There’s this Moody’s Investor Services report: Pay TV and Television Networks — US: OTT Invasion: Grand Bargain Required for Long-Term Sector and Credit Stability. I’ve only read the publicity abstract that was picked up by quite a few M&E press and blog sites. Even in an abstract form, it was such a succinct and compelling analysis of the disruption that is occurring in the media business – that I can’t stop thinking about it.
Moody’s release opens with all guns blazing, “The reign of pay-TV and television networks as the most stable, predictable and highest-margin segments of the US media industry is rapidly eroding…” It continues, “Over-the-top services (OTTs) and digital ad platforms such as Netflix, Amazon Prime, Hulu, Facebook, Apple, YouTube and Sling TV are breaking down the long-standing practice of contractual aggregating and bundling content for distribution through closed-system set-top boxes. This shift from traditionally-scheduled, linear TV to time-shifted, digital, mobile and subscription video on demand (SVOD) streaming platforms reflects dramatically changing habits for consumers…”
Neil Begley, Moody’s senior vice president, points out, “The success of these OTTs has in large part been fueled by content licensed from the very industry heavyweights they are challenging.”
Then Moody’s really drops the bomb. “According to the report to compete with OTTs and rapidly growing digital ad platforms for subscribers and advertising revenue, the pay-TV and television networks must end their linear distribution model, offer all programming on-demand with full stacking rights, implement robust search and recommendation interfaces, and implement real-time targeted ad placement focused on the viewer instead of the program.”
I have no doubt Moody’s is right. I think investors’ worries about “industry heavyweights” ability to deeply change their linear distribution models explains some of the falls in major entertainment companies stock prices and valuations we’ve seen recently. Begley worries, “…based on the current trajectory, we believe that companies will go it alone, meaning change will be inconsistent, stability will erode as individual network churn rises, and operating performance will come under pressure for those that stumble. This could result in potential for rating pressure for many notable industry players that cannot defend against the rising change.”
In other words, either you ride this wave of disruption or you get sucked under. Gathering up your toys and not playing is not an option. Delaying will only get you left further behind.
The linear distribution/monetization model has created and shaped the media business we all know and love. Ending it will change everything. What I’ve been thinking about is what fundamental assumptions, what part of the water we swim in, will we need to ditch the change the linear model? One key concept that’s got to go is that of a media archive (as we’ve always thought of it). I’d describe this as a passive archive. A passive archive sits at the end of the linear distribution chain. Programming passes down the chain in one direction, monetizing as it goes, then is put out to pasture in a passive archive where it can live out its twilight years. A passive archive is mostly a cost center. Assets in it might occasionally generate a little revenue, get a new release, get subclipped, become part of a bundle or retrospective but, in general, a passive archive is where content goes to die. It’s the logical endpoint for a linear way of thinking.
To flourish in the OTT/VOD world we need active archives. Our programming needs to engage our customers 24/7/365. From the first “sneak peak” website through to the last obsessive fan fiction site. To drive this we need active archives. Active archives are revenue centers not cost centers. Your non-linear distribution model is driven from your active archive.
Programming enters the active archive as soon as it’s ready to engage the audience not at the end of the linear chain. For some content this could be pre-master. For sports events you might want to push clips of key moments to social media within minutes of them actually happening. For the next season of your compelling drama you might want to be driving fan engagement by spawning microsites on “Valyrian Steel” with behind the scenes or teaser material.
As your programs monetization/engagement options increase, it all fans out from your active archive. Your worldwide distribution, your OTT distribution, your syndication to MCN’s or social media, your subclipping and licensing, sites and microsites, are all done from the active archive. All the analytics, claiming, social tagging, ad placement, product purchase data etc. flow back into your active archive to further enrich your programming. This is the rich metadata which will power non-linear distribution. As the Moody’s report describes it, “…implement robust search and recommendation interfaces, and implement real-time targeted ad placement focused on the viewer instead of the program.”
Sounds impossibly big and difficult to build? I agree, but I am heartened by how quickly we are moving in this direction thanks to the acceleration provided by the cloud. No one company will build this. Far from being a rebirth of the “One MAM to rule them all, one MAM to find them…” plan an active archive will be part of an ecosystem of cloud-native applications and services that deliver all this innovation. It will be built by many companies cooperating and sometimes competing in an open cloud environment. But that is the subject for another day.