Economy of Scale
S05E08: Game of Streams (Economy of Scale)
Our Media Solution Specialist, Magnus Svensson, is sharing his reflections on the online streaming industry in this post. This is part of a monthly series so make sure to follow us here if you don’t want to miss an episode.
One significant factor in the so-called Streaming Wars is the economy of scale. The latest proof of this is the announcement that Comcast and ViacomCBS will launch a joint streaming service called SkyShowtime in 20 European markets. This means that the two companies judge that the international and European market is too small to launch their own independent streaming service.
With a combined service they be able to provide a bigger combined catalogue. The platform will include more than 10,000 hours of content including titles from Showtime, Nickelodeon, Paramount Pictures, Paramount+ Originals, Sky Studios, Universal Pictures, and Peacock.
Another aspect is the need to provide local content dictated by the Audiovisual Media Services Directive from EU, which demands more local content from the SVOD giants. It states that streamers must offer a 30% quota of European content to European subscribers starting in 2021. With Sky in the mix for the new combined service this will be easier to fulfil.
Is this international cooperation also a first step towards the bigger merge between NBCUniversal and ViacomCBS?
As viewers move to streaming, the lean back experience and linear TV channels remain a popular option. In a recent study from nScreenMedia the FAST services will reach 216 million monthly active users in 2023. It is also estimated that the services will drive ad revenue from $2.1 billion in 2021 to $4.1 billion in 2023 only in the US.
The services are growing in fast pace. Roku just announced adding more than a dozen new channels to the Live TV Channel Guide on the Roku Channel, which now includes more than 200 free channels.
Another of the FAST services, Pluto TV has reached $1 Billion in annual revenue. ViacomCBS confirmed the annual revenue milestone during its second-quarter earnings call.
Our biggest competitor is sleep…
The border between video entertainment, social media and gaming is getting more blurred for every day. Both Snapchat and TikTok reached impressive numbers of views during the Olympics, just emphasizing the way that the viewing behavior is changing. With the growing amount of content available it is much about finding the audience where they are and quickly get the viewers’ attention. Instead, or as a complement to, watching the complete sports event we tend to follow the athletes behind the scenes.
Also, the more traditional media companies are trying to meet the viewers where they are. In a new strategy to boost HBO Max sign-ups, WarnerMedia is letting Snapchat users in the U.S. watch select pilots of the streaming service’s original series for free, with up to 63 friends.
Music and concerts have been exploring new venues for some time. Roblox has signed a deal with Sony Music Entertainment which will allow for “innovative music experiences for the Roblox community that offer a range of new commercial opportunities for Sony Music artists to reach new audiences and generate new revenue streams around virtual entertainment,”.
Epic hosted an Arianna Grande concert on Fortnite, and interactive experience featuring odd visuals and mini games. The concert was free to attend (with limited capacity), and players can purchase so called “skins” to look like Arianna for around 25USD. Previously Fortnite hosted concerts with Marshmello (10m players) and Travis Scott (12m players).
To watch out for the coming months…
Mergers and acquisitions have been reported in a rapid pace the last period. Sony finalized the acquisition of Crunchyroll. Peer5 has been acquired by Microsoft. Adobe announced that they will acquire Frame.io. Synamedia announced it has acquired ContentArmor.
And in the ad tech industry we have seen that Magnite acquired connected TV ad server SpringServe for $31 million and a few weeks later Integral Ad Science acquired Publica for $220 Million.
This will just continue so keep an eye on the announcements the coming months.
Magnus Svensson is a Media Solution Specialist and partner at Eyevinn Technology. Eyevinn Technology is the leading independent consulting company specializing in video technology and media distribution.