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Streaming Beacon+ Quarterly Intelligence Report

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Streaming Beacon+ Quarterly Intelligence Report Streaming Beacon+ Quarterly Intelligence Report October 15, 2020 Beacon+ Streaming Q3 2020 Overview About Storyful Storyful is a digital intelligence agency that brings together proven data, AI technology, and specialist expertise to deliver investor intelligence from the new information environment. We have deep experience in identifying, analyzing and tracking online conversations, trends and threats to help investors understand the changing digital landscape. Our expert analysts use our AI models to provide investors with a single integrated assessment of the risks and opportunities presented by the new information environment. We model, measure and monitor market trends and KPIs allowing partners to make critical, proactive decisions. Objective The purpose of this Beacon+ report is to track the changes drawn from the digital landscape to understand and interpret the streaming market. This is to provide intelligence for decisions or to surface changes that may affect investment hypotheses. Approach The Beacon+ report framework can be configured with any number of companies. In this example the three largest (Netflix, Amazon Prime Video and Disney+) have been selected for a more detailed review. A competitor section of the report also compares the three top streaming companies with Hulu, HBO and Apple TV in order to provide a wider view of the growing competition (more can be included upon request). The Key Findings provide the most critical information that will affect acquisition and retention of subscribers, and also provide a forward looking assessment as to how this may affect the sector moving forward. Storyful works closely with clients to ensure that the most pertinent information is provided for your specific and unique needs. By understanding the key signposts to your investment hypotheses we are then able to create a bespoke decision support matrix and intelligence collection plan to ensure you are provided with timely and actionable intelligence. Each company is reviewed in detail in the context of consumer interest in their content, pricing and user interface. Further information is provided on any ongoing or current labor issues and the wider trends that could provide an opportunity or present a risk to the company. An example of Storyful’s proprietary methodology on threat categorisation, Advanced Information Threats (AIT), can be found for Netflix within the Annex (see page 20). 2 Beacon+ Streaming Q3 2020 Key Findings Key Findings The following reflect the key insights derived from Storyful Intelligence Collection plan (ICP) for Streaming and has been identified as the most impactful, timely, and actionable intelligence. Overall Assessment: Netflix unlikely to beat Q3 guidance, Disney+ likely shedding subscribers and Amazon holding firm whilst pushing into new audiences. “Cuties” fallout limited with Netflix content unlikely to deliver above forecasted growth The outrage around “Cuties*” has been driven by QAnon (AIT#13 - see Annex) and their supporters who represent a very vocal minority of Netflix subscribers. The more nuanced, but less publicized counter-narratives portray a general subscriber base that is more forgiving. Although Netflix had received a bounce of 3.4% in positivity toward its content, this was focused around future (Q4 and beyond) releases. This is unlikely to translate into the necessary buyer motivation to subscribe in Q3. Assessment: Subsequent review of the data throughout Q3 shows an increase in positivity toward Netflix content (↑3.4%) with the lowest increase of negativity (↑0.3%) of all the major streamers reviewed. When balanced against external factors—such as the lifting of many COVID restrictions in US and EMEA—it is still likely that Netflix will struggle to beat their Q3 guidance. Shine comes off Disney+ likely leading to higher subscriber churn Consumers are increasingly expressing frustration with the lack of adult-focused content and the slow pace of new content added to the platform. The launch of “Mulan” as an additional paid piece of content—on top of the subscription—marked a red line for many consumers who chose to break cultural norms in the US and view the film through illegal download (ranked #1 on Pirate Bay and seeded 46K times), likely diminishing the offering. Disney+ was also plagued with a number of technical problems, with criticism levelled at the app crashing when used in conjunction with PS4 consoles, Fire TV Stick and some smart TVs. Assessment: At a time when Disney’s CPG and entertainment businesses are suffering significant challenges, it looks unlikely that Disney+ will be able to make up much of the shortfall. Although continued growth in subscribers is likely, we would expect to see a lower percentage growth in Q3 when compared with Q2, and to see a spike in subscriber churn. Were the app not to work on the new PS5 and Xbox Series X this could cause significant impact on the acquisition and retention of subscribers. Amazon Prime Video achieves