The challenge/opportunity for us all in 2019
Of all the themes we cover NewTV has probably seen the most change in 2018. When we ran our VC event on this topic in New York in April we were excited by how much momentum was building. And that has only accelerated since then.
The latest Nielsen data on US TV viewing is out and shows the scale of the change. Matthew Ball has done some analysis which shows trad TV is aging dramatically - if you are under 50 you are watching at least 23% less Pay TV than in 2010. The only growth is in the 65+
It is still an immature market with too many players, which can confuse consumers and advertisers. This analysis shows how much cross over there is on movies etc on Amazon and Netflix. And this FT piece uses Friends to highlight the complexity - AT&T own the rights and make $100m a year from Netflix - but surely they will use their asset to drive subscriptions to their own service?. At some point. The supply of programing isn’t going to slow - the FT piece talk of this and a leaked deck from Jeffrey Katzenbergs new mobile video service predicts they will invest up to a $1billion on content.
But this is based on subscriber levels. And there is the chicken and the egg of newTV. And most content businesses. You need rare / scarce content to attract eyeballs and you need eyeballs to pay for the content - whether they be monetized by subscriptions or ads or a combination. In sports it is equally challenging - as Eleven seem to be finding.
Every OTT player needs to have their target consumer understand what content they have, understand how to access it and understand the value. Only then might they subscribe.
With WPP restructuring and Accenture buying highly rated agency Adaptly the changes in the Ad business continues. Adaptly are described as an adtech firm and as a Facebook marketing partner they have a deeper dependence on tech than a typical agency. We know them reasonably well as our parent company MDC invested at Series A and they spoke at our last VC conference. They look like a modern agency should look like.
By operating at the Marketing Partner level one guesses they can make better margins than an agency can - and a former WPP exec argues Agencies can’t do their best work as they are no longer paid enough.
Will WPP sort this in its restructure? The old Irish joke seems appropriate; asking how to get somewhere, and being told “I wouldn’t start from here”.
The lure of Direct to Consumer brands for old school businesses continues. P&G have bought 5 year old beauty start up Tristan Walker. It’s clear from the article that both sides think they can learn from each other.
But as one investor points out these can be challenging investments as scaling remains unproven for many. The Bain focus is now on finding defendable brands. It’s a good read as they point out some things we agree with - not all these DTC businesses make sense as VC investments as their size is limited. And that Brand skills are still rare but essential.
As they run out of road with Facebook and Instagram DTC brands are taking their signal driven approach to OTT. This makes good sense and we are starting to see success. Terry Kawaja writes this good article on this topic.
A new study from Bain on luxury brands highlights the potential (although the badge of luxury no longer feels adequate) Online sales in luxury grew by 22% whilst retail grew by just 4%. This reminds us of a great quote from the LVMH Chief Digital Officer;
Business models & China
Another example of a different approach from Japan where a new payments app grew its user base quickly by giving away money. Now that is as old as the hills, but the way it was done was smart. With many of the big Chinese gaming apps operated by BAT (who also run payments businesses) we think this sort of approach will be tried as the Chinese look to emulate the global success of TikTok.
A move by Vietnam to insist on data being stored in the country is being strongly resisted by GAFA. It’s partly to avoid problems operating in that market but equally to avoid precedents being set that might be adopted by other markets.
Retailers are looking to minimise credit card fees by emulating Starbucks and Walmart with payment through their Apps. At an event earlier in the year a Banker told us that the amount paid in Credit Card fees by the airline industry is not that much less than the sectors total profits. These sort of moves will continue.
Just at Mobile Operator AT&T spends big on tech and content, Mobile Operator Verizon have changed their mind on that strategy and written down their Oath investments in Yahoo, AOL etc by almost $5billion.
Finally - the core product of agencies should be great ideas and we were talking with Google this week about their endeavours to get creative agencies to appreciate the amazing possibilities of digital. This Whopper campaign is great and could only come from a team that knows how the digital world works. Why is this sort of work so rare?
And as we do the final polish on the Soulful Christmas playlist for next week, here is something to keep you going; a Christmas album from the David Frost show in the US in 1970 with an amazing Jazz band and northern soul legend Gerry Granger. Obscure but quite wonderful.
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