According to PWC’s M&E outlook for 2018-2023, the U.S. entertainment marketplace is expected to reach more than $825 billion. The report includes revenues from a wide range of sources, including global content creators (Disney, Warner Bros., Starz, CBS, AMC, etc.), multichannel video programming distributors (Comcast, AT&T, Verizon, etc.), digital stores (Apple iTunes, Amazon Prime, Google Play, etc.), and streaming platforms (Netflix, Amazon Prime, YouTube, etc.). In total, these segments represent approximately one third of global revenue in this category. This also considers increasing adoption of various access options, like AVOD, DTC subscription-channels, and SVOD. Given the paradigm shift away from traditional programming forms and access methods, it’s hard not to wonder if there is such a thing as “nontraditional” anymore.
Industry growth is particularly relevant to the rapid evolution of short-form programming. Traditionally relegated to the chaotic “User Generated Content” category, this format now spans highly scripted, carefully produced shows from the likes of Quibi, Netflix, and YouTube. Short-form content also includes promotions, stunts, material repurposed from longer-form linear broadcasts, and a variety of other subjects. Like the variation found in the content itself, programming lengths vary widely, but most industry participants see higher production quality content at 8-15 minutes, though that can be higher or lower depending on platform, show-type, or distribution bias (i.e., daily entertainment news, a reality-show primed for any platform, or a premium weekly scripted show with named talent and viewing experiences tailored to smartphones).
As short-form content propels on to the main stage of consumption, Spherex has been tracking trends and insights along its trajectory. Through an innovative partnership with a major network, Spherex tracked premium daily and weekend shows to understand the distribution of short-form content freely available on the network’s website, as well as via YouTube in comparison to the shows’ linear broadcast segment. In this case, short-form is defined as between 2-6 minutes in length and derived from the network’s long-form formats, i.e., 45-60 minutes per episode. These shorts represented a category mix of popular news content and late-night-interview format shows.
Over a period of one month, Spherex Monitoring found 30-70% of the broadcast content was also freely available in short-form-version, either via owned-and-operated properties or via the network’s managed YouTube channel. The high availability of short segments signals strong acceptance that short-form content is an integral component of promotional and distribution strategies. The plan appears to be “we’ll air programming over linear broadcast; and then in a controlled way, release segments across our online presence.” Spherex’s analysis revealed both anticipated and surprising findings.
Programming teams normally expect between 25-30% of content runtime to potentially reappear in corresponding short-form versions. The fact that as much as 70% of runtime overlap occurred between specific shows and their segment-based online programming provides evidence that a staggering amount of viewing is now being presented ‘off-network.’ If such an elevated amount of content is being made regularly available online, there is little incentive for audiences to consume shows via traditional networks channels.
Additionally, on any given day, the distribution footprint of snackable ‘give-away’ programming on ‘YouTube Channels’ as compared to ‘Owned and Operated’ properties is highly unpredictable. More than half of the time, there is at least a 30% variation in total content runtime between these two channels, and a quarter of the time, the difference was more than double. On average, slightly over 8 clips are presented per show on any given day. The YouTube channel often had a wider selection of content; sometimes presenting double the number of short-form clips.
Financial considerations also arise when significantly more than planned or expected viewing is occurring via third-party channels as compared to direct online properties. In this situation, external entities are disproportionately benefiting from advertising revenue and not sharing detailed viewing habits. Content owners are also incurring ongoing administration overhead for their personnel to edit/post/maintain high volumes of short-form clips. Additionally, YouTube continues to attract large numbers of highly engaged fans who will sometimes upload an entire long-form show before short-form clips are even made available for distribution. Such actions clearly must be subject to take-down notices, but are these notices being issued and being acted upon in a timely manner? Clearly a better solution would be for more expedient posting of officially released clips.
Spherex’s study highlights how the growing reliance on short-form content places pressure on content owners. For example, how aligned are internal stakeholders on the promotions and distribution strategies being employed? Are these strategies being comprehensively monitored to ensure compliance across high profile shows and networks? Are underlying return-on-investment models for promotional content being negatively affected by lack of cross-channel performance data? What are the systemic operational issues that need to be addressed? These are just a few of the many ongoing questions related to the need for monitoring short-form content by the Media & Entertainment industry as this exciting form continues to gain popularity.
