The Bulletin Edition 18
From The Desk of
Subscription, subscriptions, subscriptions. As 2020 spills over into 2021, it seems as though the consumer appetite to make regular online payments for the exchange of goods and services, as opposed to a one-time charge, shows no signs of waning. During the golden years of layaway, deferred payments, big-box department store credit cards and even record clubs (remember those?) You could receive goods and services immediately and then pay the full price in small installments over the next 12/24/36 months. By the time you had finished paying, the item or service you bought was already out of date, in need of repair, and off back to the store you would return to buy the new latest and greatest model.
Fast forward to 2021 and we are already seeing the horizon of a completely new way of consumerism. Subscriptions. Ongoing regular payments that not only allow the consumer to manage the products or services they receive (on an ongoing basis) but more importantly, subscriptions allow brands to build up a constant and fluid relationship with the customer. Imagine committing to paying for three years of Netflix upfront and the streaming company charges you once a month for 36 months. However, during those 36 months, you don’t receive any new content, until you renew your 36-month contract?
Now we are moving to fitness wearables that cost nothing, apart from the monthly subscription (Whoop), expensive eBikes that can now be rented instead for $99 a month, including delivery and ongoing maintenance, rumblings of the fashion industry dealing with the rejection of “wear it once” and now are looking at clothing subscriptions that cover basic outfits and items but also include recycling and resell marketplaces. Even with the sudden and terrible weather that Texans have been dealing with over the past few weeks, consumers are willing to pay a monthly price to own a backup generator, instead of the usually higher cost of buying one outright.
With subscription services on one side and the consumer on the other, the next wave of startups will be those that support the subscription industry, either with better analytical tools, pick up and delivery, churn management and customer insights. Gravy, a new startup that recently received $4.5 million in A-series funding, works to re-acquire customers lost through involuntary churn, a process that happens when a subscriber doesn’t mean to cancel their service but drops off due to expired credit cards, or their payment fails or many other reasons. Olive, another startup, believes that same-day or even 2-day shipping is terrible for the environment and also a logistical nightmare for retailers, so they aim to have consumers choose one day a week where they receive all their packages ordered, and not all in separate cardboard boxes. Olive works with retailers to aggregate all purchases and deliver them in a secure Olive delivery box that customers leave at their homes.
While 2021 will continue to see the rise of many subscription alternatives for the consumer, streaming TV subscriptions lead the pack in terms of adoption and the overall percentage of household spending, with 98% of U.S. consumers now subscribing to at least one streaming service. Partly due to the low cost, ease of sign up and perceived value for money of streaming, it’s only a matter of time before food, fitness, delivery, banking and transport will also want a part of consumers’ monthly budgets.
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
Roku Earnings
Roku streaming platform released its Q4 2020 earnings this week, beating expectations by posting record revenue and swinging to a quarterly profit.
Highlights:
4Q 2020 record of $650 million, up 58% from 2019
Net profit of $65.2 million for the quarter (analysts expected a loss)
Added a net 14.3 million new accounts in Q4
Ended 2020 with 51.2 million active accounts (up 39% YOY)
Ad-support Roku channel doubled its U.S audience reach with an estimated 61.8 million people in Q4
Roku stock (which has seen recorded highs all throughout 2020) rose 3.9% in after-hours trading, after gaining 42% throughout all 2020.
Roku’s platform business increased 81% during Q4 to $471.2 million
In total for 2020, users streamed 58.7 billion hours on Roku TVs and devices, an increase of 55% over 2019.
The company also stated that Roku is now the number one smart TV operating system in the US, with 38% of all smart TVs sold in the US being Roku models. Sales of Roku streaming devices grew by 28% during 2020. It should be noted that Roku is relatively unknown outside North America (in Europe the Amazon Fire TV platform or stick dominates) so with their recent push into other territories (by partnering up with TV manufacturers) Roku’s global steam train is only just getting going.
