WarnerMedia’s merger with Discovery, AVOD in the media mix, service surfing and C4’s uncertain future blurred the business lines in 2021.
The injection the pandemic gave to streaming in 2020 mellowed a little in 2021 as people went back to the office but the habit has stuck. As a result, the average number of SVOD services per SVOD household is around 2.5 in most affluent markets, calculates Futuresource.
However, households are also more likely to be managing their subscriptions more closely now, dipping in and out when the mood takes them.
“Previously, we’ve talked about service stacking, with people adding additional services on top of their existing subscriptions,” explains Futuresource analyst David Sidebottom.
“TV’s golden age may be nearing the beginning of its end. In the UK, 2022 will be the final year that traditional TV makes up more than half of video viewing on all screens,” Deloitte
“Now, the combination of higher intent to cancel, an appetite for more services, and a higher desire to dip in and out is culminating in a new phenomenon of service surfing.”
He posits that savvier consumers are effectively looking to replace existing services with new, potentially similar services, rather than add them on top - resulting in steadier growth in the SVOD market.
One casualty is traditional broadcast TV whose share of viewing hours among UK consumers is expected to fall to 53% in 2022 and then to 49% in 2023.
That prompted Deloitte Global to declare “TV’s golden age may be nearing the beginning of its end. In the UK, 2022 will be the final year that traditional television from broadcasters, whether live, time-shifted, or on demand, collectively makes up more than half of video viewing on all screens.”
The analyst believes the UK is a bellwether for trends likely to follow in other mature media markets.
Cross platform measurement
As consumer viewing behaviours shift toward on-demand, broadcasters have become increasingly reliant on digital ad sales to deliver growth. Revenue from broadcaster video-on-demand (BVoD) advertising in the UK generated only 14% of broadcaster TV advertising revenue in 2020 and 2021, but by 2026 this is set to climb to 24% (£1bn) while annual linear TV ad revenue is set to fall by £1.173bn over the same period (Source: Ampere Analysis).
Measurement service Barb has responded by introducing a cross-platform measure for commercials. CFlight developed by Sky and based on Comcast’s technology, in collaboration with Channel 4 and ITV, aims to provide parity between measurement of both linear and BVoD TV viewing and is estimated to cover over 98% of UK broadcaster advertising (Source: Thinkbox).
Barb also introduced SVOD and video-sharing measurement into its daily reporting. The service already measures programmes viewed on linear channels and broadcaster VOD services across TV sets, PCs, tablets and smartphones. Now it can also measure the time spent viewing SVOD and video-sharing platforms across these four screens through a home’s WiFi network (although not when ‘on the go’).
Regular reports begin in January, but a preview released in November revealed Netflix Squid Game to be the only streaming service to feature in the UK’s top 10 most-watched programmes (on a TV set). Strictly Come Dancing, The Great British Bake Off and The Larkins took the top three spots (with 10.44m, 8.89m and 6.58m viewers for the month respectively) showing good old traditional TV has legs yet.
Major media consolidation
As the number of streaming services multiply so too is the rate of churn which is reckoned to be around 25% in the UK and as high as 35% in the US. Aggregation is the inevitable result as major SVODs look to increase subs and retain customers. With access to a volume and a variety of constantly refreshed content high on the list of reasons consumers sign up to - or cancel – a service, mergers and acquisitions offer the quickest route to scale.
The biggest such consolidation since Disney acquired Fox in 2019 was announced in May when AT&T swooped to merge Discovery with WarnerMedia. Pending regulatory approval, the $48 billion deal will give the combined entity the clout to compete with Netflix, Disney and Amazon.
In the same month Amazon itself paid $8.45bn (£5.97bn) for the historic MGM studios. That gives Amazon Prime access to classics like Singin’ In The Rain and the James Bond franchise but the studio is also behind several of this year’s Oscar-tipped releases including Licorice Pizza and The House of Gucci.
Nonetheless, the combined content library of Warner Bros. Discovery would boast a platform in excess of the 7,200 titles currently on Netflix and the 7,000 titles of Disney+/Hulu and second only to Amazon, finds Ampere. The analyst also suggests HBO Max and Discovery+ could either be merged into a single service or sold in a package deal that bundles the two together.
