The Bulletin Edition 11
From The Desk of
Well, we made it to the end of 2020 and have now gingerly dipped one toe into 2021. Happy New Year to all my readers and I hope the holidays were a restful (rather than stressful) period.
Like many of you, my holiday period was unusually quiet. No travel (apart from daily walks around the city) more time to improve my culinary skills without having to worry about 15 people coming over for dinner and more time than ever to read, listen to music, radio and podcasts. I still had additional time to navigate the plethora of streaming services I subscribe to, with the hope of finding something to watch. With most of us housebound this season, I expect not only an uptick in streaming use in global households but also an increased focus on the consumer’s expectations of streaming service content quality, user experience and probably some juggling of subscriptions. Increased consumer use of streaming platforms means providers are in the crosshairs more than ever so it will be interesting to see the post-holiday season subscriber churn rates. There were some interesting items in the news, with the trusty webcam making it to “gadget of the year,” holiday e-commerce sales surged nearly 50% and consumers are buying larger-screened televisions than ever before (the at-home cinema experience?)
I usually work during the holidays, tinkering about with some emails and generally doing some “housekeeping” with administrative items I simply didn’t have time to address in the closing months of the year. However, my inbox barely pinged for the entire two weeks. It was as if colleagues, partners and customers around the world had simply had enough and everyone simultaneously hit the “off” button on the 24th. I expect to see my inbox overflowing tomorrow morning when I am officially back at my desk.
One thing for sure is that 2020 was about the internet. Industries that were poised to make that leap to online over the next 5 years were almost forced to take the step in 11 months. Consumer behaviour also changed, not by choice but by sheer necessity. Consumers that had resisted online grocery shopping because they “wanted to choose their fruit and veg and just browse” are now left wondering why they never used online ordering before. E-medicine has seen explosive growth this year and the trudge to the doctors’ office, thumbing idly through magazines or your phone while waiting to be called has been replaced with a prompt phone or zoom call from your doctor, with prescriptions emailed to your local pharmacy.
The holiday period was full of hour-long family dinners via zoom and anyone with a TV or an iPad had more time to explore apps, services and channels. I do not predict this trend to decrease in 2021. The growth in signups may slow back to pre-pandemic levels however the engagement and usage will not and will continue way into 2021, even if the positive news of vaccines means we can start opening our doors again.
As ever, thank you all for your support and words of encouragement and I wish you all the success for your coming week [C]
The Weekly Dispatch
MGM
2020 certainly put the need for content firmly on the map with many studios closed to filming due to the pandemic. On the flip side, consumers were stuck at home digging deep into streaming platforms content selection. No better time for those with large content archives, all ready to go. Pre-filmed and popular content is gold dust right now.
MGM, the studio behind the James Bond franchise, is up for sale with a price tag of more than $5bn. With a library of more than 4,000 films, 17,000 hours of TV content (with hits such as the Rocky series, The Hobbit, The Handmaid’s Tale) the complete catalogue would make a worthwhile investment for any streaming service or investment group. MGM has been mulling a sale for a while now, however with the pandemic streaming surge, holding on has seemed like an extremely good strategy to maximise the value of the catalogue. With 2021 penned to be one of plenty of merger and acquisition activity in the streaming space, this deal could be wrapped up in Q1.
Global streamers vs. Europe
Even with my home country now out of the European Union (no further comment needed..) the surge of global streaming platforms such as Netflix, Amazon and Disney, knocking on the doors of European countries and eager to pull domestic viewers away from their local channels and services is certainly ruffling feathers in the EU. Europe has other ideas and wants to create a geographical force to tackle what they see as a threat to Europe's “economic and cultural ecosystem.” Nick Vivarelli, writing for Variety, explores what could be the next stage of the geographical and cultural streaming wars.
Will Amazon take pole position with F1?
This is not the first time Amazon has been knocking at the front door of the sports world, an area that has predominantly been locked up with the long term and very expensive (and lucrative) deals with traditional cable networks around the world. In the UK, premier league soccer was exclusively tied up with Sky for many years until consumer monopolistic protest led to seasons and matches being broken up (with Amazon taking some matches) which then meant soccer fans needed 4 services, instead of 1, to watch the full season which then meant the consumer had to pay more than they had previously.
