The Value of Content Report

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The Value of Content Report THE VALUE OF THE VALUE OFCONTENT CONTENT NEWS THE VALUE OF THE VALUE OFCONTENT CONTENT TABLE OF CONTENTS TABLETABLE OF OF CONTENTS CONTENTS FOREWORD 5 KEY MESSAGES PART 1 THE ROLE OF CONTENT IN THE CURRENT TELEVISION 6 INDUSTRY EXECUTIVE SUMMARY 12 24 PART 2 PART 3 THE ELEMENTS OF SCENARIOS FOR CHANGE WITHIN THE INDUSTRY EVOLUTION TELEVISION INDUSTRY 42 64 PART 4 IMPLICATIONS FOR KEY INDUSTRY PARTICIPANTS 78 BLE OF CONTENTS ABLE OF CONTENTS PART 1 THE ROLE OF CONTENT IN THE CURRENT TELEVISION INDUSTRY Two traditional ecosystems ......................................................................................................................................................... 27 Different markets, different rates of evolution .................................................................................................................... 32 The value of content: Two-thirds of the $500 billion global TV market – and growing ................................... 34 The strategic role of content in the value chain ................................................................................................................ 35 Changes, not disruptions – until now? .................................................................................................................................. 39 PART 2 THE ELEMENTS OF CHANGE WITHIN THE TELEVISION INDUSTRY The major forces at work ............................................................................................................................................................ 44 Significant industry changes ........................................................................................................................................................ 50 First-order implications for key players ................................................................................................................................. 60 PART 3 SCENARIOS FOR INDUSTRY EVOLUTION Scenario 1: Gradual evolution within the current industry structure ....................................................................... 66 Scenario 2: Disruption driven by the rise of multiplatform navigation .................................................................... 69 Scenario 3: Disruption driven by exclusive entertainment content ........................................................................... 72 Scenario 4: Disruption driven by the direct-to-consumer strategies of content creators and broadcast networks .............................................................................................................................................................. 74 Scenario 5: Disruption driven by online content aggregators moving into linear streaming of broadcast networks .................................................................................................................................................................. 76 PART 4 IMPLICATIONS FOR KEY INDUSTRY PARTICIPANTS Implications for content creators and rights holders ....................................................................................................... 80 Implications for broadcast networks ....................................................................................................................................... 81 Implications for infrastructure-based subscription TV distributors ............................................................................ 83 Implications for online content aggregators ........................................................................................................................ 85 Tuning in to the future .................................................................................................................................................................. 86 GLOSSARY OF TERMS ..................................................................................................................................................... 88 FOREWORD FOREWORDFOREWORD This report is intended to stimulate discussion and debate about the fast-changing dynamics in the video industry. Our focus in the pages that follow is on “television”. In 2016, of course, that term needs defining, as content is increasingly consumed on computers, tablets, and mobile phones (along with television sets) thanks to the advancement of online and mobile content delivery. A more accurate definition is “profes- sionally produced long-form video content* that is delivered across a variety of traditional and digital or mobile pathways and consumed on devices from television sets to smartphones, tablets, and PCs, both in - side and outsideFW the home”. This is an industry made up of three key segments: content owners, and rights holders; FTA and Subscription TV channels; and distributors and aggregators. Our report is focused on the nature of change in the industry and primarily focused on the potential implications of these changes for the channels, distributors, and aggregators. We are publishing this report as the industry is facing a higher degree of uncertainty about its future than at any other point in history. Our goal is to stimulate discussion among industry decision-makers, influen- cers, and academics. We hope this work challenges conventional wisdom and provides a valuable contri- bution to the ongoing industry discourse. * For example, television programming versus either user-generated video or two- to three-minute professionally produced video segments. 5|4 KM KMkey messages KEY MESSAGES KEYKEY MESSAGES MESSAGES The emergence of a new online-content value chain is threatening the history of Three key forces have enabled the emergence of the new online-content value chain that is driving incremental change, and is changing roles, this threat of industry disruption: relationships, and value capture. Over time, » The development of technology infrastruc- ture (streaming network topology, connected this might be as disruptive as the changes devices, and software) capable of delivering experienced by the music, newspaper, a high-quality video experience directly to the TV; by 2017, 74 percent of the European Union and magazine industries. and 96 percent of the U.S. will have access to “video ready” fixed broadband » Increased availability of high-quality online content, including professionally produced television entertainment Until recently, the nature of change in the » New and cheaper models of online content video industry (FTA and Subscription TV value creation that are driving large audiences chains) has been evolutionary as opposed to dis- assisted by a new breed of industry player, the continuous; with every new development, most multichannel network; the most successful players were able to gradually modify their strate- YouTube series, for example, have a given gies and business models in order to continue to be “episode” reach several million viewers for a successful. cost well under $50,000 The emergence of a new online-content value These forces have led to significant change chain is threatening that history of incremental in consumers’ viewing behaviors, in particular the change, and is changing roles, relationships, and following: value capture. » Whilst overall viewing time still grows, consu- mers’ content viewing habits are shifting to These changes might, over time, be as dis- the online value chain increasingly at the ruptive as those experienced by the music, news- expense of FTA and Subscription TV viewer- paper, and magazine industries. ship (by 2020, the average global viewer is expected to watch 24 hours of online content $530 billion (U.S. dollars) are at stake for per week) the incumbent actors across the content, broad - » Driven by serialized entertainment, consu- cast networks, and distribution and aggregation mers are increasingly viewing time-shifted, segments of the value chain. non-linear content (by 2020, half of all enter- tainment viewing in the U.S. is expected to Content – its ownership, aggregation, and be non-linear, with the Europe Union trailing monetization – is at the center of these changes, closely behind) and $530 billion will be redistributed in large part on the basis of which players are able to retain content as a key control point. KEY MESSAGES Key Messages KEY MESSAGES These forces are also showing early impacts » Players across the value chain are diversifying on the traditional FTA and Subscription TV value their portfolios to position themselves around chains: key content assets to drive future value, » An increasing share of TV ad money and manage content cost, or both consumer spending is moving into the online value chain Disaggregation of value from the traditional » Content value is shifting away from commo- ecosystem driven by the emergence of the online ditized, second-run content to compelling value chain has created a specific set of risks for mass entertainment and sports and high- incumbent actors: engagement niche programming entertainment » Distributors and aggregators, to prevent a and sports and high engagement niche pro- decrease in the value of their physical video gramming infrastructure and protect video content » Content creators are capturing a slightly larger revenues, are being forced to adjust and percentage of industry value with enhanced diversify their video offerings and make up bargaining power for revenue losses over multiple platforms Exhibit 1.0 ONLINE/MOBILE DRIVING VIDEO CONSUMPTION GROWTH GLOBALLY Nr. of hours per week spent Mobile video Online video TV per media
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