By Megan Anderle, Editor and Contributing Writer
Netflix’s CEO Reed Hastings announced that his company was bringing its Internet TV network to more than 130 new countries around the world, up from 60 countries. YouTube announced its partnership with GoPro and that the video platform will soon support HDR video. Sling TV came out with a sleeker, more personalized user interface to lure cord cutters. And like last year, every major television manufacturer tried to one-up its competitors with sharper, larger and smarter TVs.
Given the rise of over-the-top television and unbundled cable, it’s obvious that major changes are afoot, but these changes are often overstated. Advertising on television, for example, isn’t going away anytime soon, even with the popularity of Netflix’s ad-free model. What’s really changing in terms of how we’re consuming media, and where are we headed? Read on to find out.
1. We’re in a time of rapid innovation from a few key players, but don’t forget that it’s part of a larger paradigm shift.
In wake of all the CES announcements, platforms like HBO Now, Sling TV, Netflix and Hulu are credited with inspiring industrywide change, in terms of how and when consumers want to consume content.
The old model of cable television has been broken for years. Cable companies have grappled with how to stay relevant, unbundling packages and offering streaming options. The pay-TV industry lost subscribers for the first time ever back in 2013, and a record 600,000 cut the cord last year, according to Nielsen.
Since then, there have been many growing pains for legacy media companies. Back in April, Verizon and Disney had issues when Verizon wanted to offer its customers a selection of slim cable bundles with its Fios service. Disney said it violated their contract, specifically because the selection would split ESPN and ESPN2 into a separate sports package. Contracts and old industry standards, coupled with questions over whether to offer channels à la carte or in packages (for sports lovers, for example), have been major obstacles to giving consumers exactly what they want.
And then there’s YouTube, which has benefited immensely from increased digital video. Analysts predict that 90 percent of all Internet traffic will be from video by 2019. Capitalizing on the trend, YouTube unveiled its paid subscription service, YouTube Red, back in October.
YouTube’s chief business officer, Robert Kyncl, made a bold bet during his Jan. 7 CES keynote in reference to his prediction four years ago that 90 percent of Internet traffic will be video by 2020 and that 75 percent of all video would be digital by then as well.
“This being Vegas, I’m doubling down and standing by my prediction,” he said. “I think digital video will be the single biggest way people spend their day after sleep and work.”
It remains to be seen whether Kyncl is correct and what will happen to cable companies. Eventually, legacy media will figure out how to adapt to this changing world, but it’s unclear exactly how unbundled and à la carte television will pan out because traditional cable television is on a slow and steady demise. It’s not in rapid decline.
What is clear: We can expect to pay for Hulu, Netflix and unbundled packages separately for a while. When I joked with Todd Yellin, vice president of product innovation at Netflix, and Sean Carey, vice president of content acquisition at Netflix, that maybe one day Netflix would be licensing its original programming to traditional cable companies like Fox and CBS, they laughed. That’s because Netflix and its pioneering streaming comrades have opened Pandora’s box. They’re too strong to work with other companies, so the legacy media conglomerates will have to innovate on their own. Even though I’m sure CBS (and its viewers!) would die to have “House of Cards” on during prime time, they’ll have to get creative.
2. It’s more important than ever for television networks to think like brands and operate cross-platform.
Part of the reason why HBO and Vice Media are so successful is both companies think like brands. Vice Media has a strong Snapchat presence with a channel that resonates with its followers. HBO has engaged “Game of Thrones” fans through a number of social campaigns. In both cases, these companies are authentic and unafraid to experiment. But they’re taking a holistic approach, exploring established and emerging social platforms rather than focusing on one single platform. And they’re being strategic, only developing content on platforms that their fans use.
“You need to be on Facebook, YouTube, Twitter, Snapchat — every channel — and you need to do it really well to win,” Kay Madati, BET’s chief digital officer, said during a CES panel. “That means committing resources — writers and producers — to be everywhere our consumer is.”
Television is no longer the central place where content is distributed. Today, networks like AMC are engaging “Walking Dead” fans even when the season has ended, through Snapchat filters that turn you into a Zombie and interactive quizzes and trivia contests online. A strategy like this keeps viewers tuning in season after season.
3. Advertising is here to stay for a while, in one form or another.
Even though Netflix is “allergic to ads,” in the words of Yellin, not every streaming service has the same ethos. Hulu has an ad-free subscription option and an ad-supported option. Hulu’s strength is its ads are very targeted to each user, which makes them less insufferable than regular ads on television, which have no idea whether you’re in the market for a new Audi or whether you use Tide to do your laundry. And if you’re a Hulu fan who’s allergic to ads too, you have the choice to pay slightly more ($12/month) to watch your shows uninterrupted.
The point is, we’re getting more choice when it comes to advertisements. There’s still so much money in the ad-supported model, and conglomerate companies like Clorox and Ford still see value in them, so platforms will keep them around for a while. But digital platforms are keen to this idea that users hate repetitive, in-your-face ads, and users are less tolerant of them now that platforms like Hulu and Netflix have eliminated them completely.
What’s getting fazed out: Ads that are meaningless to viewers. With the rise of digital content, it will be easier for companies to create targeted advertisements. Advertisements will become a more seamless part of the viewing experience. There might be fewer but slightly lengthier ads to make for a less disruptive experience, or perhaps we’ll have the choice for when we’ll watch ads (maybe before we start the program, we’ll get a prompt asking whether the ad should come at the start or in the middle, for example). Or maybe brands will sponsor programming. Either way, advertising isn’t going to be as obtrusive as it once was, as brands strive to serve the right message to the right viewer at the right time. Digital platforms will be able to do this as they learn more about who’s viewing their content, which will happen as they aggregate and analyze more data.
4.The floodgates are open for global content. But there are still barriers to delivering content in some countries.
Television series on ABC, NBC, Fox and other networks run at different times of the year in different countries. But in an Internet world, there’s a greater consumer desire for shows to be available at the same time, everywhere. Netflix is making all of its shows available in 190 countries simultaneously so that consumers can choose when and over what device they want to view their favorite shows. Expect to see more of this as cable companies adopt digital models. This will prevent piracy (and, probably, spoilers on social media).
But digital content is tricky in certain countries, like China, which has unique laws. Netflix isn’t available in China, North Korea, Crimea or *** due to government restrictions on American countries. Yellin said his company is working within the constraints of these laws but is hopeful that things change down the line.
5. We’ll have better content than ever before. We’re approaching the golden, golden age of television and streaming content.
Given all the ways content can be distributed now, the fact that content has been democratized thanks to the Internet, and that consumers have come to expect premium programming, we’re in a renaissance of sorts. Netflix and Amazon Instant Video have had dozens of Emmy nominations and wins. YouTube has its own video and music awards shows to honor its best video stars. And Funny or Die, LouisCK.net and EW.com have been lauded for their online content. Heck, “Sleepy Hollow” on Oculus Rift has won an Emmy. With a range of platforms, creators and storytellers of all kinds have been inspired to tell their stories in new and engaging ways. We’re just getting started. Prepare for the golden, golden age of television.