According to PriceWaterhouseCoopers’s (PwC) Media and Entertainment (M&E) outlook for 2018-2023, the U.S. industry, which represents one-third of the global M&E industry, is expected to reach more than $825 billion by 2023. This includes revenues from global content creators (Disney, Fox, Warner Bros., Starz, CBS, AMC, etc.), linear broadcast via multichannel video programming distributors (Comcast, AT&T, Verizon, Sky, Virgin, etc.), digital stores (Apple iTunes, Amazon Prime, Google Play, etc.), and digital streaming platforms (Netflix, Amazon Prime, YouTube, etc.).
In 2019, Zenith forecast that an average person will watch 84 minutes of online video daily—up 15 minutes from the previous year. In countries such as China and Sweden, the daily average viewing time was reported to be 100 and 103 minutes, respectively. According to Netflix’s vice president of original content, Cindy Holland, an average subscriber spends 120 minutes daily on Netflix. Nielson’s 2018 data for the United States reported that audiences within the age groups 50-64 and 65+ watched a whopping 5.4 hours and 6.6 hours respectively on linear pay-tv.
Yet despite this obvious global surge in demand for video consumption, ensuring seamless title and data delivery through the traditional and nontraditional supply chain is still as complicated as ever. In 2020, content creators have various options in terms of distributing their content. For example, a title can be released digitally on transactional-video-on-demand (TVOD), subscription-video-on-demand (SVOD), advertising-video-on-demand (AVOD), Pay-TV and Pay-per-view channels. Some studios and networks such as Disney, Warner Bros., and HBO also have a Direct-To-Consumer (DTC) option. In such a scenario, an optimal revenue strategy that maximizes potential for its content is dependent on effective management of rights and availability windows.
Peter Drucker said, “What you can’t measure, you cannot manage. What you can’t manage, you cannot change.” In light of the media and entertainment industry’s complex and unreliable supply chain, Peter Drucker’s famous quote could be reimagined to state, “What you can’t monitor, you cannot measure. What you can’t measure, you cannot manage. What you can’t manage, you cannot change.” In order to have absolute control over the titles available across the various channels of distribution, it is inevitable that the process needs to start with monitoring the availability schedules and the quality of title listings from the lens of the consumer.
When supply chain activities are out of one’s control, global release inefficiencies are bound to pile up, and with them, customer complaints. This leads content creators to respond in a reactionary mindset, always playing a catch-up game. With respect to TVOD title releases, Spherex’s 2019 analysis reported that, on average, premium titles risk losing global revenue between $2.5 to $6.1 million per day due to title availability and quality issues. Whether you’re a studio, a distributor or MVPD, or a digital store, it’s time to start monitoring your content closely, if you’re not already. It is never too late!
“We are running into the global arena faster than anybody,” Jeff Hirsch, Starz COO declared at a June 2019 conference. He was referring to the fact that the Starz digital platform will soon serve over 50 territories throughout the world. Starz is not alone in focusing on global growth; Roku reported, in its recent fourth quarter earnings release, an expansion into Brazil, one of the largest digital markets in Latin America, as well as a diversification strategy away from its heavy U.S. focus. As content owners and platforms grow geographically, so too is the depth of consumer distribution touchpoints—take for example Acorn-TV, the largest purveyor of British themed programming in the U.S. Acorn is now available over Apple TV Channels, Roku Channels, Amazon Channels, Android TV, Chromecast, Comcast/Xfinity, and via Vizio Smart TV.
Why so many venues for Acorn? The competition for eyeballs, subscriptions, and share of consumer discretionary spending is clearly intensifying. To secure a foothold within such a diversified global audience, content owners and platforms need to be where the viewers are. They want their assets available for viewing on license window start dates, to feature accurate, localized metadata/artwork, and to be displayed properly within listing pages. Equally important is confirmation of the relevancy of programming selection and curated choice for consumers. But all of this is not so simple.
The level of complexity needed to perform these tactical compliance checks, while simultaneously achieving business goals, is daunting for resource constrained companies. Indeed, Spherex analysis has discovered that over 90% of episodic titles do not move to on-demand folders as part of the next-day-TV release window and approximately 45% of features are not taken down by license window end dates.
