The State of Media and Entertainment 2021
In the rather unusual year of 2020, the main video-on-demand (VOD) platforms had the chance to capitalise as people spent more time at home due to restrictions or full lockdowns. Unsurprisingly, the demand for online streaming services, including those from existing broadcasters, grew exponentially, but can this momentum be maintained as the audiences return to whatever the new normal may be in 2021?
In the UK, according to an April 2020 Dentsu Aegis report on UK broadcasters' VOD services, Channel 4 had seen an increase in viewership of 57%, Sky of 52%, and ITV of 30%. The BBC iPlayer reported a 47% growth in viewership in the same period.
There was also a rapid growth in the viewing time of subscription video-on-demand (SVOD) and VOD services, according to a May BARB study, as viewing sessions in April 2020 lasted around 53-minutes-a-day longer than in April 2019.
A study from Kantar confirmed these trends, showing a 40% increase in consumption of streaming services in the UK. It also highlighted that the 18- to 34-year-old demographic grew to between 50% and 60%, an indication that a younger demographic is adopting these services at an even faster rate.
The data points to a significant general increase in streaming services. Yet how have the specific SVOD services fared?
Last year, I suggested that Disney+'s target of 60–90 million users in the first 3 years was ambitious but not unattainable. However, due to the pandemic, the subscription figures soared to more than 86.8 million in a little more than a year. Long term, this kind of growth may be difficult to sustain, but Disney has targeted 230–260 million subscribers by financial year 2024–2025. That target, along with the first-year performance, is likely to have some of the more established platforms looking over their shoulders.
While the pandemic has delivered growth for Disney, it has also had an impact on ongoing production, leading to several high-profile series being pushed into 2021, including the first two Marvel series, WandaVision and The Falcon and the Winter Soldier.
This lack of new content could have been a concern for Disney+ as, of all its tentpole series, only The Mandalorian was able to deliver new episodes toward the end of 2020. However, there was an additional source of content, driven by the lack of opportunity for films to have a theatrical release, as Disney debuted Artemis Fowl, Mulan, and Soul on the service.
Disney+ achieved its 3-year target subscriber goal within the first 9 months after it launched, powered by original series like The Mandalorian.
The Mulan debut caused controversy, connected to the Chinese-related production deal and to viewers being asked to pay for access (a $30 fee in the US) on top of their subscription and the film only being accessible to those who already had a Disney+ subscription.
The gamble looks to have paid off, despite global box office earnings of only $67 million for Mulan by early December. In an earnings call, Disney claimed that 30% of US households who have Disney+ purchased Mulan. At the time, Disney+ had around 60 million subscribers, and although no official figures have been supplied, if you consider the US accounts for about 50% of subscribers, that would equate to 9 million purchases or around $270 million in revenue from the US alone.
Film releases represented a slow drip feed of content onto the platform, so to consolidate and grow subscriber numbers, Disney needed to deliver more content more quickly. This content drought was addressed at the Disney Investor Day last December, when the company announced 38 new series from Disney, Lucasfilm, National Geographic, and Marvel, along with 15 new films. Among those films is Raya and the Last Dragon, which will premiere on the service and get a theatrical release, much like Mulan. All of this content is promised for release in 2021–2022 and will equate to new weekly, high-profile content from mid-January 2021 to December 2022.
In terms of costs, this is a significant investment ($8–$9 billion by 2024–2025), and the service is not expected to break even until 2024, meaning there is still some way to go before it is truly a Netflix beater.
One key problem that Disney has had, particularly after the purchase of 20th Century Fox, stems from how it distributes new and archived content rated above PG. In the US, this process is straightforward, as Hulu offers Disney a platform through which to distribute, but this has not been the case in Europe.
The announcement of Disney Star in December 2020 looks to have solved the problem. The service, which comes as part of Disney+ programming, will be available internationally at the end of February 2021 and will offer a range of more mature content. Disney+ says its parental control features should allow this to be seamlessly integrated, and, more importantly, it will give the company a platform to enable simultaneous premium home releases and theatrical releases for new, more mature content. It will also mean that the company can present a clear justification for the anticipated February price increase of about £2 per month.
