Media Predictions from a Millennial Marketer
By: Wes Morton
Tags: Entertainment, Television, Advertising, Digital Marketing, Media

TV is not dead, but antiquated ways of distributing it are dying. People under the age of 30 just don’t own a cable box anymore. And honestly, burying satellite and cable is for the best. Digital distribution has made media better with three main drivers behind the inevitable shift:

For advertisers, digital media provides more granular metrics beyond simple reach and impressions such as engagement and conversions. It also delivers better targeting capabilities that provide cost savings and relevancy for brands. A baby brand can suddenly know exactly how many expecting parents their ads reached and which worked best based on conversion rates for each individual ad. Big market blanketing where 50% of your marketing dollars are wasted will become a thing of the past. Digital media provides media distributors more leverage. With digital media, networks have more depth to their data, allowing them to measure what’s working down to the unique viewer. Programming decisions become easier when you can tell exactly who’s watching and when they drop off. Beyond programming, media networks can make UX and product decisions based on how viewers behave in order to make their entertainment products better. Audiences also become more valuable to advertisers as CPMs and CPVs generally go up the more targeted one can be. In addition, the targeting ability will also broaden the market. When a smaller brand can target just the NY tri-state area rather than buying a national spot, your pool of possible advertising sponsors grows. Finally, digital media provides leverage against measurement companies like Nielsen. When you don’t need a survey to tell you your ratings, 3rd party measurement contracts become much more palatable Digital media is simply a better consumer product. Setting up a cable box with connections is onerous. Getting your entertainment on demand with a click of a button rather than on an inflexible schedule is inconvenient. Watching with flexibility, on multiple devices, and on the go allows consumers to watch even more.

Prediction 2 — Entertainment Bundling Makes a Big Return

Traditionally, cable companies bundled all your entertainment, TV, internet, and phone into a neat $125 package. The bundled packaged has been unraveling for over two decades. Cable killed dial-up, the cellphone killed the landline, and the almighty router will soon usurp your cable box.

Looking at the history of media, disruptive technologies usually revolve around distribution methods. A vanguard company or two breaks the mold and spawns a dizzying array of consumer options. The market then contracts, killing off or merging many companies in the process, into a manageable package by necessity.

You can see the cycle already beginning to contract in streaming TV. Netflix demonstrated market viability for the streaming subscription model, followed by Crackle, FilmStruck, Go90, Seeso, FullScreen TV, Edge, Aereo, FuboTV, SlingTV, Joosts, Redbox Instant, Presto, Shomi, Vessel, Hulu, YouTube Red, and Amazon Prime Video. Out of that list, only Netflix, FuboTV, SlingTV, Hulu, and Amazon still survive. Now that legacy media companies like Disney, AT&T, NBCU, and CBS have entered, expect even more death and destruction.

Where does this all lead? My guess — history repeats itself with digital bundles. When the universe of market choices gets too big, they’ll collapse inward into bundles. The media storm is already brewing. T-Mobile is offering to bundle cell service with Netflix. AT&T bought WarnerMedia and has plans to create a bundled package with cell service, content, and AT&T Internet. Smart.

Bundles no longer make sense when consumers can get equal or more value from buying the disparate parts separately. If I could get my soda, burger, and fries for a dollar cheaper, why the hell would I opt for combo #1? In the media world, consumers no longer wanting a landline, only watching sports, or only premium channels could buy them all individually for a fraction of the cost.

However, as the market matures, the collective cost of consumer services becomes higher. Growth numbers indicate the U.S. is nearing a streaming TV saturation point. Ironically, the same companies that provide the outdated cable boxes consumers are abandoning also provide their internet. I see internet providers becoming the new lords of the entertainment bundle, especially given the FCCs recent gutting of net neutrality. This gave internet providers additional leverage to push streaming services into their bundle packages or face entertainment extinction.

Fear not, bundles aren’t all bad for two main reasons:

When bundled correctly, packages can provide enormous consumer value. If AT&T can bundle my cellphone, Netflix, WarnerMedia (HBO, Warnerbros, CNN, etc), ESPN +, and internet into a monthly bill of $100, I reap the value. Bundles spread the wealth and prop up the little guy. The main reason cable can support 400+ channels is because each channel reaps the benefit of being part of the bundle. While the bundle may hurt larger networks, it funds more niche streaming channels that would not be able to attract the consumers without it. That’s good news for independent film buffs, anime lovers, and whoever still likes watching the home shopping network.