balance through its wider offering With the highest level of positive sentiment related to pricing (a 15% increase within Q3 2020), Amazon Prime experienced a solid balance of conversation around new offerings (increased sports, music and gaming content) further differentiating their offering. However, Amazon content was #1 for the top ten pirated downloads posing a threat to subscriber acquisitions. A noticeable increase in conversation amongst Indian audiences (7% of total conversation in Q3 2020) criticized the lack of Kannada as a subtitling option, yet Amazon also received praise for the film “Maharshi” that featured 15 languages—higher than most domestic productions. Assessment: The increasing consumer perception of a good mix of content and value for money, alongside the move to capture audiences other streamers are not actively seeking (i.e. sports), will likely drive increased subscriber acquisitions whilst the delivery service and special offers will continue to safeguard against significant churn. India is likely a future key market for Amazon and the breadth of languages served may signal intent of further investment. *French film interpreted by some online commentators as sexualizing young girls 3 Beacon+ Streaming Q3 2020 Competitors Streaming Market Sentiment Netflix still in third place despite significantly more buzz in Q3 The charts on this page illustrate consumer conversation about new releases and upcoming content, with mentions categorized as positive, negative or neutral in sentiment. Netflix outperformed competitors in terms of conversation volume, with more than 13k mentions of upcoming content in Q3. This is a positive increase from Q2, where Netflix was ranked 5th of the six streaming brands in terms of conversation volume. While a large proportion of Netflix’s conversation volume is positive (70%) and increased by 3.4% in Q3, both Disney+ and Amazon Prime experienced higher percentages of positive sentiment, 74% and 71% respectively. However, negative sentiment around upcoming Disney+ content has increased by 2.7% since Q2 while Amazon’s has decreased by a similar percentage (2.6%) quarter on quarter. Q2 Q3* Competitor Q2 Positive % Q2 Negative % Q3 Positive % Q3 Negative % Amazon 68.3% 16.6% 71% (↑2.7) 14% (↓2.6) Apple TV 76.1% 11.2% 71% (↓5.1) 13% (↑1.8) Disney+ 76.2% 12.3% 74% (↓2.2) 15% (↑2.7) HBO 68.8% 15.8% 64%(↓4.8) 17% (↑1.2) Hulu 72.9% 14.8% 64% (↓8.9) 19% (↑4.2) Netflix 67.6% 16.7% 70% (↑3.4) 17% (↑0.3) *From Q2 to Q3 Storyful adapted the collection methodology with regard to upcoming content and new releases. While in Q2 mentions related to the top titles mentioned per streaming platform were collected, in Q3 conversation a series of complex queries were created to broaden the collection of content conversations. This accounts for deviations in data volumes between Q2 and Q3. 4 Netflix Q3 - 2020 5 Beacon+ Streaming Q3 2020 Netflix Key Findings The following reflect the key insights derived from Storyful’s streaming intelligence collection plan and has been identified as the most impactful, timely, and actionable intelligence. Overall Assessment: Netflix will not beat guidance on Q3 growth. The “Cuties” film conversation overshadowed excitement around new content focused on Q4 releases. Little negativity appeared relating to pricing although a growing concern around future price rises has increased. “Cuties”* fall out limited with Netflix increasingly embroiled in polarising narratives Media coverage of a perceived widespread online outrage around “Cuties” is not supported by analysis of the data. The online outrage has been driven by QAnon and their supporters who represent a minority, albeit very vocal, of Netflix subscribers; negative sentiment towards Netflix only increased 0.3% across the period. The more nuanced but less publicized counter-narratives portray a general subscriber base that is more forgiving. Assessment: A likely short-term spike in cancelations in September will self correct as greater COVID restrictions are reintroduced in Q4. Were Trump to lose the election in November, it is possible that right-wing elements of his support base will seek to penalize those they see as being complicit in his loss. This could place Netflix squarely in the crosshairs of a right-wing “cancel movement.” Content excitement unlikely to help boost Q3 subscriptions The positive sentiment toward content in Q3 was overshadowed by the widely-publicized criticism around the perception of “Cuties.” The wider new releases and content afforded a 3.4% positivity boost placing the overall content offering of Netflix in 4th place. A significant positive conversation centered around animation, whether that be the commitment toward a future season of the animated series “The Dragon Prince” or the call for applications to the Netflix animation training program (July 21). Assessment: This is likely a strong retention play toward animation and manga audiences that make up a strong and loyal following. It is not apparent if this is part of an ongoing strategy regarding animated content or if there is concern that this audience's interest is waning.
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