The Bulletin Edition 4
From The Desk of
By the time you are reading this edition, I will have closed up my computer and may look like the man in the image above, lying on his couch (albeit with a few physical appearance adjustments)
My week has been a waiting game for election news on one side and then a race to forge ahead with my own work and projects on the other. I honestly wondered if I would be able to get this issue out today after such a time crunch and a long week of commitments.
By Thursday of last week, 88% of both Republican and Democratic voters “just wanted it to be over,” when asked how they felt about the 2020 Presidential election. Most of us have been glued to the news for a few weeks now, either on the TV or online (or both) and I wonder if the news networks will have much to report now that the election is over. Primetime TV spiked 71% in October according to Nielsen and Fox News Channel was up 139%, MSNBC was up 45% and CNN was up 116% in average viewers. What will they find to talk about next? I can’t imagine the Brexit situation in my home country will hold as much interest after the pandemic and the Presidential election. Now that we can all breathe a sigh of relief that an election decision has been made, will linear TV viewing plummet as news saturated viewers seek solitude and self-control within the depths of Netflix, Disney+ and other streaming platforms?
Talking to many clients, partners and colleagues this week, one thing is sure, we cannot keep waiting for results or news and developments for decisions to be made, markets to be stable and industries to settle down. 2020 has shown us that we cannot “wait for the right time.” How we move forward, launch new products and services, market our brands and engage with our customers will change and has changed.
The entire way that consumers buy and interact with services and products has completely changed. Many industries and companies that were already on shaky ground thought they had another five years to figure it out. This year has already halved or even three quartered that window into just 6-12 months.
Traditional TV is also seeing the writing on the wall, yet at the same time the revenue gap between the linear and cable TV model vs streaming (either subscription, ad-supported or both) is still a wide-open space. The same happened in the music industry when the MP3 arrived and took off but physical CD sales were still a hefty part of the relied on revenues. For existing players, it’s not just a conversion of the old model to the new. Will moving the existing service to the new just cannibalize a still revenue-generating old model? Yes it will and there will be many casualties.
Everything has been consumed by this year’s developments in some way or another but we still have to start businesses, new projects and get things moving. As many businesses falter and sectors struggle, a record number of startups are appearing with new ideas and solutions to problems we didn’t even know we had a year ago.
I was listening to a podcast this week and heard the line:
“Many brands and services are looking to go global, yet are asking the same question of “how to we get started?” You start by developing a global product and brand, then connect the dots around the world. Create brands that want to travel.”
We are more connected than ever and the opportunity to grow your business or launch your product to a global audience has never been greater. Look beyond your borders.
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
Roku announced their Q3 numbers this week, posting an unexpected profit and beating both analyst estimates and shareholders expectations. Revenue increased 73% YOY to $452 million, versus Wall Street projections of $367.5 million. Advertising still counts for much of the platform’s revenue with only 6% coming from the sale of the hardware devices. Gross profit jumped 81% YOY to $215 million and 9 cents per share. Active user accounts increased by 43%, topping out at 46 million, with streaming hours soaring 54% to 14.8 billion.
“Monetized video ad impressions were up almost 90% year-over-year in Q3, up sharply vs roughly 50% year-over-year in Q2. Not only are existing brands growing spend but many new advertisers are shifting into streaming as more and more cord-cutting consumers become unreachable to brands on traditional linear television. First-time advertisers more than doubled year-over-year in Q3 and once brands become accustomed to the superior performance of streaming they tend to stay with Roku. Ninety-seven percent of brands that spent $1 million or more with Roku in Q3 2019 continued to invest in Q3 2020.”
Scott Rosenberg, SVP / GM Platform Business - Roku
Our take:
The demand for streaming services has definitely risen in 2020, particularly due to the pandemic and government-imposed lockdowns around the world (which has also resulted in the cancellation of most sports events, a key subscriber retention for cable TV) However, the advertising industry has also taken a beating, with many ad-supported streaming services taking a hit. Entire industry sectors such as retail, travel and hospitality are still struggling to figure out their advertising strategies resulting in pauses or drops in ad spend and activity.
There was some concern that the global drop in ad spend would hurt Roku’s Q3 results and that any increase would purely be in line with increased lockdown streaming and then would slide back down to pre-pandemic levels next quarter, however, Roku is set on establishing themselves as a platform built solely for the television, as opposed to a platform app that sits on top of the TV’s main interface. In short, they allow TV manufacturers to lower their costs by using the Roku OS as an out of the box solution, while still being able to bring all the most popular consumer content apps (Netflix, Amazon Prime, Disney, Spotify) to the living room.
Netflix launches a linear channel
This announcement sneaked out at the beginning of the week but by Thursday it had really picked up some steam and raised some eyebrows in the industry. Netflix announced that it would be trial launching a linear channel option that would contain an EPG with a continuous lean back offering of its most popular original programming in France, rather than the tastes and recommendations of the individual user.