These monitoring tasks, when not diligently and systematically performed, have the lasting and cumulative effect of suppressing potentially higher return-on-investment metrics and confidence within underlying distribution and licensing agreements. With price remaining the principle consumer consideration for a subscription package, the majority of content platforms (outside of the few very large market dominators) complete on the basis of specialized focus and the ability to refresh with ongoing compelling content and overall product quality. A series of recent commentaries looking at the evolving media subscription-based commerce landscape predicts (not unlike retail eCommerce) one-in-five digital content consumers will consider cancellation as they no longer want the content presented (i.e. not compelling vs. other offerings), while one-in-ten will claim deterioration in product quality, including product descriptions.
Overall, a conservative estimate for this rate of churn can be taken at approximately 10% post the initial subscription period. With the assumption that a targeted D2C streaming platform achieves a successful market position with 1MM global subscribers paying on average $4.99 per month each, annual revenue loss due to overall churn could be as high as $500,000; if one-fifth of this is attributable to lack of competitive content catalog and product quality, that equates to an avoidable annual loss of $100,000 to the bottom-line. Believing in the competitiveness of a catalog/programming assortment relative to competitive outlets and knowing that factors influencing product quality are being monitored, the threat to financial stability and growth for subscription platforms–especially across a global audience base—is removed.
Disney recently removed a LGBTQ+ moment from “The Rise of Skywalker” in Singapore, leaving many confused why the media company would make this kind of decision. The answer itself is simple: Disney did this to ensure a lower age rating for the film in its Singaporean markets. This edit translated directly into a wider distribution of the movie and a larger audience. In short — Disney earned more eyes on that film and it was able to better protect its brand in that market. Disney made sure it was not seen as irreverent of local customs or bring any doubt to its kid-friendly, family-focused brand in Singapore. And, as for the Southeast Asian country itself, LGBTQ+ rights have long been a hotly controversial topic despite growing progressive movements within Singapore’s traditionally conservative politics.
While the choice on Disney’s part to remove the scene may be controversial in the eyes of some, it’s important to recognize the business rationale for adjusting content to respect local regulations and cultural sensitivities, while also acknowledging the differences in each culture that calls for such actions. And, in this case? While the seemingly strict crackdown occurred, the removal of the short scene had a positive outcome on the financial and brand successes of “The Rise of Skywalker” in Singapore. For a global company like Disney, its brand is paramount to its success, no matter the territory or region, and cuts like this are commonplace in the industry.
How could this scene have impacted the Disney brand, though? It’s cut and dry — Singaporean censorship rulings firmly state that any film containing LGBTQ+ themes or content may completely be restricted to viewers 18 years of age and above, while any films focusing on homosexuality face harsher scrutiny and may be subject to a 21 and over rating. If the film had been left as is, it automatically would have received an 18 or even 21+ rating in Singaporean markets, due to featuring material that many Singaporeans aren’t comfortable viewing for themselves or for their families. By virtue of removing several seconds of film not integral to the movie plot, the maturity rating completely changed (receiving instead a PG-13 rating for violence) and allowed a much wider audience to be able to pay for, attend and enjoy a film they otherwise would not have been able to. This was a deliberate move on Disney’s part, rather than some last-minute effort or mistake.
Regardless of Singapore’s specific laws, many have said this removal disenfranchises LGBTQ+ representation, and even J. J. Abrams stated in an interview, “In the case of the LGBTQ community, it was important to me that people who go to see this movie feel that they’re being represented in the film.” Others have said that it doesn’t matter that those few seconds were removed, as many viewed the scene as a simple ‘throwaway’ that did not push the envelope or give people from the LGBTQ+ community the representation they wanted or deserved. With many saying it was a step back for LGBTQ+ representation in film rather than a step forward, multitudes of voices on the internet have since called for openly LGBTQ+ characters in future Disney productions instead of relegating the representation to background characters.
Content providers today distributing their titles internationally are often faced with the similar challenge of balancing storytelling and statistics, the integrity of their film with the profits of their franchise, and importantly, the physical distribution of their title within regions that may find some parts of it contentious. Many studios, as a result, elect instead to respect local laws and ensure their films are culturally appropriate so they have the ability to reach the widest market, impact the biggest audience and make the most money. Even just knowing when or where to change a small scene or remove a single frame in a region-specific compliance edit could allow the film to be seen by hundreds of thousands more viewers, and in some markets, even millions.
This example of Singaporean censorship serves as a shining example for how being culturally compliant can be good for business and a brand, while also serving to stress the importance of executing that cultural compliance as openly and tactfully as possible.
