Big Media scrambles to meet challenge from Big Tech
Big Media scrambles to meet challenge from Big Tech
Even with popular shows like "Game of Thrones,"
about 32 percent of consumers have canceled or "traded down" to a
less expensive package, and many young viewers rely entirely on Internet
platforms for video
By Rob Lever • December 9, 2017
Washington (AFP) - America's media giants have seen this
movie before: Big Tech enters an industry with piles of cash and new ways of
doing business, devastating the competition.
That's why Big Media are scrambling for partnerships and
tie-ups to bolster their content arsenal in the face of a well-funded onslaught
from the tech sector.
This shifting landscape helps explain talks between Walt
Disney Co. and 21st Century Fox to sell key television and film assets from the
Rupert Murdoch family-controlled group, and a proposed AT&T purchase of
media-entertainment powerhouse Time Warner.
More deals are likely as the industry adapts to a
consumer shift to online, on-demand services like Netflix, and efforts by tech
giants such as Facebook and Apple to jump into original content.
"It's an incredibly complicated game of musical
chairs happening simultaneously," said Robert Thompson, who heads Syracuse
University's Bleier Center for Television and Popular Culture.
"Everyone is trying to make sure that when the music
stops they have enough content and people to keep making it for them."
- 'Game of Thrones' -
The old model of hefty pay TV packages supporting the
content creators is fading, and the struggle for power in the industry is now
referred to by some analysts as a "Game of Thrones," a reference to
the popular HBO series.
Streaming services like Netflix and Amazon have already
disrupted the sector. According to a report by the investment firm Raymond
James, 31 percent of Americans said their primary source of video was streaming
services.
About 32 percent of consumers have canceled or
"traded down" to a less expensive package, and many young viewers
rely entirely on Internet platforms for video, the report said.
Google-owned YouTube is also ramping up its original
content offerings and Apple has reportedly created a $1 billion war chest for
its television service programs.
"It's more than taking away money and subscriptions.
It's about viewership, eyeballs," said Bruce Leichtman of Leichtman
Research Group, who follows media and entertainment.
Richard Greenfield, an analyst at BTIG Research, says the
established "legacy" companies are being forced to sell, diversify or
"scale up" to compete against tech players.
But Greenfield said Disney's plan to acquire Fox's stake
in Sky TV and studio assets while gearing up for its own streaming offerings
may not be enough.
Disney, which owns the ABC television network along with
ESPN sports channels, still appears wedded to "legacy distribution
platforms," Greenfield said in a research note.
With more consumers moving away from big pay TV bundles,
"industry fundamentals are worsening by the day," Greenfield writes.
"At the same time the tech giants/platforms are
flourishing and they are taking aim at consumer time spent with legacy
media."
Analyst Brian Wieser at Pivotal Research said the moves
come amid concerns about eroding profits, and mergers can give the firms better
scale.
"The pursuit of size allows for more cost
efficiencies and a better negotiating position" for content, Wieser said.
- Pipes and content -
An AT&T-Time Warner deal would merge one of the
largest distribution platforms -- AT&T's pay TV and Internet service --
with the media-entertainment conglomerate's HBO, CNN and other content
channels, putting it on the same level as Comcast, a cable giant which owns
NBCUniversal.
But the Trump administration's Department of Justice has
filed an antitrust suit to block the AT&T deal, fueling concerns the move
is aimed at punishing White House foe CNN.
The "vertical integration" of a company with
content as well as "pipes" could present a formidable foe to the tech
sector.
And a plan by US regulators to end "net
neutrality" -- rules aimed at treating all online traffic equally -- may
force companies like Netflix and Amazon to pay more to deliver to consumers.
With relaxed rules, firms like AT&T and Comcast may
be able to use some of the same tools employed by Netflix and Facebook by
garnering data on viewers for promotions and advertising, according to
independent media consultant Alan Wolk.
"Right now if you are ABC, you have no idea who is
watching your shows," Wolk said.
Having better data "is probably the most important
thing" for these media firms, Wolk said, adding that it allows for more
efficient targeted advertising.
Thompson, of the Bleier Center, said that even as the
industry faces disruption, content creators -- writers, directors and producers
-- will have more choices and potentially more bargaining power.
"I think these new tech operations can disrupt the
old legacy means of distribution, but they still have to make this stuff,"
he said.
While Big Tech has disrupted many industries, its roots
come from a culture of math and engineering geeks who may not be adapted to the
entertainment sector.
Wolk said Google-owned YouTube "bombed pretty
badly" with most of its shows for a paid streaming service.
"They didn't hire anyone with Hollywood programming
experience and they underestimated the skill for this," he said.
Apple by contrast "made a smart move" by hiring
entertainment executives, according to Wolk, and Facebook is pursuing a
different strategy of finding "niche" programs for devotees of
certain kinds of shows.
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