content and produced over 700 new shows in 2018. 23% of all U.S. adults stream Netflix daily and over 40% of 18-34-year old’s watch Netflix “most often”.
(Amazon Prime Icon)
Included in your Amazon Prime account is Amazon’s video streaming service, Prime Video. Because of this inclusion, it wasn’t that hard for Amazon to get Prime to 100 million subscribers in the U.S. by 2019.
Amazon has licensed a number of traditional TV shows (such as "Frazier") but is pushing hard on producing original content, some of which is paying off big time based on awards received. The network received eight Emmy Awards for "The Marvelous Mrs. Maisel", "Jack Ryan" (from the successful Tom Clancy book series), and "Homecoming" (starring Julia Roberts) to name a few. Amazon is on pace to invest $7 billion in content in 2019.
As of February 2019, ESPN had two million subscribers after a few months of availability, at five dollars a month. This has not yet made up for the over 15 million subscribers lost to cable cutting, but it’s certainly helping. ESPN predicts 12 million subs by 2024. Not all programming is available on the app. Again, the NFL has a separate license. While you can watch Monday Night Football on ESPN using your Cable subscription, you can’t watch it on ESPN+. But for those who love Ultimate Fighting, Boxing, Rugby, and Major League Soccer, this app might be for you. Also, every match of Wimbledon and the US Open Tennis tournament are available on the app.
So, what does the future hold? We are certainly living in the era of subscriptions. We rent our phones, our music, and many of our computer programs. More consumer choice is inevitable as companies test how many apps they can sell us. For example, NBC hasn’t included CNBC in the new app because they know that consumers will pay separately for that service. The industry is trying to figure out how they can slice and dice offerings for maximum revenue. The real question is - how will we live without stumbling across "The Real Housewives of Chattanooga"? The changes certainly have an impact on how marketers approach and buy paid media. We will cover these changes and their impact in the next few months. Stay tuned...