Roku’s U.S. active account base is now more than twice the number of the U.S. video subscribers of the biggest cable company
Other noteworthy mentions:
No timelines for when Roku will be releasing the 75 shows it purchased from now-defunct short-form service Quibi
Roku curiously placed a job ad looking for an attorney to work on its “expanding slate of original content,” setting industry tongues wagging on whether Roku will start developing their own originals. In 2019 Roku CEO Anthony Wood stated that the company “had no plans to create their own content,” choosing to focus on licensing from third parties instead.
Roku appears to be testing a rechargeable remote which would be an upgrade over the traditional AA battery-powered ones that then mysteriously stop working when the batteries are taken out for another device… According to a post on Reddit, Roku is testing the new device with members of its Early Access Program.
Will India be the next streaming battleground?
Amazon announced this week that it will start manufacturing Fire TV sticks in India in order to meet the government’s “made in India” regulations. Amazon hopes to make hundreds of thousands of sticks a year to meet the demand of Indian consumers. Amazon is not the first company to set up manufacturing facilities in the country as Apple was recently prevented from selling iPhones in India unless it sold more made-in-India goods. Apple is now manufacturing phones and tablets within the country.
On the streaming platform side, it is clear that Disney+ and Netflix see India as the next battleground for subscribers after both services are reaching market saturation point in other markets. Some analysts have predicted that the Disney+ Hotstar service will have 98 million subscribers by 2026, dwarfing Netflix’s estimated 13 million Indian subscribers. It is certain to note that India is the only country where analysts see Disney overtaking Netflix simply due to the nature of the Disney+ brand, its franchises, India’s young and upwardly mobile and tech-savvy population and the dominance of Indian local content on existing platforms. NDTV has a very good overview of the streaming marketplace in India for further reading. The only challenge to all streaming platforms as they venture out of the highest-priced markets to more budget-conscious territories is ARPU. Both Netflix and Disney+ are priced very low and aggressively to attract new subscribers in countries like India, however, the overall monthly subscription fee is much lower than that of the same service in the U.S. or Europe. Analysts should take note that in future earnings calls, the enormous growth in the world’s most populous countries will affect the service ARPU and whether this will come as a surprise or just a fact of going global, is yet to be seen.
BBC continues its international push, but trouble is brewing back home
In the 10th edition of The Bulletin, I mentioned that the BBC would be rolling out a new standalone streaming service called BBC Select. Well, this week was the week and BBC Select has now officially been rolled out across North America. Available through Amazon Prime Video as an add on and also on Apple TV as an app, the Select service will focus on culture, politics and ideas. The lineup will be existing BBC shows, along with planned originals.
Back when it was previously announced, I said such a move was a confusing one and didn’t make sense for an international audience who see the BBC as just British Television. All British programming is “the BBC” to an international audience, who even thought Downton Abbey was from the BBC (when in fact it is an ITV production) British television and the BBC are just completely synonymous with each other so it didn’t seem to make sense to have subscribers to Britbox (the BBC/ITV joint-venture streaming platform) have to pay for another subscription to other BBC content. I would quite happily pay more for my Britbox subscription if it came with BBC select and the idea of a standalone BBC streaming platform, encompassing Britbox, BBC Select, BBC News and lots of other “beeb” content just seem like a better value offering and global strategy. It will be interesting to see how the British content loving international audience warm-up to another service when there is already Britbox and Acorn TV slicing and dicing British television into many pieces.
In other news closer to home, the acclaimed screenwriter Russel T Davies (Doctor Who) had stark words of “the BBC faces oblivion” in the face of international streaming platforms such as Netflix et al. There is no doubt that the BBC produces some incredibly high-quality programming however in an era of “switch on and zone out” and “binge-watching,” will this be quality over quantity, at the expense of well-written scripts?
Discussed
As always, Discussed covers a few notable topics that came up this week during my interactions on social media and in communication with colleagues that I think are worthy of sharing. The discussions are cross-industry but as you will find, we are all merging into this digital world now where retail, home, entertainment, fitness and travel are all starting to morph together. Hopefully, my notes and observations below will get you thinking and any additional contribution to the topics is always welcome so please get in touch.