The Best of the Rest
For other content producers, the way forward in Europe is not as simple. The lack of cinema exhibition space impacted Warner Brothers' box office for Tenet in 2020. This means that studios are unlikely to look at a theatrical-only release for films in the first half of 2021 and will continue to hedge their bets with dual releases or shorter times between theatrical releases and VOD/streaming releases.
This is the strategy adopted by Warner Brothers in the US, which will now release all 17 major films in 2021 simultaneously on HBO Max. This isn't without controversy, however, as these plans and similar ones mooted by Universal were condemned by cinema chains, directors, and others and could lead to a fundamental change to the landscape of theatrical releases.
Warner Brothers’ Tenet saw lacklustre returns at the box office, leading the company to decide to release all of its 2021 films simultaneously in theatres and on HBO Max.
In Europe, where there are fewer platforms for a dual release (e.g., no HBO Max), it will be interesting to see how these changes are implemented, particularly where most films are still scheduled for theatrical release.
Netflix showed a significant increase in subscribers in the first half of 2020, with growth in the first two quarters adding just less than 26 million subscribers. But with a relaxing of restrictions around the world in Q3, this rate of growth dropped significantly to an increase of a mere 2.2 million, with the company predicting a further addition of 6 million subscribers by the end of 2020. By the end of 2020, the subscriber base was expected to have reached more than 200 million globally.
A large percentage of these new subscribers (46%) are from the Asia Pacific region. This comes as the platform looks to diversify its offering globally to counteract slow growth in subscriber numbers in the US and slowing growth in Europe.
Netflix's new content production also seems to be back on track after filming was suspended on many shows early in 2020.
Amazon similarly is now expecting to have around 150 million subscribers and, in the UK alone, has added almost 2 million subscribers between Q1 2019 and 2020. This is due to Amazon accounting for almost 45% of total SVOD UK sign-ups in Q2, according to Kantar. This seems to have partially been driven by Amazon's gamble to buy small packages of Live Premiership football and being able to retain a number of viewers who sign up initially for trial subscriptions to watch the live matches.
By the end of 2019, according to data from Ampere Analytics, Apple TV+ had around 33 million subscribers; a target of around 40 million was projected by the end of 2020. However, the majority of those users appear to be on free subscriptions given away with new Apple devices.
This may not be an issue if you view the platform at least initially as a customer retention programme. By giving away the content, Apple is able to differentiate from other device manufacturers and also convert a percentage of the free trial subscribers into paying a full subscription in the second year.
One of the main problems for Apple could be its small pool of original content compared to rivals. The commissioning for Apple TV is comparatively small scale, but this may not be much of a problem if it can find a programme that begins to cut through to the mainstream rather than the series of relatively well-received but not critically acclaimed programming available on the service at the moment.
In terms of content, Apple, Amazon, and Netflix have all benefited from the inability of the studios to release films into the cinema chains globally. With many movies being postponed, the release calendar for 2021 is looking increasingly logjammed; the SVOD platforms enable the studios to sell on already-completed films, reducing the risk of them underperforming in a highly competitive marketplace in 2021.
One of the most high-profile 2020 films was Borat Subsequent Moviefilm. While the movie was always planned as a surprise cinema release ahead of the US election, it was quickly sold to Amazon by Universal for a reported $80 million. According to Amazon, this set up a potential win for both sides, as Universal banked a profit on the production while the film gained an audience of tens of millions on its opening weekend.
Amazon is now also able to offer a unique promotional capability for new content with the launch of the recent Watch Party feature on Twitch. The feature allows those streaming to watch Amazon Prime Video content along with their audience if they too have an Amazon Prime account linked to their Twitch account.
