“Soon we’ll all start looking at our credit card bills and start saying, ‘Why am I subscribing to all of these services?”” Paul Hardart, a former Warner Bros. executive, told TheWrap
Video and tech has dominated 2019 — and we’re only halfway through the year. Let’s take a moment to reflect on the seven trends that have defined the entertainment business, so far, including Silicon Valley’s struggle with content moderation and DirecTV’s viewer exodus.
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1. Vertical Video Fails to Take Off For IGTV, But That’s OK
IGTV, Instagram’s year-old vertical video hub, hasn’t panned out quite like the company expected. While vertical formatted video continues to be a hit in the company’s Story feature, which attracts more than 400 million daily users, it has struggled as a standalone feature on IGTV. This was apparent in May when Instagram announced that videos no longer had to be in a vertical format to work on the video platform.
“While there’s lots of content that can be created and shot and formatted [for vertical], there are lots of stories that just can’t be told,” says Nick Cicero, who heads social insights at Conviva, a measurement and analytics platform. Cicero says Instagram’s decision to nix the idea of a vertical-only video platform was part of a natural evolution for IGTV, which he believes will strengthen its offering.
“It opens up the IGTV experience to a larger group of people that might not be recreating or re-cutting their videos specifically for IGTV,” Cicero told TheWrap. “For example, people coming from a YouTube experience, where you might be creating more premium horizontal video, can actually bring that into IGTV.”
Cicero notes IGTV’s lack of monetization opportunities also limits the platform’s adoption.
“I definitely think that IGTV needs to have greater monetization options to kind of be established,” he said. “I think other than that, they’re just another platform for marketing and awareness and partnerships.”
2. Facebook Watch Finds Its Footing
Facebook Watch, the social media giant’s video platform and answer to YouTube, has started to gain traction among Facebook users. In June, Facebook announced that the video service now reaches 140 million people that spend at least one minute a day with the platform — up from the 75 million in December. The company says that on average, these viewers are spending up to 26 minutes a day with Facebook Watch content.
Facebook also reports that the number of Watch Pages actively using Ad Breaks has more than tripled over the past year, with the number of Pages that earn more than $1,000 per month increasing eightfold and tripling the number of Pages earning more than $10,000 per month.
The updated numbers signal a much-needed shift in the viewing habits among the Facebook community, which has been slow to migrate to the Watch tab. Because most Facebook users are accustomed to scrolling through quick-hit, viral content that spans from 10 seconds to a few minutes, long-form premium content on Watch has struggled to take off. The short-form viewing habits of the community, coupled with the low consumer awareness of the Watch platform has been a common criticism among video publishers looking to monetize their video content. As a result, some creators have opted out of creating exclusive content for the platform altogether.
“Our biggest reason for not moving forward is the [return on investment] on that platform, as it relates to the cost of an asset we produce versus the rev share we received, even when those views exceed seven figures, just mathematically is not justifiable,” one publisher, which partnered with Facebook on several funded shows, told TheWrap in May.
3. AT&T’s DirecTV Now Gets Smacked Hard
After years of steady growth, DirecTV NOW finally hit a wall at the beginning of the year that resulted in the hemorrhaging of subscribers. The streaming TV service, which launched in 2015, announced earlier this year that it had lost 267,000 subscribers in the fourth quarter of 2018, followed by a loss of 83,000 subscribers in the first quarter of this year. This drop in subscribers followed a string of price hikes and cutbacks on promotional discounts for the service, which helped fuel the exodus.
AT&T’s John Stankey, who serves as the CEO of WarnerMedia, now says the company eventually plans to kill off the standalone vMVPD service and fold it into WarnerMedia’s upcoming streaming service. The announcement followed another price hike for the service and an overhaul on its pricing structure.
ScreenMedia’s chief analyst Colin Dixon says that these types of price hikes and shakeouts will be commonplace in the vMVPD industry, where streaming TV services are struggling to keep prices low despite being charged standard carriage fees for popular networks like ESPN.
“You will see a lot of adjustment in [vMVPD] packages. They have to, they’re not making money, and you can only afford to lose money so long to get market share,” Dixon told TheWrap.
4. Amazon Takes on Roku
Amazon isn’t just trying to make a name for itself when it comes to content — the e-commerce giant also is looking to dominate the streaming device market, as well. That ambition puts Jeff Bezos & Co. squarely in the middle of the ring with Roku, the leading streaming device maker in the U.S., grappling for supremacy.
As TheWrap reported last month, Roku holds a slight edge in the United States over Amazon, with about 28 million households that have at least one of its devices. But when factoring in global active users, Amazon Fire TV grabs the top spot: Its 34 million streaming accounts surpassed Roku’s 29.1 million active accounts at the end of Q1 2019.
So as streaming becomes increasingly popular, which company will prevail? Peter Fondulas, media analyst for Hub Entertainment Research, said Amazon has a slight edge moving forward, thanks to its “strong foothold internationally” and the company being a “marketing machine at this point,” able to “barrage” its customers with ads for its Fire Stick devices.
