Insights is a new weekly series featuring entertainment industry veteran David Bloom. It represents an experiment of sorts in digital-age journalism and audience engagement with a focus on the intersection of entertainment and technology, an area that David has written about and thought about and been part of in various career incarnations for much of the past 25 years. David welcomes your thoughts, perspectives, calumnies, and kudos at david@tubefilter.com, or on Twitter @DavidBloom.
This installment of Insights is brought to you by Beachfront RISE.
News that Time Warner has bought a 10% stake in Hulu for $583 million, but no seat on the board, created a bit of a tizzy in streaming-media circles these past several days. While it’s notable that Time Warner is making yet another significant investment in yet another corner of the online-media universe, that’s not even this sector’s most fascinating news of the past month.
Just consider these developments, all more telling about the future of entertainment to my mind than the Time Warner – Hulu deal, loaded as it is with Hulu’s complicated management structure, owner ambivalences, and eternally shifting business plan:
What’s common to all five of these companies is not just their move into original programming. It’s also that none of them rely on entertainment programming to pay for their supper.
Apple uses content to lock people into its high-margin hardware and ecosystem of services. Facebook wants you to spend more time on its site so it can run more targeted ads by you. Same, to a slightly different extent, with Alphabet/Google/YouTube and its targeted search ads. Amazon, of course, has made Prime a hard-to-beat deal that locks people into buying stuff with free shipping while also getting access to free movies, TV shows, books, and music. Verizon clearly hopes to drive growth and customer stickiness with content and targeted ad sales.
It’s also true that each of these companies knows far more about the people watching their entertainment offerings than Hollywood has managed to learn in a century of trying.
In this emerging era of endless content, that knowledge allows several advantages. A company knows exactly who in their audience is likely to watch a specific show. With that, they can make programming decisions with far more confidence in what will work.
Once made, programming can be marketed in targeted ways that bus-bench ads or TV promos never could do. Depending on the outlet, they also can target ads with much higher CPMs. And distribution, once the difference maker for studios and networks, isn’t any more. These sites can reach audiences in most parts of the globe with distribution costs approaching zero.
Meanwhile, the companies that used to control distribution, marketing and finance to dominate the market for high-quality entertainment (you would know them as TV networks and movie studios) no longer hold the same unassailable positions. Even as those companies buy or build pieces of the new online-media universe (Maker Studios, or Machinima, or Hulu, for instance) they don’t appear positioned to thrive, because this universe doesn’t fit their scale-driven cost structures. Many of the studios and networks are licensing far less content to Netflix, for instance, because they perceive it as a competitive threat instead of a new distribution window. The Time Warner – Hulu deal reportedly was held up because of studio concerns that Hulu’s approach devalues its content; the fix is Hulu’s move to end its original ad-funded free-viewing option (though some programming will be available on partners such as Yahoo).
But now the tech giants, funded by other revenue streams, are moving into their territory.
So what do the networks and studios do? They’re vulnerable, thanks to a glut of product (more TV shows were cancelled last year than were made five years ago), new ways to consume entertainment, growing distaste for the bad user experiences of traditional TV, and a lack of other ventures that could subsidize content.
How do the traditional entertainment companies of Hollywood change the equation? The ones best positioned for the future – resort-owning Disney, Comcast-owned NBCUniversal – are the ones with a wide footprint beyond the core of entertainment. Questions about the rest are why we’ll see more deals like the Lionsgate–Starz tie-up.
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