Now Amazon is rumoured to be in talks with Formula 1 to address the racing bodies growing need to move onto digital platforms to attract younger fans who wouldn’t or don’t have traditional cable subscriptions. With F1 losing nearly $400 million in the first nine months of 2020 due to the pandemic, the sport could use some lucrative deals right now and a shift to Amazon could be another big 2021 signing.
A world without Cinema?
As a lead in to the Focus section of this week’s edition, I have been thinking back to previous changes in the media and entertainment sector and the tendency to jump on the bandwagon of the pandemic putting the nails in the coffin of cinema, live music and theatre and we will now never leave our homes and everything will be available on our phones and TV sets. The old models are dead and now it's up to the creator and industry players to find new models or go out of business.
While this could possibly be true for a number of industry sectors, this shift will, of course, come at a price. The consumer has seen the benefits of life moving online but hasn’t yet realized the detriments that will come with it. An article that slipped through my net re-surfaced last week and made me think back to the days of “made for TV movies” which were typically low budget, middle to low (or unheard-of) actors and usually lacked most of what makes made-for-cinema films worth paying $20 to watch on the big screen. Owen Glieberman’s piece “Why an All-Streaming Movie World Won’t Look Like You Think It Will,” lays bare the realities of what a no-cinema film industry could look like and how it could affect the quality of films being produced. A very worthwhile read indeed.
The Focus
While the happenings of 2020 proved all predictors wrong at the end of 2019, there has been no shortage of tea-leaf gazing in the media for what's in store for us in 2021. Some predictions for 2021 are obvious (increase in streaming, online shopping etc) while others are more hidden and will evolve out of 2020. Without writing some long laborious piece on my crystal ball predictions, I have attempted to provide a “Cliff-Notes” version on what I have read and what I believe will be key in 2021. This is obviously not exhaustive so I would like to receive any comments and ideas from readers.
Music & Podcasts
The audio hardware sector (wearables such as earbuds) will continue to grow in 2021 but with the added demand for more integrated features and the ability and comfort to wear them for longer periods. Exercise, sleep and wellness functions will start to be integrated into wearables, tracking movement looped back to music and/or personalization.
Podcasts will expand, particularly around celebrity-driven shows and shows connected to films and TV series (particularly original content on streaming services) Popular musicians will also expand their usage of podcasts to reach their fanbase, particularly to start getting the younger generation to listen.
Streaming will become more than just pressing play however for these added features I expect subscription prices to continue to rise. Next level recommendation engines will appear utilizing AI, that is more in tune with the individual listener (even on a music channel) as opposed to human curation that serves only to a broader listenership. (Interestingly enough, AI is also being used now on the A&R side, with new tools appearing to select potential hit songs automatically out of thousands of submissions.)
Listenership will slow down on an individual basis on audio-only streaming services, especially amongst younger age groups as gaming and social media (such as TikTok) become more music-focused. This isn’t to say subscriptions will not increase worldwide, but I believe actual individual listening hours will decline in 2021.
M&A will be busy in 2021, with more publishing and song catalogues being snapped up either by the larger players or by investment entities (especially in publishing) I also see the major labels taking an interest in acquiring companies and song catalogues such as Epidemic, Soundstripe and any other royalty-free music company.
Artists will continue the fight for fairer deals from both their labels and the streaming services. With the downturn in live performances, revenue from streaming will become a key metric for recovering lost income or seeking better rates.
New revenue models for the music industry will accelerate, including gaming, fitness and wellness, live streaming and social media. UGC (user-generated content) will become a foundation of the future of the music business with consumers becoming music licensees and distributors. This is no more apparent than on platforms such as TikTok, Twitch etc. Note to readers: “Can TikTok rival MTV’s HeyDay for Gen-Z?” and “This Is Why You Heard About TikTok So Much in 2020”
Streaming video
Growth for streaming video services will continue in 2021, however not at the pace of 2020. As countries reopen and consumers start venturing outside again, viewing hours will decline and it will just be whether declined viewing will result in subscribers trimming the number of services they signed up to during the 2020 lockdown. Streaming services will also need to scale up their distribution in 2021 in order to reach a global audience via connected TVs, cable partners, mobile operators and streaming stick manufacturers.
