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Video streaming and digital media industry trends to watch

As the streaming wars intensify, can consumers expect to see more diverse on-demand options in the year ahead? Kevin Westcott, Deloitte’s US leader of telecommunications, media, and entertainment, explores the biggest media trends for 2020—from content re-aggregation and ad-supported video to esports and 5G.

What to watch: The streaming wars

As major networks and studios continue to launch their own direct-to-consumer streaming services in 2020, competitors will likely scramble to offer content libraries broad enough to both attract and retain customers. According to Kevin Westcott, vice chairman and Deloitte’s US telecommunications, media, and entertainment leader, Deloitte LLP, this creates opportunities for media, and entertainment firms to “re-aggregate” their content libraries with a wide array of offerings—from video, music, and gaming services to ad-supported content.

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An interview with Kevin Westcott

Where do you see opportunities for growth in 2020?

As we enter 2020, it’s clear that the growth of video streaming will continue to explode. In fact, in Deloitte’s most recent Digital Media Trends Survey, more respondents indicated that they have at least one streaming video subscription (69 percent) than possess a traditional pay-TV subscription (65 percent).

At the same time, an all-out streaming war is underway, with virtually every media company looking to establish direct relationships with consumers. It now appears that all major US TV networks and studios will have a stand-alone direct-to-consumer streaming service by mid-2020. As they launch their services, the big studios are withdrawing content rights from third-party streaming platforms. Hence, it has become almost impossible for platforms to bring all major studios or networks under one umbrella.

As a result, many US consumers are growing frustrated with having to manage and pay for multiple subscriptions to watch what they want. Research suggests that consumers are willing to pay only for a certain number of streaming services. Deloitte’s Digital Media Trends Survey found that consumers have an average of three streaming video services, a number that has remained steady for two years.

In the end, streaming services that offer the best and broadest content libraries will likely own the inside track to success. One method of getting there is “re-aggregation” (or re-bundling) of streaming offerings—an approach pioneered by players like Amazon and Roku. Providers have an opportunity to offer highly customized packages of content that, in addition to video, could include streaming of music and games, as well as the option for customers to accept ad-supported video: advertising in exchange for “free” (non-subscription) content.

Ad-supported video has already become the dominant model of delivering streaming video to consumers in China, India, and throughout the Asia-Pacific region. Sometimes it is combined with subscription services; in other cases, revenue comes from ads alone. Ads also provide much-needed revenue for streaming providers that seek to expand into different services, such as gaming and music.

In the United States, by contrast, most direct-to-consumer video offerings are pursuing the ad-free subscription model that Netflix has used to dominate the American market. US consumers like to avoid ads: 44 percent say an ad-free experience is a top reason they signed up for a streaming service. Yet, as more TV networks, film studios, and tech companies launch their own subscription services, it’s likely that only a handful can thrive in a subscription-only model, and many may offer ad-supported options.

Ultimately, consumers will likely select a handful of “must have” subscriptions. Media companies with large libraries that don’t make the cut could launch their own ad-supported services, with or without a subscription tier. For other services, providers may have to decide between making them subscription-only or joining an ad-supported aggregator.

One of the additional advantages of ad-supported video is the advanced advertising capabilities that come with it. These include consumer segmentation and targeting, which help promote effective measurement and campaign management.

Of course, targeted advertising relies on providers’ ability to extend highly relevant offers to consumers. This requires a deep understanding of customers’ interests and buying behavior. To gain these insights, providers should deliver value in exchange for the personal data consumers need to share for targeted advertising to work. Unfortunately, too many providers still haven’t figured out how to address this challenge.

There is a sizable audience awaiting providers who do. For example, among millennials who stream video, 29 percent of their streaming time is spent watching video content on free, ad-supported sites like YouTube and Sony Crackle. By comparison, these millennials spend 46 percent of their streaming time viewing content from paid services.

Mergers and acquisitions will likely continue to provide another avenue for media companies to strengthen their content libraries. However, while we expect consolidation to continue, we don’t anticipate the number of megamergers that have occurred over the past couple of years.

Which markets do you see emerging in the sector?