The sports entertainment sector is a bit of a mess: As mentioned in last week’s edition of The Bulletin, 55% of U.S. TV households only keep their cable subscription for sports. Yet at the same time, the entire spectator sports industry is in rather a pickle not because of just COVID but also because of the new streaming era. So who has what and who is doing what? If we are to understand the future of Sports, we have to understand sports media rights. TV Rev has put together a good overview of the U.S. sports marketplace and just who owns what. Let’s start here:
The music catalogue buying frenzy could end in tears: The almost daily news of yet another singer or songwriter selling off their wares (or part of them) to an investment fund has slowed down over the past few weeks but that doesn’t mean transactions have slowed in the background. With live-touring on hold indefinitely, many legacy artists are cashing in their chips to pull some future investment out of their recording royalties. Having some personal experience in this field, it’s clear that the creator is benefiting from an upfront check however it’s more the worry of whether the buyer knows what they’re getting themselves into when they just fronted 25 times a song’s historical royalties. This fixed income structure, sitting on top of low-interest rates and the rise of streaming could spell trouble ahead however like they say “the old classics never die,” I just hope all these legacy recordings are still passed from generation to generation in order to recoup these enormous purchase prices.
Legal streaming platforms are crushing piracy in Indonesia: In a region historically plagued by illegal downloads and piracy, news came out this week that Indonesia has managed to cull traffic to piracy sites by 73% between August 2019 and January 2021, according to a report from the Asia Video Industry Association’s Coalition Against Piracy. The increase of available streaming platforms in the region (the top 5, in millions of subscribers, being Disney Hotstar Plus, Viu, Vidio, Netflix and then Mola TV) plus the combination of offline viewing options, including Migo, a service that allows a subscriber to download content to their phones from a convenience store booth, has clearly put out the Indonesian piracy fire.
From “Streaming Revolution” to “Streaming Recuperation:” Streaming is the future and we went from the streaming wars to the streaming revolution in 11 months. Now, what comes next? It will soon be time for streaming services to peer at the balance sheet to see how all this content and expansion will be paid for once the lockdown ends and consumers are desperate to watch something that isn’t on a screen less than six feet away from them. Games Radar’s “Total Film” sections explores some of the challenges the industry could face post-lockdown
Windowing? More like circus mirrors: Similar to the sports sector, the traditional movie window has also been turned into a circus hall of mirrors, leaving film fans confused and bewildered as to where to watch the latest releases. It used to be quite simple, a new film was released and after much pent-up promotion, awards and festivals, the film had a box office date where movie lovers could turn up at the cinema and quite happily eat popcorn. Then the film would appear on PVOD for those that missed the theatre release period. Now with cinemas closed, studios looking at PVOD windows and streaming platforms fighting to carve up this easy-to-understand film release window, it’s no wonder the consumer is completely confused as to where and how to watch the latest releases.
Will smaller streaming services be snapped up by larger platforms?: Today there is barely anything that resembles an independent music label as most were bought by the three major labels or are distributed by them. What will happen in the streaming world? With over 350 streaming platforms out there, many serving niche audiences, could some of them get snapped up by Netflix, Disney and Amazon? The “go-big” strategy seems to be the way to scale up in order to reach as many subscribers as possible, however, there is also not an infinite amount of global potential customers out there either. Merging services together could be one way to justify the price increases while demonstrating more value and choice for the monthly fee.
To free or not to free?: All the big streaming players have done away with free trials, relying on their popularity, content, brand strength and sheer dominance to not see any reason as to why a potential subscriber would need to “try it out.” But what about all the other services? How much longer can the humble free trial be part of the subscriber acquisition arsenal? And at what point should a streaming service decide to do away with the free trials? Could a weekend pass be a better option? Instead of $10 a month or 7 days free, a $1 pass for a weekend instead?