Pre-filmed content will be in hot supply in 2021 due to production stoppages in 2020. With many studios also launching their own services this means less content for the big players like Amazon and Netflix to license.
M&A, I expect to see much M&A activity in the entertainment sector in 2021 with many strong players looking down on more pandemic-vulnerable players to snap up. Like the music sector, the content will be in strong demand along with production and existing services. I could see some of the smaller niche streaming services being acquired by larger players in the same market, genre or target demographic.
News TV will shift from traditional cable to online streaming offerings. Viewers will start deciding whether a 24 hours news channel serves their needs with so many other outlets across different devices and channels. Local news will also see a shift into streaming with better ad targeting and demographic sampling.
Sports is still a tough one to gauge. So much is dependent on vaccine rollouts and then how long it will take for the sports industry to get back on its feet. If it drags out too long, the sports fan may have already shifted to streaming as sports was the only reason to keep cable. There will only be so much of a window for consumers to keep paying for cable sports packages that don't carry any games.
Pricing will continue to increase across all streaming services. Already Netflix has increased their pricing and Disney is set to increase Disney+ pricing in March 2021, both bolstering confidence that the consumer will accept the price increases. This could make it harder for the smaller and niche services as the marketplace gets even more crowded (and expensive) yet at the same time, Netflix will have to look beyond price increases as a way to continually increase revenue. Its subscriber base in some countries is reaching saturation and with only one product, Netflix doesn’t have any other tools in its belt.
Churn will be a key area for streaming video services to address in 2021 especially after a record number of signups in 2020 and many free trials extending for months on end (including bundling a year free service with a hardware purchase, such as Apple TV) Keeping the new subscriber engaged and paying will be a key challenge in 2021.
Advertising revenue on streaming platforms (AVOD and FAST) will grow substantially in 2021 and so will the consumer usage of such free services. Advertising spend is returning and OTT offers new fertile ground for brands with better demographic targeting however OTT ad-fraud continues to be a major issue.
Live music and cinema
Live music events will not return until at least the fall of 2021, particularly for large stadium shows. I know this comes off the back of many hoping for a spring/summer 2021 return but if you look at the logistics of widespread testing and the global vaccine rollout, I do not see how it will be feasible or profitable for live music events to return for the summer. There are also many other areas to address including live show attendee testing or vaccination certificates plus all the legalities around both.
Live streaming will continue to fill the void of in-person events but music fans will grow impatient with crowd-less performances, particularly for bands that the crowd experience is part of the overall live experience. I do see a big return to live events, however, the length of time between the shutdown and reopening could leave many live players by the wayside until there are further government and industry financial intervention.
Cinema will need to evolve into a hybrid model. With the cinematic industry and business model not changed for decades, the pandemic has clearly shown the fragility of relying on real-estate and high priced concessions with small margins. Studios will continue to produce films but the ones already in the pipeline don’t have anywhere to be distributed. If cinema’s remain closed and are the last venues to be reopened, or have to open up at reduced capacity, the studios will continue to push for joint cinema and premium streaming at home release. I expect many cinema closures, not solely due to the pandemic but also because so much cinema real estate (particularly in North America and in the UK) is tied to shopping malls, that also have been taking a hit over the past 5 years due to consumer shopping habit shifts.