“Netflix Direct” would only be available in France, for now, and would be accessed by clicking on a “Direct” link on the web version of the service. Programming would be offered to subscribers in real-time and would be updated every 5 days to avoid content repetition. Users would be able to see the next 24-hours of programming but once you are watching, that’s it. The content is live and there is no skipping, fast forward or pause options.
Our take:
Netflix has over 9 million users in France, however the French viewer still loves to watch linear TV and Netflix is simply responding to this in a surprising but also not so surprising move. Using their own originals to fill out the linear channel, of which Netflix controls 100% of the rights, makes complete sense, especially in markets where linear viewing is still popular and the trend of “trying to find something to watch” on any SVOD service is still a global consumer gripe. The lure of Netflix has always been about being able to choose something you want to watch, however, the opposite effect of this is that users tend to then feel as though they have to be more engaged in watching their chosen film or TV series.
This Netflix linear “lean-back” offering could provide an interesting brand and service extension to their on-demand service, especially to fill those viewing gaps in a consumer's day when they just want to have the TV on in the background while simultaneously using their phone to check social media or messaging.
Spotify
The streaming giant popped up a few times in the news this week, announcing that the service will now be available for some users as a standalone app on the Apple watch series with Bluetooth support to headphones or AirPods. This should satisfy the segment of users who want to run or exercise and listen to music while leaving their phone at home or in their bag.
On Monday, Spotify announced that they would be releasing a new tool called “Discovery Mode,” that will allow artists and labels to prioritize tracks that would appear in users recommendations, which would, of course, increase the potential streams and exposure of that track and artists. The caveat to this opt-in tool, however, is that the label and artist agrees to receive a lower royalty rate per stream. This ruffled a few feathers in the music industry news, with some pointing to the old radio “payola” model. Murray Stasson, writing for Music Business Worldwide, explores this new development and the supposed controversy around it.
In a previous edition of The Bulletin, we discussed Spotify’s growth in the podcast sector, especially with the inclusion of full music tracks via their Anchor platform and how this could push Spotify to grow their podcast business (especially the exclusive celebrity shows) to become a competitor to the traditional morning radio show. This week The Verge covered a Tweet from Variety’s intelligence platform President, Andrew Wallenstein, referring to a Spotify survey in which he was asked if he would be willing to pay an additional fee for a subscription to a specific podcast. This could be an interesting development if Spotify locks in further exclusive celebrity podcasts and then charges a small additional fee on top of the monthly service subscription for fans to listen to that show. Certainly something to keep an eye on.
Disney bundles up
Mention the word “bundle” and we think back to the very model in the industry that is now unravelling, with consumers wanting choice vs paying for a collection of channels and services that they may not use. However, in streaming, the bundling option, either from a consumer or distribution perspective, is growing in attractiveness with many streaming video platforms fighting to be included in various platforms and digital offerings. Even taking a lower revenue share from a partner has enormous upsides if your service included in a network offering that reaches millions of their customers.
This week it was announced that Disney and Globoplay Brazil are entering a “combined subscription” offer for consumers to receive Globoplay and Disney+ at a discounted rate. Although there will not be any joint integration or platform sharing, this discounted convenience bundle with LATAM’s largest media company, will give Disney+ even more front line exposure above and beyond the already well known global franchise.
Epic Games, the studio behind Fortnite also announced this week a new partnership between Disney+, informing their user base of over 350 million players, that they will receive Disney+ for free, on any in-game purchase or purchase using Fornites “V-Bucks.”
Focus
When economic constraints and expiring offers hit home
If it’s not enough to have streaming adoption and cord-cutting rise this year due to more at-home viewing, the increasing economic challenges facing millions of cable subscribers to pay their monthly bills also comes to a head with many subscription services free trials ending at the same time. This 3-way highway funnelling into a small corridor could see yet another shake-up in the industry over the next few months.
For Pay-TV operators such as AT&T, Comcast, Dish, Charter and Verizon, they have already seen the effects of cord-cutting and the pandemic on their business, with estimates of over 4.1 million households in the U.S. cutting the cord during the first nine months of 2020, more than 300,000 households above the same period last year. Many customers were already pondering the decision to switch to streaming whereas others were reviewing household expenditures and put their internet service as a priority but could do away with cable. The lack of live sports has also tipped the scales in the decision.
Similar to utility bill companies, many Pay-TV networks are still granting COVID relief billing deferment to hundreds of thousands of subscribers, who most likely would have either stopped paying or would have been disconnected anyway due to non-payment. It will be hard-pressed not to see an impact on cable subscriber numbers once these grace periods end.
