Tuesday, February 21, 2017

The Future of Streaming: Broadcast Television

To say the streaming video industry has been growing at an incredible rate is an understatement. However, there are signs that the industry is starting to become saturated, despite its continued growth.

Netflix is the clear industry leader; but to compete and further differentiate, all the major players have been pouring money into creating original content. Even Apple has decided to enter the fray with two new shows that nobody asked for.

With the increase in competition in an increasingly saturated market, other avenues for growth are needed.

My solution: Broadcast television.

While this may seem counter-intuitive, I think it would be a mutually beneficial partnership for both the content creators and the broadcast networks.

I don't believe Netflix or Amazon should sell content to the "Big 3" (ABC, CBS, NBC). Rather, they should look for established independent channels that are looking for content. I'm not sure how big that market is or how many still exist, but in the Boston market, there is a perfect opportunity.

While I recommend partnering with independent stations, content providers could also partner with larger corporate stations or even cable. However, this would create a strange dynamic where the stations' own shows would be competing with the streaming companies. This conflict would be even more pronounced with cable, as many consumers are cutting cable TV in favor of streaming-only.

Example: WHDH Boston

WHDH, (Channel 7 in Boston) it is a independent locally-owned station that had NBC affiliation for years; i.e. it was a distributor of shows and newscasts produced by NBC. This used to be standard in the industry, but NBC-corporate has been trying to consolidate and buy local affiliates instead of paying them as distributors.

This WHDH-NBC affiliation was set to expire at the end of 2016 and NBC offered to buy the station, but its owner refused to sell. NBC, in turn, refused to renew its affiliation; instead, it is now broadcasting its content on other channels it owns.

Obviously, losing NBC-related content severely impacted the programming for WHDH, which can be seen in the 2017 schedule seen below:


WHDH's strength, outside of NBC-affiliation, is its local news team (my personal favorite). Naturally, when it lost affiliation, it expanded to broadcasting news almost 12 hours a day. This may be an easy short-term fix, and great for the news team, but not sustainable long-term unless it wants to be "the CNN of local Boston news". (I'm no expert, but I don't recommend this as a strategy).

Being starved for content, WHDH would gladly add some of the highest rated shows, but what's in it for the streaming companies? Expanded viewership.

Netflix continues to expand at a rapid pace, but it is on track to spend nearly $6 billion in 2017 on new content. To continue to compete with other companies, it will need to continue spending on new content and the success of its shows is not guaranteed to last, nor is the growth in subscriptions.

"Number of Netflix streaming subscribers worldwide from 3rd quarter 2011 to 4th quarter 2016 (in millions)" (Statista)

"SymphonyAM's data is based on engagement in the first 35 days of the show's release in the US. Netflix, Amazon, and Hulu don't release viewership numbers for individual shows." (via Business Insider)

As streaming becomes increasingly standard for the tech-familiar, there is a large portion of the population that will be left behind and never able to see any of these great shows. To address this, streaming companies could sell their content to standard broadcasters and air episodes weekly (much like the current model). This would increase viewership, while providing additional revenue streams for their content.

Content providers are not likely to lose any significant number of subscriptions over this because most shows are now binge watched and streaming viewers are now accustomed to on-demand content in full. I doubt many would trade instant gratification to save $10/month. In fact, it may even lead some over-air viewers to subscribe to streaming services to access the remaining episodes immediately.

This may be a sympathetic view to try and save one of my favorite local stations, but it makes sense to me.

Other thoughts on how to expand this potential business opportunity?

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