Chasing the New Normal

May 2015

Chasing the New Normal

We are in a period of rapid if not accelerating change in the way that content of all kinds is produced, distributed and consumed.

In the past, no matter the kind of content, well defined distribution windows were normal and were followed consistently by distributors.   That is no longer the case.

Those distribution windows and other barriers have been broken and will never be repaired or returned to what was “normal.”   Companies, some new and disruptive, and others who have long been mainstream players, are searching for what might be the new normal as a means of attracting an audience to their offerings in the increasingly fragmented marketplace.

Indeed, the various changes that have occurred in recent years and those that many of us forecast for the future, do not indicate a new normal any time soon.

Never looking back – We often use this phrase in the context of a technology, product or service that is no longer in use or for which the “new” version, however defined, is now dominant.

From a statistical point of view, it is often cited when the old and new cross paths in their respective trajectories, or that trajectory has already passed its tipping point and has the requisite momentum to never look or turn back.

For a lot of technologies and products, there is no looking back, only looking forward to where the “new” will land and where and how that is going to impact the various businesses, industries and consumers involved.

As a part of that search for the new landing spot, organizations are chasing the new normal. They may never find it.

For example, it was announced recently that Comcast now has more broadband subscribers than TV subscribers.   The trend has been emerging for some time, even with some periodic quarterly fluctuations, but the trend clearly demonstrates that there is no looking back.

Perhaps we should now call them Broadband companies as opposed to Cable companies, making that name the new normal.

Over the top and through the middle – Cord cutters and cord shavers are at the root of the changing mix in these companies, since for a large and growing segment of the population, having a broadband connection of one kind or another provides them with sufficient access to the content they want.

Indeed, it is the rise of the multi-channel networks (MCN) that is at the forefront of the significant changes that are taking place.   NetFlix primarily, and other streaming, over the top services such as Hulu, Amazon and You Tube, with all of the MCNs that are resident on that and other similar platforms, are the drivers of the change.

They have all been creating a significant amount of original content in order to keep feeding the beast that has a voracious appetite.   But, as they spend prolifically for the new and original products, they also need to keep feeding their revenue streams, requiring a constant campaign for new paying subscribers or for the advertisers that see the value and are willing to spend to attract the target audience.

As a result, their delivery process has added a new dimension, of being available through the middle of the set top box as well, the same way that content has been delivered to our TVs for many years in the old “normal.” While this transition is still in its very early days, the trend is noticeable and it may continue.

Competition for the viewers’ eyeballs, and in turn their wallets, is intense, so while this is occurring, HBO, for example, long resident on the set top box, is now also making its service available to those whose primary means of accessing the content is streaming.

Their stated goal is to attract the 10 million or so US households that have broadband but do not pay for a TV service.   Before the change, subscribing to HBO required purchasing a bundle that included substantially more channels than most people could watch or even wanted, and certainly did not want to pay for.   For the longest time, that was the “normal.”

Attracting the 10 million – Other companies have started their over the top services as well, offering a smaller bundle at a lower price than most often charged by the cable and satellite providers.

These include the first out of the box so to speak, Sling TV, that initiated its service earlier in 2015 and which included in its package ESPN, the most expensive part of the bundle, no matter who the provider is.   Among the others are Verizon, CBS and PlayStation VUE.

Other content owners and/or aggregators will be jumping on this concept before long, hoping to catch a share of what might be the normal as cord cutters and cord nevers buy in.   It is so early in this cycle at this writing that subscriber counts have yet to be revealed by the various companies, so it will be some time before we have a clear indication of the trends and insight into the degree of success these companies will enjoy.

Getting the content to the TV for those that want to watch on a larger screen is easy given the proliferation of streaming devices. Research firm IHS recently forecast 31 million devices to be shipped globally in 2015.

But the challenge will be who can offer the best package for the right price, an aspect that continues to inspire and attract competitors and, of course, the consumer seeking content in the changing environment.

Other parts of the normal – The foregoing is merely the tip of the iceberg as to what is occurring unabated in the chase for the new normal.   Changes are occurring at many other points on the value chain that may further indicate that a new normal will not occur, including:

• Who supplies internet access?     Cable, telco or mobile network? Mobile networks are offering increasingly higher speeds and an ability to create a wifi hotspot to connect to devices;
• Impact of non-legacy business models outside the US that may ultimately impact US creators;
• Over the air television (OTA) is making a comeback, fueled possibly by the now defunct Aereo, which reminded consumers of the viability of OTA, especially when a cloud DVR system was a part of the system.     Widespread OTA with broadband for other content will impact the normal;
• Binge watching through OTT, VOD and the 50% penetration rate of DVRs is impacting the way we approach content;
• Live events of all kinds, from traditional TV to streaming such events as concerts, Periscoping the recent boxing match, etc. are having and will continue to have an impact;
• Mobile – with Facebook announcing recently that 75% of the videos watched on their platform were being watched on mobile devices, mobile tech is now a part of normal; and,
• Many other aspects of content production and distribution all disrupting what we do.

