Streaming is the most disruptive force in video media. Globally, streamed video services continue to grow, led by the US majors, apparently at the expense of nonstreamed and advertising-dependent broadcasters. Recent trading announcements by leading streamers and leading UK broadcasters point in two directions: streaming growth in the North American market is slowing, according to figures from Netflix and Disney, while UK public service broadcasters (PSBs) reported a strong advertising recovery in 3Q21. Both trends were influenced by the pandemic, which slowed the production of new content – this is unwinding and points to a healthy 4Q21. Similarly, leading UK PSBs expect a strong 4Q, with advertising at record levels. Other trends are at work, however. Content spending is forecast to grow strongly, boosted by the arrival of new streamers, while Netflix and Disney continue to increase their content budgets. Investors are looking at the increased competition, rising content spend and expanding investment in new studio capacity, and worry about longer-term streaming profitability. Netflix is a well-established streamer with significant advantages. As it grows, its business model develops. It offers an increasingly diverse range of content in terms of genre and language. Local content is produced in local languages, and this can be dubbed or subtitled for other markets. Soon, other content could be added; for example, gaming, or even music. A huge entertainment offering is emerging. This will support Netflix’s core objective: sustained subscriber growth in a market where scale is everything. Linear, advertising-funded channels are recovering vigorously from the impact of COVID-19. UK TV advertising markets have seen the return of established brands and the arrival of new ones. New e-commerce businesses, typically tech-based startups, are using broadcasters to build their brands. UK broadcasters aim to reduce their dependence on advertising, and they are meeting the challenge of streaming by exploiting its possibilities with new business models. The diversification strategies of UK broadcasters are bearing fruit, although they have to be sustained and proven beyond the recent very positive trading news. Revenue and profits from D2C streaming strategies are increasing. Content creation is making a growing contribution, as production studios, expanded by acquisition, benefit from rising demand for content internationally. There is a huge difference between the ratings given to streamers compared with broadcasters. Internet-driven streaming is seen as “the future”, and broadcasting is seen as a disrupted business. However, streamers face mounting costs and greater competition, while broadcasters are becoming more digital and building content businesses. Can the ratings gap stay this wide?
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Streamers vs. broadcasters
- Published:
26 Jan 2022 -
Author:
Hardman & Co Research Team -
Pages:
23
Streaming is the most disruptive force in video media. Globally, streamed video services continue to grow, led by the US majors, apparently at the expense of nonstreamed and advertising-dependent broadcasters. Recent trading announcements by leading streamers and leading UK broadcasters point in two directions: streaming growth in the North American market is slowing, according to figures from Netflix and Disney, while UK public service broadcasters (PSBs) reported a strong advertising recovery in 3Q21. Both trends were influenced by the pandemic, which slowed the production of new content – this is unwinding and points to a healthy 4Q21. Similarly, leading UK PSBs expect a strong 4Q, with advertising at record levels. Other trends are at work, however. Content spending is forecast to grow strongly, boosted by the arrival of new streamers, while Netflix and Disney continue to increase their content budgets. Investors are looking at the increased competition, rising content spend and expanding investment in new studio capacity, and worry about longer-term streaming profitability. Netflix is a well-established streamer with significant advantages. As it grows, its business model develops. It offers an increasingly diverse range of content in terms of genre and language. Local content is produced in local languages, and this can be dubbed or subtitled for other markets. Soon, other content could be added; for example, gaming, or even music. A huge entertainment offering is emerging. This will support Netflix’s core objective: sustained subscriber growth in a market where scale is everything. Linear, advertising-funded channels are recovering vigorously from the impact of COVID-19. UK TV advertising markets have seen the return of established brands and the arrival of new ones. New e-commerce businesses, typically tech-based startups, are using broadcasters to build their brands. UK broadcasters aim to reduce their dependence on advertising, and they are meeting the challenge of streaming by exploiting its possibilities with new business models. The diversification strategies of UK broadcasters are bearing fruit, although they have to be sustained and proven beyond the recent very positive trading news. Revenue and profits from D2C streaming strategies are increasing. Content creation is making a growing contribution, as production studios, expanded by acquisition, benefit from rising demand for content internationally. There is a huge difference between the ratings given to streamers compared with broadcasters. Internet-driven streaming is seen as “the future”, and broadcasting is seen as a disrupted business. However, streamers face mounting costs and greater competition, while broadcasters are becoming more digital and building content businesses. Can the ratings gap stay this wide?