As global OTT revenue doubles over the next five years, (now estimated by Digital TV Research to exceed $129 billion by 2023), the M&E industry continues its inevitable march toward digital expansion, over a global supply chain that is becoming more fragile by the day. The explosion of original film and TV content across increasing channels, license types, windows, devices, and formats is pressuring studios and intermediaries to find new ways to manage titles through an increasingly more complex digital supply chain.
At Spherex, we are seeing that finger-tip access to store-level visibility is paying real dividends to both film and television content providers — helping them generate measurable value, increase operating efficiency and recover lost revenue.
A major studio customer with digital distribution across 18 retailers — including 10-plus set-top boxes — has experienced significant benefits using our platform to manage its top titles. Compliance verifications that were taking weeks are now taking days. Post-implementation, our customer experienced a 17 percent increase in titles monitored across its global stores compared to the same interval 12 months earlier. This increase in monitoring efficiency also resulted in 10 percent to 20 percent more compliance errors discovered, verified and corrected. These improvements reflect our customer’s ability to expand monitoring coverage of its titles, while at the same time improving the quality of titles already in stores across a combination of OTT and MVPD channels.
The cost of being late
A platform that provides store-level visibility also has the structured data needed to measure and compare compliance across stores and territories. It’s not uncommon for our customers to discover that their top titles are late to market on average between five and seven days depending on the store and territory, representing a large lost revenue opportunity globally.
To put this lost revenue into perspective, we combined DEG: The Digital Entertainment Group’s quarterly U.S. consumer spending report and SNL Kagan’s U.S. Availability Report (of “premium” content) to estimate the lost digital revenue for each day a top title is unavailable to consumers across global OTT channels. We conservatively scaled back DEG’s total digital U.S. consumer spending of $17.5 billion in 2018 with the 80:20 rule for premium titles.
To estimate the number of available premium digital titles in the US in 2018, we increased Kagan’s 2016 estimate of “premium content” U.S. titles available by 10 percent to 30 percent to arrive at a range of available 2018 premium U.S. digital titles (2,000 to 2,300 titles). Applying a factor of two on U.S. spending to estimate global spending on U.S. titles, we arrived at a global consumer spending range of between $50,000 to $58,000 per premium U.S. title, for each day it is available across a global network of digital stores.
To a major studio, this means that for every premium title delivered on average five days late (from its commercial availability date), the potential lost revenue ranges from $250,000 to $291,000 per title globally. If 10 to 15 premium titles are late on average five to seven days, the lost digital revenue ranges from $2.5 million to $6.1 million globally. Compounding this lost revenue is the number of marketing dollars wasted promoting titles in digital stores where they are not yet available.
In the TV industry, in which next day episodic compliance or on-demand EPG monitoring represents a killer combination of digital compliance requirements and business rules, we conducted a holiday season audit of one of the largest providers of global entertainment, news and information content. Using a mix of carefully selected daily and weekly titles across seven networks and fifteen platforms, we found only 30 percent compliance across hundreds of episodes from tens of thousands of compliance monitoring events.
A monitoring sample of this size gave our customer a bird’s eye view of its programming. It discovered that improving content availability started with upgrading its planners to daily changes and communications. Insufficient windows were planned for encoding and handshakes between stakeholders across content types, with no flexibility built-in to adjust schedules. Benchmarks did not exist to measure the gaps between hops along the supply chain.
Platform-level visibility let it for the first time test changes to its supply chain and measure the effects on title availability, providing a level of control not yet experienced in its supply chain operations.
At Spherex, our early data suggests the enterprise potential of having global store-level visibility can be expressed in recovering millions of dollars annually in lost revenue, driven in part by the improved operating efficiencies realized and control afforded by measurable compliance KPIs. We believe this data green lights an exciting new wave of digital services that will create significant value in the global digital M&E industry.
Our team is thrilled at the possibility of unlocking this value for our customers.
The ROI data is clear that a circular digital supply chain has tangible ROI to M&E companies
$50,000 to $58,000 lost revenue per day for late premium titles
- MESA M&E Journal, Spring 2019 – Fluid Metadata Spells Opportunity
Titles not in and EPG/IPG 5-7 days before air date likely not recorded.
- Spherex M&E documentary client
30% of abandoned digital sales due to poor product descriptions.
- Shopfarm Product Information Report
New, circular digital supply chain technologies deliver ROI
- 30% lower operating costs
- 75% reduction in lost revenue
- McKinsey – The Next Generation Digital Supply Chain