Big changes in media infrastructure, content next?
11 January 2018
Looking back on 2017, the digital transition of consumers in video is going strong, especially in the older age groups who are becoming ever more frequent users of streaming services. Amongst the young, a clear majority are frequent users of on demand services. In the 15-24 age bracket, 70 percent of time spent viewing is on demand. The dominance of on demand viewing in the younger age groups comes as no surprise, however the real challenge comes as older age groups start to radically change their consumption habits.
The American giants often referred to as “FAANG” (Facebook, Apple, Amazon, Netflix, Google) dominate the market. Combined, Netflix and Google/YouTube accumulated more than half of all on demand viewing in the Nordics during 2017 while local actors had to make due with what was left. And we have yet to really see the likes of Amazon or Facebook Watch on the Nordic market. Disney, on the other hand, is most definitely preparing to make a move. Bob Iger closed out 2017 by acquiring a large stake in Murdoch’s 21 Century Fox for $66 bn, which gives Disney access to a gargantuan library of content rights as well as the American streaming service Hulu. Conclusion 1: The American giants will most likely continue to dominate during 2018. Which in turn poses the perhaps biggest challenge for the local media actors.
Despite the media ownership being globalized and moving west, the picture is not as clear when it comes to content. On one hand: A clear majority of the viewing on streaming services’ 2017 was spent on foreign content. On the other hand: The American giants are increasingly interested in locally produced content. Netflix has recently been stepping up their production of non-American content with productions such as Italian series Suburra, Swedish Quicksand, German DARK, Brazilian 3% and Danish The Rain. According to Netflix’ head of content Ted Sarandos, Netflix’ strategy for 2018 is to ramp up the production of local content. HBO Nordic is jumping on the bandwagon as well. Swedish director Lukas Moodysson is set to produce a series called Gösta. To the consumers’ delight local streaming actors are ramping up their production as well. Both public service and commercial actors are putting money toward local drama and sports, among other things. Collaborations between companies are becoming more frequent, as a pragmatic way of solving the increasing costs of a global arena. Conclusion 2: Consumers rejoice! 2018 is looking to be a year of content in abundance.
So, what does the crystal ball tell us about 2018? So far, this year has shown two different but important structural changes, and that is just in its first two weeks. They might provide a hint of where we are heading. European media conglomerate RTL acquired United Screens on January 9th and Com Hem – Tele2 announced a merger on January 10th. These two events indicate that size matters in today’s media industry. To create scalable economic advantages is the obvious goal for companies who directly target consumers. Add to that a strong economy, large sporting events (Olympics and FIFA World Cup) and even a general election. All the ingredients for excitement and large media events are in place for 2018.
Another question that needs answering, and that is being asked by many, is how local and traditional actors can establish a long-term advantageous position for themselves? The cost of technology, marketing and customer management is huge. Not to mention the cost of strong and well-made content…
Mediavision estimates that close to 5 million Nordic households will have at least one paid on demand streaming service at the end of 2018. Usage of ad-funded services is quickly rising as well. Altogether, another year of strong growth for OTT – but with the majority of revenue going to global actors. At the same time, the traditional streams of revenue (advertising and pay TV) are being stretched thin. Conclusion 3: Based on this, we are likely to see more restructuring in the Nordics of the same kind that started off the year. Perhaps, a couple of unexpected collaborations might pop up. “Bigger is better” seems to be the way to deal with the competition from the American giants.
Regarding the consumers, the future is easier to predict. 2018 will be a year of extraordinarily strong supply – qualitatively better and more abundant than ever before. Seldom has so much great content been produced and made available to so many. Welcome 2018!