Ampere Analysis – Understanding the Future of Television

Understanding the future of entertainment

Daniel Gadher - 20/08/19

Apple's $6bn original content spend will see it leapfrog Netflix and most of the majors

Apple will spend upwards of $6bn on original content for its new streaming service, Apple TV +, in 2019 according to The Financial Times, propelling it to the top tier of original content spenders globally. This spend is substantially higher than the previously reported commissioning budget of $1bn. If Apple was to persist with this level of spend on an annual basis it would quickly become one of the top five spenders on originated content globally. Apple has already announced 36 original titles for the new service, which is expected to launch in November.

A spend of circa $6bn a year would propel Apple immediately into the first tier of content spenders worldwide, which are all currently investing between $6bn and $8bn in original content annually, which includes Disney/Fox, NBCUniversal/Comcast/Sky and Viacom/CBS. Although Netflix is rapidly increasing its original production spend, it will put an estimated $2.4bn into original production in 2019. Just a year or two ago, this sort of spending would have placed Apple even higher; however, due to the recent surge of consolidation in the market, the spending budgets of some of the industry largest players have been concentrated, creating an elite top tier of originated content spenders. Disney/ Fox, NBC/Sky and Viacom/ CBS will all pass $8bn in original content expenditure by the end of 2019.

Nonetheless, Apple’s significant increase in content expenditure highlights its commitment to the streaming video space, and its willingness to go head-to-head with the industry’s biggest spenders. It also points to a much wider strategic push than has previously been assumed. Spend at this level, if it persists, will mean Apple TV+ must be more than the 'showcase' channel for a few key Apple originals. Rather, this is spend at a full blown streaming premium service or platform level. The imminent launch of a number of high-profile streaming platforms, including Disney+, HBO Max, NBC Universal’s unnamed service, and Katzenberg-led Quibi will intensify competition for streaming subscribers. High value exclusive content is the key battleground. Commissioners and producers continue to invest vast sums of money to attract the best talent. The ability of the platforms to produce quality and differentiated content will be integral to success in a market where Netflix, Amazon and Hulu are already entrenched.

Other new entrants to the direct to consumer streaming space have been slightly more cautious in original investment compared to Apple. Disney has indicated that it will invest around $1bn into Disney + original content in its launch year (rising to $2.5bn by 2022), and to-date has announced 43 original titles for the service. However, in addition to its dedicated service spend, we expect Disney will spend $5bn on original Disney programming plus the additional original spend from its acquired Fox assets in 2019. Disney will be able draw from this, and its vast back-catalogue of content to bolster the Disney+ offering.

Jeffery Katzenberg’s new venture, Quibi, the mobile-only streaming platform concentrating on short form content has committed $1.1bn in original content in its first year. It has already commissioned over 44 new titles, though due to the short format nature of the content the aggregate runtime of the catalogue will likely be significantly less than competitor services.

Isaq Chowdhury - 19/08/19

Tolerance for advertising highest among homes taking multiple streaming services

As the SVoD market reaches saturation, consumers are becoming more open to advertising video on demand (AVoD) services indicating that there is still an appetite for ad-supported TV. The more SVoD services a household takes, the more likely they are to be tolerant of advertising. In Ampere’s Q1 2019 consumer tracking study, respondents with two or more SVoD services were more likely to agree with the statement 'I don’t mind seeing advertising when I watch TV' than respondents with just one service. Customers taking five or more services are considerably more likely to be happy with advertising breaks in their TV shows. Across the 20 markets Ampere surveys, as the number of SVoD services taken increased, so did the percentage of respondents who agreed with this statement. Among US Internet users, 36% of respondents with one service agreed to this statement. This number increased to 40% for respondents with two services and 51% for respondents with five or more services.

While the streaming market has to date been driven by a subscription model, ad-supported streaming services—like Viacom's Pluto TV—are increasingly common and hybrid models that combine both subscription and advertising are likely to characterize the next wave of streaming launches. Hulu has had early success with the model. Earlier this year, it revealed that 70% of the total audience is on its ad-supported plan, generating $1.5bn in ad revenue in 2018. In recent weeks, Viacom has announced that Pluto TV has seen monthly audience rise by 50% in six months, resulting in 19m active users.

With Netflix and Amazon continuing to dominate the streaming space, AVoD platforms are challenging in an increasingly competitive market. However, these services are not directly competing with the large SVoD platforms and instead present an alternative option for consumers who are seeking more content at a lower cost. While age is almost certainly a factor (those taking multiple services are likely to be younger, and younger consumers have a higher tolerance for advertising) another factor could be that as consumers reach online video spending limits, they may be more willing to watch ads as a trade-off for a service that is cheaper (Hulu’s ad-supported tier is half as expensive as its ad-free tier at $5.99 a month) or free.

Richard Cooper - 14/08/19

European SVoD majors refresh a quarter of content each year in battle for success

Europe's six largest SVoD players use a similar content refresh rate to drive engagement and grow the breadth of their offers.

Orina Zhao - 8/08/19

Local streamers band together to take on Netflix in South Korea

The rapid growth of Netflix in South Korea has pushed two local streaming competitors to merge in what could be the first in a wave of industry consolidation.

Elinor Clark - 1/08/19

Netflix pay TV platform deals hit more than two-thirds of Western European subscribers

Netflix's drive to 'onboard' with European pay TV operators has driven its potential reach through operator set-top boxes to more than two-thirds of Western European digital pay TV homes.

Richard Cooper - 19/07/19

Netflix grows catalogue at the expense of recency

Between May 2018 and May 2019 Netflix’s US catalogue grew by 10%, 621 titles, a mix of movies and TV seasons. Much of that grown was driven by the addition of older titles. In the space of 12 months the proportion of titles accounted for by titles over 3 years old has risen from 48% to 52%. This equates to 544 titles, almost the entirety of the catalogue increase.

Minal Modha - 18/07/19

Will there be a rise in free sport on TV in the UK?

The past Sunday saw the England Cricket team win the World Cup in the most dramatic fashion, it was also the first time the sport was on free-to-air since 2005. Is this a watershed moment for sport in the UK as rights holders move towards making more of their content free for audiences?

Hannah Walsh - 17/07/19

Public broadcasters driving Germany's original content market

Public broadcasters are the main drivers of content investment in Germany with ARD and ZDF's accounting for the lion's share of spend on original content. Germany contrasts to other big European TV markets where commercial and pay TV groups dominate the market for content investment.

Toby Holleran - 10/07/19

The Whole Nine Years: Average US SVoD household has access to nine years of content

Thanks to Amazon, Hulu and Netflix's expansive catalogues, the average US SVoD household has access to more than nine years of on-demand content through their SVoD subscriptions.