Hey Bheem,
The title reflects that there is going to be a winner. I have spent the last two posts (1,2)of mine determining why it is not a war and how the participants of this space are positioned. But the thing I haven’t done is how do they fare when compared relatively. This post is to ensure that we have a complete picture in place for us to witness the ensuing action.
(You can read online by tapping on the heading and average reading time is 10 mins)
Never a Zero Sum Game
Streaming has displaced the medium of propagation but not the content of entertainment. So far the only thing that streaming has ensured is a renaissance of edgy production of shows that wouldn’t have worked in the previous medium (Cable/Screening) based model. This one fact is enough to prove that producing content for people viewing is never going to be a zero sum game.
The creators involved in producing content both professional and amateur are in it with multiple motivations. Hence, it is hard to understand and postulate a model around them. Anecdotal references of a few examples will make me feel like a snob who is basing this whole thing on his own preference, the one thing I tried not to do while writing this series. So, I will not pick any specific reference to drive home my take on these things.
Bundles
Back in the days of cable dominance there was a great advantage for everyone involved in watching TV, channel bundles. This bundling of various channels made people watch their favourite content at a cheaper cost than they would have had to pay exclusively. To understand more about this bundling, you should read this [post from Chris Dixon of a16z.] An excerpt from the post highlighting the basic belief that users, creators and businesses started to imbibe with the onset of the internet.
There is a widespread belief in technology circles that bundling of cable TV, newspaper, magazine and other information goods will go away now that those products can be distributed à la carte on the internet. The assumption seems to be that bundling is an artifact of another era when distribution was physical. But this reasoning misses the economic logic behind bundling: under assumptions that apply to most information-based businesses, bundling benefits buyers and sellers.
Cable bundled channels made money for each of the channels by serving a larger set of customers. This made economic sense for both content and distribution companies. In return, they provided a surplus of content for the viewers as well. It was a genuinely a profitable business but lacked agency and choice for the viewer.
Contemplating the Shift in Medium
Streaming companies technically didn’t proclaim any unbundling, rather they sold the convenience of on-demand TV viewing without buying à la carte on the internet. Streaming over buying single movies.
The narrative of the sector went in the way of unbundling of cable, cord cutting and direct access to the audience. What the narrative missed is the cultural change of users (people) since the advent of Internet economy. Since the Internet achieved widespread adoption, we users had adapted to seek information rather than being fed information. We users wanted to create, explore and seek more of things we were curious about. While doing all of those things, we also like to be entertained the same way we are interacting with the world. This led to the huge demand piling up for TV moving on to the internet. No cable or content company did this before Netflix. Why is that is only something I can guess. Bheem, try telling your nephew that you need to wait a specific time to watch the cartoon like how we waited for in our childhood days. They will turn the world upside down then and there. We have a generation growing up not knowing how it was to wait for your favourite show and how the TV was really an Idiot box.
But, when Netflix opened the doors to its streaming service and virtually killing the DVD rental business, there were few other internet companies that took notice. Streaming produced content over the Internet was not an innovation, we just didn’t have the threshold to make it viable. But in 2008, when the bandwidth speeds caught up, it made sense. And now in 2019, cable is no longer even required for your consumption just as newspaper is not required for news.
Bigger Bundles
With internet in the picture, you already have a bundle that supersedes any cable bundle. The entire information of the world is suddenly the bundle you are working with. A huge set, it was only rational to bring produced content onto the internet for streaming through unbundling. This led to unleashing of demand for new content as the consumption of content shot up. Choice provides agency and agency generates demand for more content. To generate the needed supply to match the demand, money was poured to fill the coffers with any content that deemed watchable. The legacy cable companies had the IP over the existing catalogue but distributed them geographically rather than medium wise. Meaning, shows though on internet can only be watched geographically. This led to a lack of content to distribute for a potential global audience.
All content produced by production houses are still distributed online through geographical licensing, leading to a limiting of content that can be globally accessible. This is another reason why streaming companies started producing their own content. The resistant nature of content companies to adapt to a new medium led the streaming companies to improvise.
Winning Strategy will still be bundling
Content on its own serves a marginal value if not sold with the experience. Theatres sell this when we go to watch a movie. It’s not just the movie, its an experience. Streaming services can’t control what you watch and where you watch. Their whole motto is watch where ever and when ever. Then streaming companies are competing against with not just the competitors but the entire Internet economy. They base their differentiation in varying strategies but the core idea is to differentiate themselves from everyone else.