For recent productions, including The Boys finale and Borat Subsequent Moviefilm, Watch Parties with cast members or high-profile streamers and celebrities have delivered significant audiences. A watch along with Sacha Baron Cohen as Borat delivered an audience of more than 1 million.
Amazon Prime offered a watch party with Sacha Baron Cohen for Borat Subsequent Moviefilm, drawing an audience of more than 1 million.
Outside of the main VOD platforms, YouTube also saw a significant increase in average viewing times, which was partially driven by the increase in live content on the platform.
Average video views on YouTube in Europe were up 10% since lockdowns started, according to figures released by Tubular Labs. This increase can be attributed to significant growth in certain content areas, such as health & fitness (up 145%), people & lifestyle (up 48%), and music (up 47%). Live-streaming views are also up on YouTube by 12%, with notable rises in news & politics (up 30%) and gaming (up 13%) as the audience sought out both entertainment and information.
Sundar Pichai, Google CEO, recently highlighted the growth, saying, "YouTube watch-time has also significantly increased. One area in particular is live streams. I hope you saw Andrea Bocelli on YouTube live on Easter, which just had over 39 million views and it was truly beautiful."
The Andrea Bocelli live stream, which was broadcast from the Duomo in Milan, reached a huge audience globally on YouTube and was also syndicated to over 100 TV channels around the world. It was so successful that an album of the concert was released on audio streaming services.
Throughout the year, most platforms have seen a significant increase in their audience, but I couldn't complete a review of such a successful year of growth without mentioning the most high-profile failure of the year: Quibi.
Quibi, designed to be a mobile-only platform of short (up to 10 minutes) videos, closed down a little more than 6 months after its April 2020 launch. It pitched itself as the perfect entertainment for the commuter, just as cities around the world went into lockdown.
Launching with established broadcasters and talent and with around 60 original shows, the subscription-based service struggled to differentiate itself from free, short-form content on YouTube and never managed to find the "must-watch" content that it sorely needed.
Subscriber numbers were low, only hitting about 1.5 million in the first 6 months, far short of its first-year target of 7.4 million. Within weeks of its launch, the app was well outside the top 50 on Android and Apple app stores.
The experiment simply didn't work, as the limited functionality of the mobile app was of little use to an audience that was spending more time at home watching on a big screen, and the inability to really differentiate the service ultimately stifled interest. Overall, it was an interesting and expensive experiment, but one not different enough to really build itself a unique niche.
The Year Ahead
So, after a solid year of higher growth than expected for most of the VOD and live platforms in 2020, how do they capitalise on this growth in 2021?
Disney has quickly reached its target, but if it can resolve the more mature content issue with Disney Star, it will expand both its appeal and content offering while also finding a home for dual VOD and theatrical releases. This could be pivotal in generating revenue for new films in 2021 while not jeopardising theatrical release profit.
Netflix and Amazon will need to consider how to push subscriber numbers higher in key areas, as otherwise, the gains of the year may degrade as life returns to "normal." This will need to come from content generation, and in terms of promotion, Amazon's use of Twitch could be pivotal, allowing it to offer something new to its younger userbase.
Apple TV needs to focus on the conversion of first-year subscribers. This may simply come down to finding the breakout shows which make the service essential viewing.
YouTube can continue to follow its own path with shorter, more on-demand content while continuing to exploit and attract unique live content. This could then help it carve out a significant space where it is a go-to destination for a whole host of content that has to be live.
With vaccination programmes marking a return to normal, or at least a "new normal," in 2021, the focus will remain on how quickly the platforms can adapt to thrive in a rapidly changing environment as many of them did in 2020.
With dwindling linear viewing and rocketing online video ad spends, broadcasters have teamed up to form joint initiatives spanning OTT services, content pacts, and advertising.
Already wilting under the Death Star orbit of Netflix and forewarned of further competition landing from US studios, Europe's broadcasters have drawn up plans to defend their position.
The SVOD market is already crowded. Do new entrants Disney+, Apple TV+, and BritBox have what it takes to give Netflix and Amazon Prime Video a run for their money?