On Point
1$ - price increase of Disney+ coming into effect March 2021, to $7.99 (Disney)
50% - percentage increase of foreign-language titles watched by Netflix U.S. subscribers in 2020 (Netflix)
63% - percentage of Polish viewers who oppose ads on VOD services (Videotrack)
6 - number of hours per day consumers over 18yrs spent watching video in 2020 (Neilsen)
$4.23 billion - estimated Disney+ U.S. revenues for 2022, putting it on par with Netflix (eMarketer)
$270 - average annual income for 82% of music creators from streaming services (Ivors Academy)
70-inch - TV display size where sales increased by 82% in 2020 (NPD)
21 - number of extra hours UK households spent per month in 2020 watching TV (Virgin Media)
81% - percentage drop in U.S. theatrical box office revenues for 2020 (IMDB)
$19 billion - amount that Netflix is forecast to spend on new content in 2021 (Bankr)
Productivity
The productivity section of The Bulletin has been omitted in some past editions simply because unless I come across an article worth sharing, I decide not to include the section. The internet and all our feeds are full of “Top 10 ways to work better in 2021” and I don’t feel as though these types of articles reflect my objectives of this weekly, which is to provoke thought and to encourage your own ideas.
With many industries and tasks being automated, it’s tempting to look at how this could affect our own work and industries and the careers and roles of future generations. This great article from Forbes delves deeper into changes on the horizon and how jobs will be displaced to automation and digitization but also more jobs will be created to bridge the gap between the division of labour between humans, machines and algorithms. A fascinating read indeed and something to think about for your own personal skills and career growth path.
Diversion
Many of your may have seen this video over the holidays however for those that haven’t it still became of diversion of choice for this weeks edition. If you have followed robotics over the past 5 years you will no doubt have seen many lumbering robots stumbling around or trying to accomplish the most simple of tasks. With balance, coordination and the entire nature of robotic technology, the below video is an astounding example of how far the robotics sector has come and gives us an insight into the future. I must say, I prefer the notion of happy, dancing robots to gun-wielding Transformers, at least in the short-term.
Visual Insight
And Finally
The role of a fixed address
Over the past few years, the rise of “the digital nomad” seemed like a dream for many with the notion of travelling the world while sending emails from the beach and posting photos on Instagram to rile up those stuck back in the office on the 9-5 hamster wheel. Well 2020 changed all that, and for many global travellers, the digital party was over, and they had to pack up and come home, whereas those who were stuck at the office suddenly had the luxury of working from wherever they wanted (or from what room of the house)
This article subheading from Wired, “States are predicated on the idea that people live at fixed addresses. Are they ready for that to change forever?” piqued my interest as a number of friends and colleagues around the world have recently chosen to work out of one country (or multiple) but their business is registered in another. Estonia has become the first country in the world to offer an e-residency program, a borderless digital society for global citizens who want to start an EU registered company online.
Kersti Kaljulaid, writing this article for Wired, raises some fascinating points about the connection between governments, cities, taxes and the economy with the notion of keeping companies and employees within a fixed location (i.e. the city and the office) If online work and education function just as well within a local jurisdiction, then why can it not work with the citizens living somewhere else? I could choose to work for a UK company and my children to attend a UK school but live outside of the UK. It’s a drastic change from what society is accustomed to but leads me to wonder about the future role of borders and the connection between penning citizens into a city or a country.
Checkmate
As 2020 spurred record online sales of puzzles, wooden toys, sporting and recreational goods and plenty of nostalgic collectables, the role of streaming services in the increase of physical good sales also cannot be ignored. I read that Barbour is doing brisk business with its renowned wax jackets as global viewers of The Crown series are opting for that royal and country look.
I was pleased to see that the good old game of chess has taken off like a rocket since Netflix's “The Queen's Gambit” was released, with the show being watched by 62 million households in the first 28 days after its release, more than any previous Netflix scripted limited series. This led to some chess set retailers seeing a 1,100% increase in sales over the holidays. Bloomberg covered the spectacular rise of chess due to the series in this article, highlighting that on Twitch, more than 70,000 viewers tuned in to watch one game. If chess going digital means life can be reintroduced into this classic game, then I’m all for it.
This concludes this week’s edition of The Bulletin. If you would like further details on anything mentioned or have questions or suggestions that you would like to discuss on email or to schedule a call, please drop me a note.
Cheers and thank you for your support and I wish you all the success for your coming week.