Its European base could be further boosted by taking control of BT Sport. The pay-TV broadcaster is being offloaded by BT as non-core to its main business of 5G and fibre broadband with Discovery in the hot seat. That’s because a potential £600m sale by BT to streamer DAZN appeared to have faltered over a “chaotic” DAZN bid, reported the Telegraph.
A joint venture with BT would combine their sports broadcasting assets such as the Olympics and Champions League games with BT eventually selling its stake to Discovery.
YouGov meanwhile, observes that perhaps happiest of all will be Sky Sports, who will have seen off yet another competitor for its place at the top of the sports broadcasting tree – it’s reported that because of cross-licensing agreements, it will even be asked to sign off on the deal.
Rise of AVOD
The depiction of the battleground as between TV and SVOD was blown out of the water in 2021. The rise of free advertiser supported on-demand is in part down to subscription fatigue and the need to manage costs.
But it is the traditional ‘TV like’ nature of some ad-supported OTT channels which is seen as particularly potent. Services which playout programming in a linear stream are termed Free Ad Supported TV (FAST) as distinct from AVOD which invite viewers to select content on-demand.
One of the market leaders is Viacom-owned Pluto TV which has almost doubled its total users to over 30 million worldwide since 2020.
“We see our biggest opportunity in SVOD-first homes,” Dan Fahy, SVP, head of emerging business, ViacomCBS Networks UK told Broadcast.
“That’s because homes where viewing is primarily SVOD-first are less likely to access traditional linear TV, so Pluto’s app-based linear offer plays into this space. Secondly, research shows that SVOD-first homes will periodically desire a more ‘passive’, immersive TV experience and Pluto’s ease of use and simplicity is a valued complement to these households.”
In 2022 and beyond, Deloitte expect AVOD to increase its share as new services are launched and existing services to gain momentum.
As far as the consumer is concerned of course, it’s all TV. Ultimately, full convergence is where the TV industry is headed too. Sky Glass, a TV set ditching the satellite dish for an all streaming pay-TV experience launched in October, is indicative of this trend.
“We’re at the stage where most households have multiple paid streaming service and multiple ad supported streaming services that all these distinctions between AVoD, SVoD, linear, BVoD and FAST are irrelevant,” says Guy Bisson, director at Ampere Analysis. “At that point we just need to call it TV. It is just migrating from one means of delivering Free to Air TV to another.”
Channel 4 on the block
UK PSB Channel 4 goes into the new year facing an uncertain future. The government’s intention to review the broadcaster’s ownership model and remit could see it privatised with a significant impact on the indie production sector.
An Ampere Analysis report found that 60 British indies could face serious financial difficulty following a sale of C4, if the existing programming budget were cut by a new owner. Ampere examined 207 production entities that have worked with C4 over the past two years. For 66% of those, C4 represented over half of their announced TV projects during the period.
Privatisation could however enable C4 to increase its profits, suggest Ampere, by setting up its own in-house production company and generating income from the sale of rights.
Culture secretary Nadine Dorries is working through 60,000 responses to a public consultation on whether it should be sold off, “officially out of genuine concern for its survival prospects in the streaming era,” notes The Telegraph. “Few in the television business believe that story, not least because as it approaches its 40th birthday next year, and regardless of the pandemic, Channel 4 appears in some of its best ever financial health.”
Turnover for 2021 is expected to reach a record £1.2bn, up 24% on the previous record of £995m back in 2010. Its profit is forecast to break through £100m for the first time.
Sale estimates vary between £500m and £2bn with suitors including ITV, Sky, Discovery, ViacomCBS and even the BBC (to boost BBC Worldwide) as potential buyers.
“Orthodox industry opinion suspects that Channel 4 is being targeted because of Tory anger over its perceived left-wing bias,” suggests The Telegraph, which carried an interview this month with C4 CEO Alex Mahon.
With 50% of the broadcasters’ budget being spent outside London by the end of this year, Mahon is appealing to the government’s policy of ‘levelling up’.
“We’re a flagbearer for levelling up and investing outside of London,” she said.
One headache for Norris will be removed. The flagbearer of C4’s perceived liberal agenda, heroic news presenter Jon Snow retires at the end of this year, aged 74.