Content producers and distributors are working hard to attract an audience and strike the right balance on their quest to find the new normal.

The question is, will there be a new normal, and if there is, what will it be?

As for The Shindler Perspective

Since our last newsletter subsequent to CES, we have been busy on several fronts from our work with clients to attending NAB and the various panels in which I have participated at industry conferences.

NAB – This annual event was well attended this year, with some 103,000 in attendance.   Our take was that the changes we saw were mostly incremental over last year and prior years, other than a very impressive and noticeable uptick in the number of companies involved in various aspects of virtual reality and drone technologies.

I was pleased to offer some commentary to Randi Altman’s postPerspective and to be interviewed by Steve Waskul of Waskul TV at the Studio Xperience.   The link to Waskul was not available at the time this newsletter was released, but will be posted on our web site when available.

SMPTE – On Tuesday, May 19, 2015, I will be a panelist at the Hollywood section’s monthly meeting entitled OTT-Side effects of over the top. This will be held at the Academy’s Linwood Dunn Theater. Panelists include:

• Stephen Cronan, CEO, 5th Kind
• Jeffrey Gilbert, Director Verizon Digital Media Services
• John Griffin, VP of Digital Entertainment, Dolby Laboratories
• Christophe Louvion, COO, M-Go
• Claudio Ludovisi, SVP, Marketing & Digital, Operational Strategies, NBC/Universal Entertainment
• Tom Munro, CEO, Verimatrix
• Marty Shindler, CEO, The Shindler Perspective, Inc.
• Moderator Steve Wong, Director Telco & Media Sales Americas, Siemens.

Digital Hollywood – Always a great industry conference with a wide ranging and attentive audience, I was once again involved in two smart, very topical panels that included executives that enabled us to inform and engage the audience.

The first panel was The Future of TV: From Primetime to MultiPlatforms: Wall Street Analysts Meet Entertainment Executives which was streamed live and is available for viewing at the preceding link. Read the topic summary here.  See a picture of the panel here.

Next up was Hollywood Strategies – The Multi-Platform Brand – Theatrical, Video, TV & Mobile – Multiple Screens are the Future – the 360 Degree Marketplace.   Read the topic summary here.  See a group picture of the panel here.

Stay tuned to our Facebook, Twitter, LinkedIN and Google + posts for news of forthcoming speaking engagements and our take on various news items.

Trends in the Marketplace and Other

Tracking trends through regular and even periodic data points helps to analyze the direction in which various industry segments and industries are moving. Never looking back often is the product of those trends.

Never looking back

The Comcast announcement that they now have more broadband subs than video is significant. While there remains the possibility of this turning around, the reality is that it will not.

The Hollywood Reporter published a report on May 13, 2015, that [Brian] “Roberts also told the overflow audience of Wall Street analysts about a conversation he had with Bill Gates when the Microsoft co-founder invested in Comcast in 1997. Some day you’ll have more data customers than video customers, Gates told him.” It took 18 years to get to that point, but the trajectory was clear to Mr. Gates at that time.

Searches – Google announced in early May that searches in the US conducted on mobile devices exceeded those from PCs for the first time.   Note, too, Facebook’s announcement that 75% of the videos watched on that platform are on mobile. No looking back on this one.

Music – Revenue in 2014 for digital music matched the total for packaged media and albums at 46% of the total. The digital music trend has been building momentum for many years and for some, it will come as a surprise that this cross over in their respective trajectories did not occur sometime long ago. According to the LA Times on May 13, 2015, per the International Federation of the Phonographic Industry, 41 million consumers globally have subscriptions generating $1.6 billion for streaming music in 2014.   No looking back here, not even with a so called resurgence in vinyl that accounts for approximately 2% of the market.   This is a very competitive market segment with numerous companies vying for marketshare.

India – The country’s regulatory authority reported that India is now the third largest TV country in the world, behind only China (#2) and the US (#1).   Will it become #2 in the future?   Probably. It will certainly not fall further back on the list.

Looking ahead – In February, China’s box office exceeded that of the US (excluding Canada as is not usually the case) for the first time, posting a total of $650 million.   Chinese New Year is in February, helping to drive the total.   However, this is a sign of the future, with China expected to be the #1 box office country in the world by 2018 or 2020, depending on which analyst report you read, but the point is clear.

Comics reflect reality

We have all been there in attempting to read or just accept those end user licensing agreements (EULA) that crop up each time we download new software or load in a new app to our devices.   Apparently, according to this Non Sequitur, some try to read and would like to negotiate the terms.

Dilbert always seems to say it best, no matter the topic.   This is on the way people understand or more appropriately do not understand social media.

As always, we welcome your feedback on our newsletters and posts on social sites on topics of relevance to our clients, past clients and prospective clients.

For The Shindler Perspective, Inc.

Sincerely,

Marty Shindler

Chief Executive Officer