It doesn’t just stop at the cable companies. New to the market streaming services also face a reckoning at the end of many extended free trials that were designed to increase sign-ups. Next week, Disney reaches the anniversary of its Disney+ launch partnership with Verizon, when Verizon’s customers received a one-year free subscription to Disney+. This offer now comes to an end and it will be interesting to see the conversions to paid subscribers, especially as there are estimates that some 15% of Disney’s total 60 million subscribers could be on the free Verizon promotion.
On Point
28.6% - the percentage growth of India’s OTT market over the next four years, making it the world's fastest-growing streaming marketplace (PWC)
$901 million - revenue AMC lost during a 3 month period as cinema ticket sales plunge 97% (AMC)
54% - the percentage of Netflix subscribers that share passwords with friends (KTCB)
$115 million - the revenue generated from user in-app spending on TikTok during October (Sensor Tower)
0.2% - the estimated drop in video entertainment ad spend across ten key markets in 2020, outperforming the 8.7% drop for the ad market as a whole (Zenith)
220 million - the total September viewing hours on the Tubi ad-supported streaming service (Tubi)
4.6 million - the estimated number of Netflix subscribers in India by the end of 2020 (Media Partners Asia)
20% - the percentage drop in average TV viewers for this year’s Presidential election compared to 2016 (Nielsen)
$783,718 - the amount advertisers spent on a 30-second spot on NBC’s “Sunday Night Football,” laying off concerns that lockdown had driven away sports fans (Ad Age)
$20 million - the amount Netflix will pay to produce the David Beckham documentary on the football stars life and family (The Streamable)
Diversion
With consumer spending on tech hardware and service this coming holiday season projected to reach $135 billion in the U.S., a 10% increase from 2019 (CTA) it is highly expected that streaming consumption will also see an increased lift, perhaps more than during the spring and summer lockdown period.
“With consumers forgoing budgets for travel and experiences this year, more dollars will go towards technology gifts that support connection, productivity, health and entertainment, as technology has been a critical asset to so many during the ongoing pandemic.”
Lesley Rohrbaugh, director of market research, CTA.
The top 5 tech gifts are predicted to be smartphones, laptops, video game consoles, TVs and wearable electronics.
With this in mind, we decided to take a wider look at consumer trends and predictions this week, with an insightful piece from Dunn Humby, exploring more about what consumers are expected to value and focus on during this holiday season. A must-read for every consumer facing industry.
Productivity
If you used to commute into the office every day either by car, bicycle, on foot or via public transport, that travelling part of your day in the morning and then again in the evening may have appeared to be a chore, regardless of the weather, distance or cost. However, writers from Fast Company put out a great piece this week on how, unknown to many of us, our commute served a purpose for us to add a double dosed “mental buffer” to our day, transitioning from home to the office and then back again.
With many of us now working from home, this commuting block of time is gone and with the summer over, even those work-from-home neighbourhood morning and evening walks could also be causing us to stay inside with no separation from home and work at all. This idea of taking your pre-pandemic commute time at the beginning and the end of your day, and using it to engage in “work-related prospection,” could change the way you see working from home.
One To Read
Pulling battered and dog-eared books out of my own personal library has become a habit over the last month. I usually click and buy recommended reads from the weekend’s newspapers, however with the summer being about getting outside and spending socially-distanced time meeting friends or exercising, my incoming book pile grew larger and more scattered around the house.
This week recommended read wasn’t intentional, however, the topic, especially during this week, seemed more relevant than ever. The author makes some great points on how, as a society, we now seek out opinions and implied-truths that suit our own beliefs and agendas, as opposed to also looking at alternative and opposing narratives. The internet and the foundation of how it now operates being based on recommendations and similarities of content has only exacerbated this, however, the author does then tend to veer off into various political and cultural corners which may be uncomfortable for some readers. If you can finish this read and have an open mind, this book will serve exactly the opposite of what the internet does, in that it will challenge you to agree or disagree, rather than be curated a feed of opinions that match your convictions.
Visual Insight
And Finally
Should the arts receive government support?
The headline is hard but the reality is not. In Europe, where there is art, there is the government. In the U.S. less than 0.7% of government spending goes towards cultural services. In Europe and the UK, the situation is quite different and with the art sector experiencing one of the biggest ripple effects of the pandemic and government closures. The Economist explores the link between culture, the arts and government and whether such reliance is needed or will only result in putting salt into an already open wound.
A stroke of genius
During an election week that probably saw the anxiety levels of an entire nation (and the rest of the world) rise, the meditation app Calm launched a genius marketing initiative with CNN, with ads and alerts informing viewers to “seek some relaxation,” amidst the daily Presidential election coverage. The ad campaign saw Calms app rankings soar 20 times and provided many of us with a much-needed smile and a reminder to pause.
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 us a note.
Cheers and thank you for your support and we wish you all the success for your coming week.