Content Distribution Options are Everywhere … Choose Wisely

Content Insider #902 – Decisions

“It’s always difficult to keep personal prejudice out of a thing like this. And wherever you run into it, prejudice always obscures the truth. I don’t really know what the truth is. I don’t suppose anybody will ever really know.” – Juror #8, “12 Angry Men,” Orion-Nova Productions, 1957

The entertainment industry is in a hellhole spiral.

The entertainment industry is in a dramatic resurgence, reinvention.

Depending on where you work in the industry, one or both statements are true.

The industry is in perpetual change – always has been – and it will be “interesting” to see what tomorrow has to offer as it begins using new technologies and expands its entertainment offerings.

Some segments are up and growing like streaming, video gaming and social media while others such as theatrical and pay TV are readjusting, reinventing themselves.

Some of the industry players want to be everywhere all at once, others focus on a few of the areas to dominate them, others wonder WTF is going on.

Some people mention entertainment and they view a single entity.

After all, entertainment is entertainment.

It is and it isn’t.

It’s a bunch of loosely associated themes, ideas and approaches designed to appeal to and captivate/hold people for … a while.

We have a couple of friends who will play video games for hours/days at a time. One goes to the movies for special films, his wife at the drop of a hat and the other friend a couple of times a year. Our wife watches cop and doc shows. We watch sci-fi, action thrillers when she grants us the control or goes to bed.

All of that can be lumped under the entertainment umbrella even though each segment has its own unique challenges and opportunities.

Return But – The video content industry bounced back from a number of setbacks in recent years but it has also shifted in both type and location of content. Some segments will rise while others shrink.

But of primary interest to investors and creative folks is theatrical, pay TV, and streaming.

Everything else has its own set of rules/guidelines and nibbles at or contributes to content creation, production and distribution.

The global industry is doing just fine, despite the fact that some segments have only seen modest growth and some players have struggled as they overextended into the next great thing.

No one really does it well unless they slowly, methodically build the enterprise’s foundation and its infrastructure.

When they make a misstep, they quickly correct their course.

Every region and country has its entertainment leaders but the global leaders are arguably:

Disney
Comcast
Baidu
Google
Warner Bros Discovery
Tencent
Netflix
Paramount
Alibaba
Sony

China, the second largest market in the world, sets a unique challenge for the industry.

The middle kingdom faces major issues with the declining/aging population, the nearly 24×7 monitoring of individuals’ movement/activities and younger people abandoning the movie theater.

While the US represents more than a third of global video entertainment spending, China’s theater attendance dropped more than 68 percent from its 2019 high as unemployment climbed over 17 percent among the young (16-24).

More than 200M men/women regularly see movies in the more than 80,000 screens in China country while the remaining 1.2B population has retreated to home viewing.

China’s entertainment rules and restrictions have enabled Baidu, Tencent, Alibaba and others to not only dominate the country’s home and phone screens but to focus their expansion into other countries in SEA (Southeast Asia) revenues to more than $366B by 2028.

The growth rate is more than double that of the Americas industry which still maintains a substantial lead and will deliver more than $809B in revenues during the same period.

While entertainment leaders in the US have had their ups/downs, wins/losses, stumbles/wins, Disney is the only company on the list that is arguably the leading or major player in all of the entertainment categories.

WBD is an excellent example of how to build an entertainment giant with an assortment of good spare parts that are sorta, kinda like each other and are therefore interchangeable.

They’re not!

The company continually struggles to maintain its position as a major theatrical first creator or develop/deliver a steady stream of movies/show series to maintain and grow its global streaming service.

As for its pay TV channels, the loss of sports exclusivity delivered a major blow to the firm’s earning potential and corporate ego.

News operations present a modest return with expensive overhead while TV channels have shifted to reality, contest and unscripted shows rather than the more costly investment of scripted shows to maintain/build audiences.

Demand Priorities – It is extremely difficult for a country’s content creation studios to meet everyone’s requirements and expectations. Focus beats envy every time.

Sony, Universal and Lionsgate have resisted the siren call of streaming content, focusing instead on creating movies for both theaters and streaming services as well as being major production operations for streaming video shows/series.

As FX’s CEO John Landgraf forecast more than a dozen years ago, pay TV has reached its peak.In spite of Wall Street’s rush to bury it and its entertainment services, it continues to represent a major home/personal global entertainment and marketing/advertising source.

Comcast, one of the world’s four largest broadcast, cable and internet firms in the world (behind China Mobile, Verizon, AT&T), is considering divesting some of its legacy cable/satellite assets to focus on its global studio, theme parks and broadcast network businesses.

This follows on the heels of David Ellison’s Skydance’s acquisition of Paramount Global for an estimated $8B.

Ellison has a major job ahead of him after Sheri Redstone anointed three guys to be CEO of Paramount to do all the “staff reduction” and “reorganization” before David sends them packing.

But they aren’t alone.

All of the Hollywood management teams – with the exception of Disney which is focused on finding Eisner’s replacement and growth – are focused on shoring up their bottom lines and healing.