In the picture above, I try to place each of the services we covered in the previous posts in a bracket that is most suitable. We can broadly classify the internet into genres and this classification is very rudimentary. Bear with me and I am sure this will make abundantly clear why I made these classifications and how they make sense with the current trends of the industry.
Situation reports on Individual firms :
Netflix is only in the business of entertainment excluding live events. It was conscious decision Netflix has taken. In order to maintain its edge, it needs to produce the best shows, movies or sign the biggest stars that bring their audience to your service. All of this to generate the experience needed to draw audience to your service.
For Amazon though, Video is a bundle it is selling with the ability to buy almost all the things you need. It is for Amazon to be omnipresent in the minds of its customers across verticals. For Amazon, content is only means to attaining their actual goal: Customer loyalty.
Social Media is a different beast in itself. The content is generated by users and is propagated among users. The more viral the content, the wider its reach. They have fundamentally re-wired how we communicate, spend and consume content. Streaming is vying for a piece of time from them as well.
Hotstar covers the entire entertainment segment. It has sporting events as well. This gives it the edge as it bundles most of the entertainment under its service. Also, live sports is the only thing that is also very hard to be pirated. You can consume a show later than when it was released but unless you are fanatic there is no joy in watching any sort of match after it was played. This gives Hotstar the edge in the Indian market.
Meta play and multiple executions
Take a look at the Info graph below:
When you measure each of the services with the Users perspective we look a 2x2 matrix that looks something like this. Deriving from the above concept of bundles, the left graph is of only entertainment offering while the right one is of offerings from the wider internet offerings. As you move along the right of a graph, the agency increases and as you move up a graph, the relative value offered increases. When you measure each of the services against value and agency, this is how they fair.
Companies like ALT Balaji, Disney + are production houses entering streaming themselves leaving them restrictive in the nature of programming they would produce and show. Thus limiting both the value and agency to the user.
The only service that stands a chance to be in the top of the right half is Amazon. But its current approach will not lead it there. This is because, rather than following the AWS model of web services, it is following the model of content companies and investing huge sums of money into the content. This is a post in itself for a later day.
Which brings us to the part of executions, I mentioned it at the start of the post that producing content is not a zero sum game. And producing content is hard. When it comes to execution, there are only few that stand the chance of seeing it through. My bets are not yet sure, but I would like to layout the probable hurdles in the way.
Analogy Time
Right now all the participants are busy trying to fill up their catalogue wells with different types of content to cater to all sorts of consumers. The way the shows are greenlighted and how they produced are still much the same.
If a bucket symbolises attention and time of the viewer. The bucket needs to fill up with water (content to watch) and they will pick up the one on the top of your well the most times. They are not out there looking at the depth of the well unless they poured all the water out of your well. The important thing is that they are coming with their bucket to your well. I don’t think depth matters as much as they get something to pull up worth viewing in their bucket.
There is still no one working on making it easier to access and direct the show i.e., to crowdsource scripts, create alternate production streams and have a better remunerative stream. Movies and shows are being packaged the way they are being done since the beginning it’s only the distribution that is changing. Even in this scenario, what shifts is that tomorrow you and me can decide to produce or create a movie and still publish it to the world without needing any permission from any member of the industry. That counts for something, right.
Dividing lines are dwindling
The biggest competitors would be game development companies. How lovely would it be if we can play any role in the movie while watching the movie with each one of us part of the larger narrative. Gaming industry’s growth and revenue is off the charts. That is something everyone in the streaming is keeping a close look.
I would like to end by re-stating that though it was just a shift of medium, this shift bought a lot of competitors because TV industry started playing in a field that is no more siloed. It is head on taking all sorts of businesses for viewers time.
Then again, content is no commodity. Creative pursuits are mostly single endeavours and have no formulaic nature to their success. Though, many claim there is one. It really doesn’t work that way. You are entering the field with a promise of entertaining the audience, this is a huge ask in itself. India, with its rich history has many things on its hand to think about a global audience and this is where there is an opportunity for the 31st streaming service to start making content and gaining some share of the market that is left for anyone’s taking.
Phew!! Diced it too many ways I suppose. But I am here to talk to you if you need to say whether this made sense or was complete bull**** for you. Eitherways, I am all ears.
Regards,
Vivek
Duologue is an effort by Vivek and Bheem to have a dialogue about varying topics.
If you liked what you read, you can subscribe to our newsletter.
Share it around if you find any of this piqued your interest or might be interesting for your peers.