Do older streamers need a different UX/UI?: This question popped up in an article I came across and did provoke some questions. Everything UX/UI-wise has always been about customization from webpages to social media, to devices and phone operating systems. Yet streaming platforms are all exactly the same, regardless of age. I won’t start again on the fact that streaming subscribers should be able to hyper-customize their streaming platform home pages, opting out on genres they don’t want and having more control over recommendations, however, this article from Fierce Video highlights some interesting questions, especially as older consumers are adopting streaming services. Can streaming platforms have one-way works for all mentality when it comes to the interface?
On Point
$60 billion - The predicted market size of the live streaming sector by 2026 (TMR)
10th - Where the UK stands in the worst category for broadband speed and value for money (Global Broadband Index)
98% - The percentage of broadcasting executives that say Covid-19 has permanently changed the TV industry, especially audience consumption and the production processes (3Vision)
22nd February - The date Spotify will give a “special” online live session exploring the power of audio, with surprise announcements and guests (Spotify - link here)
$230 million - The amount iHeartMedia paid for the podcast giant Triton Digital (iHeart)
60 minutes - the length of the “music for sleep” track Keith Urban has recorded exclusively for the wellness app Calm (Calm)
3 billion euros - 2020 revenue of pay-VOD in Germany in 2020, a 28% increase compared to 2019 (Goldmedia)
10 minutes - the length of time Disney+ went offline this week, after the latest episode release of WandaVision (Twitter)
75% - The percentage of UK SVOD households that say they “have all their content needs” met with existing SVOD platforms (Amdocs)
48 hours - The length of time the movie “The Trial of the Chicago 7” will be available to watch on Netflix for free (and without a subscription) (Netflix)
Quote
“Just five to six years ago, if you had a non-English show, in Europe for example, your market was basically limited to the dubbing territories, so Germany, Italy, Spain, and Eastern Europe. Now you can sell it anywhere. The advantage with the streamers is there are no broadcast ‘slots’. There is no limit to real estate. So the platforms can experiment”
Jens Richter, CEO of International at Fremantle, speaking about the growing global streaming demand for already made and ready-to-go, non-English language shows.
Diversion
As always the Diversion section of The Bulletin takes you completely out of the streaming narrative, yet hopefully provides you with some insight, education or just a diversion that makes you think “I didn’t know that” or “that’s really interesting, how could that apply to my own business or industry?”
This week’s diversion explores the concept of shelf space rental in stores in Nairobi, where instead of having to rent an entire location and manage staff, product owners can rent a shelf in an existing retail location. Whilst much of retail has transcended to an online environment and the concept of going into a physical store (especially during the past 12 months) seems almost a strange activity to many of us, I am always fascinated by how different ideas pop up as a result of changing consumer habits, lack of online shopping or delivery infrastructure, retail store dynamics and sometimes, the still-existing need to see products in real life.
And Finally
Why are we so nostalgic about our choice of music?
I’ve always said that as I have gotten older, my music collection has gotten smaller. I still listen to the same albums and artists from my school and college years and with life, work, family and all other commitments (trying to get through seasons on Netflix) the youthful habit of exploring new songs and bands dried up a long time ago. My playlist or streaming album selection hasn’t changed in over two years and lean-back talk or classical radio tends to fill my house during the day (which again tends to be the same songs on a repeat schedule)
A recent study, published in Music and Science has come up with some of the reasons “Why do we think that music from the past is always better?” Kelly Jakubowski, writing for The Conversation, explores the study in more detail. A very nice Sunday afternoon read to ponder about.
Fortnite is now hosting film festivals inside its platform
Not content with offering live concerts inside the gaming platform, Fornite is expanding the immersive entertainment by offering a “Short Nite” film festival within their violence-free mode, Party Royale.
The event will start on February 20th at 2pmET and the entire run will last about 30 minutes. The complete festival will be rebroadcasted for 24 hours, ending on February 21st at 2 pm ET.
A very interesting, although not surprising, development, especially considering recent studies showing that gaming consoles are increasingly becoming dominant devices to not only play games but to access streaming services for film and TV content.
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.