Augmented and virtual reality apps (AR and VR) may not have lived up to the initial hype, but the media and entertainment industry is now finding ways to integrate them into their applications and services. In fact, the past two years have seen a series of investments into the AR/VR space. Research shows that AR technology is currently enabled on one million mobile devices and is expected to grow to more than 3.4 billion devices in 2020.

In the coming year, we expect to see the emergence of AR/VR in a wide range of enterprise apps—particularly in situations where users don’t have access to the processing power of a PC. In the world of media and entertainment, AR/VR solutions will likely be used to:

● Provide a highly interactive alternative to traditional gaming controllers and keyboards

● Help companies produce educational programs that provide information in a more interesting manner

● Supplement other tools for training new employees on day-to-day tasks

● Offer an immersive theater experience by allowing the audience to get involved in the action

● Improve visitors’ experiences at museums, art galleries, and amusement/theme parks

● Make concert performances even more memorable

Another category expected to continue its rapid growth is esports. Deloitte’s most recent Digital Media Trends Survey revealed that professional gaming events are gaining serious traction, with 40 percent of gamers watching esports events at least once a week. By 2020, the global esports market is expected to generate $1.5 billion in annual revenues, primarily from sponsorships and advertising to an estimated global audience of 600 million fans. Marketers bestowed more than 600 brand sponsorships on esport titles and events in 2017 alone.

Legalized sports betting represents an entirely new growth opportunity for telecoms and companies in the media and entertainment industry. The United States Supreme Court lifted the federal ban on sports betting in May 2018, and since the ruling, several states have legalized sports betting, including New Jersey, Pennsylvania, and West Virginia.

In many ways, 5G technology and sports betting are made for each other. 5G is designed to support low-latency, high-volume communications—precisely the kind of connections that real-time sports bettors are likely to desire. And, 5G is already being deployed in sports stadiums, sports bars, and other venues where such betting might take place. In fact, the National Football League and Verizon announced that 13 stadiums would have the 5G Ultra Wideband network installed for the start of the 2019 season, with more to come throughout the fall.

Media and entertainment companies are getting in on the action, too. For example, Fox announced the introduction of “Fox Bet,” an online betting app. And, mobile sports app theScore is planning to launch its own mobile sports book, beginning in New Jersey. For now, many TV networks are taking more conservative approaches, such as developing TV programming for sports-betting fans or placing betting content on streaming services.

What should businesses be mindful of as they plan for growth?

In the coming year, it’s never been more important for media and entertainment companies to make data privacy and security a top priority.

Deloitte’s most recent Digital Media Trends Survey shows that consumers still fear identity theft, financial loss, and unauthorized use of sensitive data—largely because many have experienced these threats directly. In fact, 23 percent of US households were victimized by cybercrime in 2018. As a result, consumers are increasingly demanding the same level of control over their personal data that they enjoy in crafting their home entertainment experience.

Consequently, media and entertainment firms should work hard to create digital environments where people feel safe—and where brands are comfortable advertising. This is especially true in the area of social media, where several platforms are now using artificial intelligence solutions in conjunction with experts to weed out spam and other offensive content.

Another concern for 2020 is the growing antitrust backlash against large tech companies. For example, the US Department of Justice and the Federal Trade Commission (FCC) have launched multiple antitrust investigations into the workings of the biggest technology players. In the coming months, tech giants will likely have to brace for a wave of heightened scrutiny as regulators review the power they wield.

All media and entertainment companies also should address increased regulatory scrutiny across the globe. General Data Protection Regulation was the first significant regulation that challenged US technology companies to re-examine how they conduct business and store consumers’ data. However, since then, there have been a flurry of actions by global regulators against US tech companies. Global regulators cite the European Union’s example for their own laws and investigations against big tech. The scrutiny is only expected to increase in 2020.

With the large-scale rollout of 5G, coupled with the launch of many over-the-top (OTT) streaming services, 2020 promises to be a seminal year for the media and entertainment industry. Opportunities abound for those who can capitalize on the trends we’ve highlighted, while keeping a close eye on the ever-changing regulatory landscape.

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