Bundling may even extend off the screen. Many media companies have built out robust live entertainment divisions. I could see especially smart media execs coupling the purchase of live tickets with access to digital channels. Given insights that “millennials like experiences”, the bundling of live and online content would be an innovative way of making a media company stand out.

Prediction 3 — FANG Goes Kabang! Amazon Gets Broken Up. Facebook and Google Get Regulated. Netflix Loses Value.

This is a tough prediction because U.S. anti-trust law cases have historically predicated on a company inflicting consumer harm. Yet, despite providing huge consumer value in easy research (I found almost all these statistics via Google) and direct-to-consumer shipment (my coffee a la Amazon), public sentiment has shifted. Big tech has few friends in Washington these days with both Republicans and Democrats clamoring for digital retribution.

And have no doubt, Google, Facebook, and Amazon are monopolies. Together, Facebook and Google control 57.5% of all digital ad revenue with Google owning 92% of the search market. Amazon controls roughly 50% of all e-commerce. That means one out of two purchases online happen on Amazon.

The trends are only set to grow. The companies provide tremendous value by bringing advertisers and consumers into close digital proximity. Recent and future privacy scandals will do nothing to stem advertiser spending or consumer use.

Amazon Gets Broken Up:

Amazon will face the U.S. Justice Department when Amazon basics and voice come into their own. Basics is already replacing many name brand products such as batteries, lights and furniture. With the introduction of voice, consumers will simply ask for and get generic, Amazon basics.

With voice and Amazon Basics, Amazon will cease to be a marketplace for other companies’ goods. The prospect of one company owning all product, distribution, shipping, advertising and access to over 50% of the online market will be too much and the Justice Department will intervene.

I surmise Amazon gets broken into 2 or 3 companies, with e-commerce + shipping in on one side and their web services, media (Twitch and IMDb), and Studios/Prime Video on the other.

Google and Facebook Get Regulated, Probable Break-Up After That:

GDPR was a major move in the European market. Despite embarrassing panels of legislative grandparents asking tech executives how to internet, we will get federal privacy legislation largely modeled off of GDPR.

In fact, many states have already passed individual privacy legislation modeled after the European law. The platforms have even asked for federal action because compliance to one federal law is easier than mandates from 50 states. Given the bipartisan demand for some sort of statute, a GDPR like law could pass during the Trump administration in the next two years. Regulation that limits data sharing between services under their umbrella would be an effective way of developing anti-trust-like legislation without going through court.

Effective regulations, further privacy breaches, and activist investors could create impetus for a future break-up. For Facebook, blocking their planned back end merger of messaging would be a prudent first step in allowing others to compete for display and video revenue. If their planned messenger merger succeeds, look for a split between their display properties (Facebook and Instagram) and messenging apps. For Google, I can see a likely split between Google Search/Doubclick and YouTube. The exact cases brought or if the Justice Department brings them is anybody’s guess.

Netflix Loses Value

As of market close of February 23rd, Netflix is just 10 billion shy of Disney’s market cap. That’s right — the market thinks Netflix, a global TV streaming platform with basically zero distribution costs, is worth the same as Disney, the owners of 12 global theme parks, 4 major film TV studios (Disney, Marvel, Lucas Films, and Pixar), ESPN, ABC, A&E, Disney music group, and a cruise line.

We mentioned above that every media company is joining the streaming business. Yet, most consumers only subscribe to 3 according to Adweek. With new entrants like AT&T, Disney+, and Apple ready to join the fray, the streaming market is going to be more crowded than a NY subway car during rush hour. I don’t see Netflix’s 15 billion content investment in 2019 changing this. With more content providers, and options than ever before, streaming differentiation will plummet and profits will get squeezed as more companies sacrifice margin to gain subscribers.

Netflix won’t go away by any means. It will remain a robust channel, essential to any content bundle consumers buy into. It just won’t be as relevant and all dominating as it is today.