At the same time, they’re trying to figure out how to make their home/personal entertainment businesses profitable.

The “right-sizing” of the traditional home entertainment pay TV isn’t “hot and sexy.”

But those involved have learned that there is an extensive audience out there who like, want and need a little simplified predictability in their lives.

People want to know exactly when their news, scripted shows and sports will be available to them to enjoy without a lot of hunting and hoping.

Not Dead – Pay TV isn’t dead but it also isn’t growing like it did in the “good ‘ol days.” Much like movie theaters, the industry has to adjust to consumer wants/needs to survive.

The traditional TV businesses are coming to grips with the brutal fact that they have to adjust staffing, programming and advertising in a market where they are no longer king of the hill.

The introduction and “relatively” rapid (20 years) rise of streaming hasn’t been a death blow for pay TV.

However, it was a painful slap across the side of the head that tough reorganization decisions must be made.

At the same time, they need to update their services and content approaches to meet business and consumer demands.

O.K., let’s be brutally honest…

Streaming ravaged Hollywood/gentlemen’s agreements and the standard way of running entertainment businesses around the world.

It’s no longer a rich get richer game that bases decisions on their own self-interests.

That never ends well!

Folks who want to become serious players in this arena have to pivot away from raw subscriber growth and focus on managing programming and content costs, pushing normally accepted accounting principles aside and focusing on free cash flow and EBITDA (earnings before interest, taxes, depreciation, and amortization).

Non-traditional studios that are still clinging to a legacy of movie houses and TV channels have found it easier to place their first priority on the streaming audience while using movie theaters and social media to build viewer interest and subscriptions.

YouTube is the enigma in the industry that frankly, irritates and confuses us.

Global Content – YouTube has broken the content creation, production, distribution mold for its success, paying creators with shared ad revenues for traffic success.

Their total content investment – third largest worldwide – includes sports rights (behind Disney and Comcast. But its major investment is revenue sharing with roughly 64M content creators worldwide.

Unlike streaming video services, its primary income doesn’t come from subscriptions but advertising ($35B in 2024).

We’re not a frequent, occasional or casual user so we’re ill-equipped to discuss its benefits other than eyeballs.

On the other hand, we know streaming is a major industry valued at $544B that trains and employs tens of thousands of professionals around the globe who create content for nearly 2B TV households and more than 7.2B smartphone users worldwide.

Most of the streaming services are limiting their growth to local/regional growth rather than global.

Subscriber Dominance – Three of the four leading home/personal streaming services focus heavily on listening to and understanding their subscribers’ desires when it comes to entertainment and in assisting creators in developing projects that satisfy that desire.

From the outset, Netflix was a major investor in content in individual countries to not only win over local subscribers/users but also to offer projects, films and TV series that would be interesting to someone regardless of where he/she lived.

Local Investments – Netflix dominates the global streaming industry by acting local and thinking global. It acquires content that attracts local viewers but also has global interest.

This was made possible and practical by scrutinizing and closely analyzing subscriber viewing data.

We honestly don’t fully understand the value of knowing that subscribers watched over 2B minutes of a film/show during the past week.

We may watch 2-3 minutes of four different movies before we ultimately select one to watch for a couple of hours. But that wasn’t really “watching” the film, it was browsing.

You know, like channel surfing on your pay TV days.

The big break for the global streaming survivors has been the increased use of AI to quickly analyze all of the viewer data and give them models/recommendations on films/shows that are most likely to attract and retain the optimum number of viewers regardless of where they live.

Add to that the AI-enabled localization of content to reduce the time and cost to deliver films/shows with accurate captions as well as seamless translation and dubbing.

“AI localization has been a major boost for content creators/producers in Europe, Africa, the Middle East and Southeast Asia,” said Allan McLennan, CEO of Padem Media Group. “It enables them to get their content on household screens in the Americas and other English-speaking countries.”

“The time and money investment used to be the major cost you didn’t see in international films and shows on screens in the US/Canada. Today, it’s almost an automatic part of the post-production process before the project is released for distribution,” McLennan added.

We’re really happy about it because it significantly broadens our home entertainment selection pool and gives great creatives in other countries the opportunity to share their video stories.

If we’re going to spend a couple of hours every evening in front of our home screen, it’s interesting to follow a storyline that was developed in Poland, Kenya, Indonesia, India, New Zealand or even Atlanta.

Because contrary to what you probably believe, we don’t know everything about the content industry.

Or, as Juror #12 in 12 Angry Men said, “Come on. Nobody can know a thing like that. This isn’t an exact science.”

And since we have a relatively thin skin, let us just add Juror #9’s observation, “It’s not easy to stand alone against the ridicule of others.”

Andy Marken – andy@markencom.com – is an author of more than 800 articles on management, marketing, communications, industry trends in media & entertainment, consumer electronics, software and applications. Internationally recognized marketing/communications consultant with a broad range of technical and industry expertise, especially in storage, storage management and film/video production fields. Extended range of relationships with business, industry trade press, online media and industry analysts/consultants.