The new results for Netflix are out and growth was half that predicted -so their stock took a hit. The timing of Stranger Things has an impact here - it started right at the end of Q2 so the Q3 number will benefit.
The attraction to Netflix is the depth and breadth of content and that can also be a curse - it takes people a long time to choose and many give up - Neilsen tell us that;
The average U.S. adult takes 7.4 minutes to make a selection on a streaming service. Adults 18 to 34 take 9.4 minutes, while 35-to-54s need 8.4 minutes. Viewers 50 and older abandon discovery after about 5 minutes and just dive.
So the two most watched programmes on Netflix will revert to their owners (HBO/ Warner and NBC/Comcast) next year. Around the same time as the competitors start rolling out.
Redef have a good long read on the forthcoming Streaming Wars and it explores the options open to key players. The New York Times has also done a piece on the Streaming Race and the WSJ looks at the real future of TV. It’s also worth reading the financial site Seeking Alpha for an in depth look at ATT & HBO plans and how they are well positioned in advertising. And how ATT announced their HBO plans.
All good reads but it’s all conjecture. For now Netflix runs the show and the waiting room at their LA HQ is the place to see and be seen. Clearly this doesn’t look like a waiting room - more like the Virgin lounge at Heathrow.
But as content prices inflate, Netflx cannot compete if they have a declining subscription base. And their subscribers numbers should be taken with a pinch of salt - every time I speak at an event I ask who is has a Netflix subscription and a sea of hands goes up. But when asked how many are sharing a subscription or login most of the same hands go back up.
When the going gets tough we think the ad business will ride in - but Netflix has again said they don’t plan to do ads. Redef covers off ads and view them as unlikely at Netflix for the next couple of years - as they don’t have either the talent or the tech plumbing needed. That can quickly change and in the meantime there is a lot of brand activity in Netflix content, but good product placement doesn’t look like an ad.
In my view there are two key factors; the need for cash and the evolution of better ad formats. If the best the ad industry can do is annoying 30 second ad like those that pollute most TV viewing now, the need for cash must be intense. If we get smarter ads - better targeted, less intrusive ( eg the pause ads) - then the need for cash may be less critical.
Influencers / Creators
As our friends at Vidcon pack up another successful event, the big agencies are waking up to the importance of Influencers with many developing platforms that use AI to match brands and influencers. Really? Is that the sound of the stable door being bolted?
We are thinking Infuencers is the wrong label. It’s actually more about Creators; talent that builds an audience through their content. Some may act as influencers but most are looking at wider ways of having their talent recognised and rewarded.
Whilst we haven’t seen much evidence of Agency presence at Vidcon, the platforms were there in force - with some major announcements. All of which seem heavily influenced by the sort of business models we have been watching in China for a while. Googles Neil Mohan announced that 20k YouTube channels now make the majority of their money through SuperChat where people pay to post a message or comment - some make $400 a minute. More details on that and other merchandise and membership options on YouTube here.
Which has us thinking that Social Video apps can increasingly be seen as Marketplaces; you need a huge audience of the right people to attract creators and you need the right creators to keep that audience engaged. So building tools that enables the right (economic) connection between both sides becomes key. It is YouTube that everyone is gunning for but what will Snap and Instagram do next?
A similar logic exists in newTV. Whilst a showrunner will take any commision to get their show made, they want to be on the optimum platform - so who has the audience that will make the show a hit? The pitch from the new platforms has to be compelling, otherwise the talent will stick with the known properties like Netflix, HBO and the BBC etc. Money still talks though; Quibi signed another deal
Whilst payments by users to talent is an interesting new model, the real money is still ad revenue, and the industry is very focused now on privacy.
It’s progress and that’s good. None of these issues are going away so the more people looking for ways to improve has to be a good thing. We are very positive about the emerging tech that looks to replace cookies with context ( especially as context has been really undervalued in the rush to audience based buying)
Regulators around the world are watching the UK investigation into how the ad market works. YouTube is getting heat from AdTech royalty and an AntiTrust looks likely. Back in Europe the EU is looking at whether Amazon exploits its many small sellers through the data they collect.
The most significant move against GAFA is probably the French setting a 3% tax on sales in France that affects mainly big US digital businesses. I think this will be copied world wide - and possibly in the US too - as Governments seek to exercise more control.
Prime week appears to have gone well but it will be a while before we know whether it did it’s main job - signing up more Prime customers. One interesting promotion offered customers $10 credit if they let Amazon track them through Amazon Assistant - a comparison shopping tool that works as a browser plugin.
At the other end of the business Amazon want to launch 3000 satellites to provide an almost global broadband service. Add that to the 12000 Elon Musk plans to launch and that feels like a big change to our sky. But Elon tells us it will all be OK.
Finally …. when we talk about ads we often use this quote from Proctor & Gambles Marc Pritchard (talking at ISBA last year);
One of the key people making that happen is P&G media director Gerry D’Angelo and in this interview he talks about how brand and performance are intimately connected;
A key question to anyone involved in advertising is what do you want someone to do as a result of seeing this ad. I think you can plot likely effect against the woolliness of the answer. Say no to woolliness.
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