2012 will be a watershed year for the media industry that will see a decline in traditional TV consumption, according to Rich Greenfield of analyst firm BTIG.
“We believe 2012 will be a watershed year for the media industry and serve as a historic inflection point for traditional TV consumption,” he writes in a blog post listing a range of predictions for the coming year. Noting that the saturation of cable channels trying to cater to every niche has boosted the time people spend in front of the television, Greenfield suggests that consumers “have reached a breaking point”. “Media consumption habits will change – immediacy will diminish/disappear for most video programming (sports and events the exceptions),” he suggests. Instead, Greenfield suggests that social gaming will become a new ‘cure for boredom’.
Movie viewing is also tipped to decline. “We believe consumers are tiring of expensive, premium-priced movie experiences, particularly when combined with an increasingly unsatisfying exhibition experience,” he said, suggesting that OTT platforms such as Netflix will be the beneficiaries of people turning their backs on the multiplex, with Netflix’s push into original content set to pay off for the company. “We expect Netflix’s push into original programming to be a positive surprise for investors in 2012 and expect it to create a new form of “buzz” around the Netflix brand that has been missing since the serious missteps of Q3 2011,” he wrote.
Greenfield suggests that 2012 will see the development of what he calls virtual MVPDs (multichannel video programme distributors), with consumers ditching set-top boxes and dishes in favour of subscribing via the Internet. Such a move could see cable operators that are also broadband providers, such as Comcast Corp. and Time Warner Cable competing against each other by becoming virtual MVPDs.
Greenfield suggests that satellite broadcaster DISH and telco Verizon will be the first movers, with Wal-Mart/Vudu and the TV OEMs (such as Samsung or Vizio) highly likely as well. “Near-term winners would be cable networks who will be paid a premium for their full-suite of networks, albeit the longer-term risk is that virtual MVPDs set the media industry on an unbundling path that has dangerous/uncertain implications. Near-term losers would be satellite-based MVPDs, who have no broadband business to make up for video sub losses,” he suggests.
He suggests that while many/most of the soon-to-be launched YouTube original content channels will fail to capture a meaningful online presence, a handful will be very successful, drawing millions of viewers each on a regular basis. BTIG also believes YouTube is preparing to enable subscription offerings within its content channels. “As cable networks, more recently broadcast networks and even Hulu have illustrated, video businesses flourish when they are supported by dual (advertising and subscription) revenue streams. While we expect the overwhelming majority of original content on YouTube to remain free, ad-supported, we expect to see in-channel subscriptions for premium content in 2012,” he notes.
He predicts that fuelled by billions in cash from a mid-2012 IPO, Facebook will decide to become a major player in online video, mirroring its success in online photos. “Facebook begins to build out server farms and create a video platform capable of showcasing user-generated videos, iVOD (movies and television), and video content created directly for the web (very similar to Google’s current strategy for YouTube). However, Facebook remains true to its ‘platform’ mission by focusing on enabling others’ video services (similar to what it is already doing with Netflix and Hulu), rather than actually investing in/owning video content itself,” he writes.
Noting the existence of Amazon’s standalone subscription video service in the UK -LOVEFiLM – Greenfield suggests that Amazon is preparing to launch a standalone video service in the US to compete more directly with Netflix. “Amazon also owns IMDB, which could lead to a superior search/discovery engine for its video streaming service, not to mention a next generation Kindle Fire should arrive by mid-2012,” he adds.
He predicts that UltraViolet will fail to capture consumer interest, “Even if more retailers, beyond Warner Bros.-owned Flixster come on-board to support Ultraviolet (still a big ‘if’), we believe the studios will need to shift the windowing of electronic sell-through (EST) to at least 2-weeks, if not 4-weeks ahead of DVD/Blu-ray on-sale and significantly reduce the price (sub $10 feels like the sweet spot for an HD movie in the cloud, equates to 2x the HD rental price),” he notes.
He expects video piracy to explode as IP-connected TVs take centre stage. “Video content creators are making the same mistakes that the music labels made nearly a decade ago, focusing on laws/regulatory changes to alter consumer behaviour (SOPA/PIPA laws being debated, albeit, we would be surprised if either made much progress as we have now entered a heated-election year). Their mistakes will be amplified as TVs rapidly become IP-enabled or ‘smart’ directly or indirectly with apps that facilitate piracy only a matter of time. Rather than focusing on new laws to shutdown illegal websites, content creators should be working on addressing the complexity of video content windowing and pricing,” he recommends. “The video industry’s real problem is that piracy/’stealing’ is simply easier for a consumer than dealing with the complexity of the established windowing/pricing infrastructure of the media industry. The video industry needs to learn from Spotify and rethink how to serve content to consumers anywhere/anytime,” he concludes.