Roku, though, remains formidable because of its easy-to-use interface that doesn’t push one streaming service ahead of others — something viewers may appreciate compared to Amazon’s approach.
“Roku’s biggest advantage is that it’s streaming platform agnostic,” Fondulas said. “It’s pretty easy to get to Netflix or Amazon Prime Video from Roku’s interface. Whereas Fire Stick does really try to steer you towards Amazon content.”
5. Streaming Fatigue Sets In
Just because there are more video streaming services hitting the market doesn’t guarantee viewers are willing to pay for them.
In fact, to start 2019, there has been a slight dip in how many services the average U.S. household pays for. According to data provided by Ampere Analysis, the average U.S. household subscribes to 2.6 services and pays about $30 per month altogether, indicating a minor drop from June 2018, when the average household paid about $33 per month for 2.8 services.
It may be subtle, but “stream fatigue” appears to be setting in.
Cord-cutting was intended to drop bloated, expensive cable plans in favor of cheaper, yet still entertaining, streaming options. But look at the prices for the top streaming players. Netflix’s premium plan runs $16 per month; Hulu’s “no commercials” plan is $12 per month; HBO Now is $15 per month. Amazon Prime Video comes with a $120 annual Prime membership fee. And Live TV options from YouTube and Hulu hover between $40 and $45 each month.
On their own, these prices don’t break the bank, but they quickly add up in combination. And that’s not even counting non-video streaming services, like Apple Music, Spotify, or a monthly subscription to The New York Times.
“Soon we’ll all start looking at our credit card bills and start saying, ‘Why am I subscribing to all of these services? Something’s got to give,'” said Paul Hardart, a former Warner Bros. executive and current head of the Entertainment, Media and Technology Program at New York University.
With several big name players set to enter the streaming race within the next year — including Apple, Disney and WarnerMedia — it’ll be worth keeping an eye on which platforms are able to attract increasingly wary viewers.
6. Ad-Supported Content Isn’t Dead Yet
Don’t call it a comeback for ad-supported content. While viewers have started to reconsider how many streaming services they’re willing to pay for, the industry has started to bet on ad-supported content to attract eyeballs.
Viacom closed its $340 million buyout of Pluto TV, the Los Angeles-based AVOD service, earlier this year, and Amazon recently launched its own AVOD service, Freedive. And Tubi, a Bay Area-based ad-supported service, reported earlier this year its ad revenue jumped 180% from 2017 to 2018 (without disclosing specific dollar amounts) while it also saw a 400% increase in the amount of content watched on its platform.
“Ad-supported content seems to have gained a lot of favor lately among consumers,” Fondulas said. “There was a time when I would’ve predicted ads could be going the way of the dinosaur, because people were so eager to avoid ads and Netflix had made people accustomed to that. Now, all of a sudden, we’re seeing a resurgence of ad supported content, especially online.”
Despite Netflix’s dominance, Pluto TV chief Tom Ryan told TheWrap earlier this year that there’s still a demand for free, ad-supported content — it just needs to reach customers the way they’re now used to watching shows, which is via streaming.
“Consumers want to have a lot of the things traditional TV has done well over the decades, but they want it on an internet-connected product,” Ryan said. “They want to watch it over the internet or on their phone.”
“If we look back over the course of television history, a significant portion of the great content that we’ve known and love has been funded by advertising, so why would that change in the future? A significant portion of television will continue to be paid for by advertising, even though we’re in this golden age of television, in part, because the major SVOD services are investing so heavily [in ad-free content]. That’s great for consumers, but consumers are only going to subscribe to so many subscription services.”
7. Silicon Valley Grapples With Content Moderation
What should and shouldn’t be allowed on our platform? That’s been the defining question several tech powerhouses have struggled with this year. YouTube, in particular, has had a difficult time answering it.
For one thing, the sheer size of the Google-owned video giant makes it hard to police; more than 500 hours of content are uploaded every single minute to the site. And its arcane rules make its content moderation efforts often appear arbitrary. This was evident last week, when the company demonetized conservative commentator Steven Crowder for using several homophic insults against Vox personality Carlos Maza in his videos — even though YouTube said the insults didn’t violate its policies. The result left no one happy, with Maza’s supporters saying YouTube didn’t crack down enough on hate speech, while Crowder’s supporters worried free speech was being trampled on.
“YouTube finds itself in a no-win situation where leaving up extreme and misleading content invites accusations of sowing discord and being negligent, while taking down content bring forward accusations of censorship and unchecked power,” tech ethicist David Ryan Polgar told TheWrap. “The public is demanding that platforms are not neutral, yet any action will be upsetting to a significant and vocal group.”
This isn’t a problem just for YouTube, of course. Facebook was both championed and criticized for its decision to ban “dangerous individuals”, such as Alex Jones, Milo Yiannopoulos and Nation of Islam leader Louis Farrakhan in May. The social network has also come under fire recently for its decision to not remove an edited video that made House Speaker Nancy Pelosi appear drunk. (The company also declined to remove an edited video of CEO Mark Zuckerberg this month.) Twitter also has looked to improve the “health” of conversation on its platform, as CEO Jack Dorsey has repeatedly put it.