And tech is beating media to the punch
As consumers bemoan the disaggregation of their favorite TV shows from Netflix into Disney+, HBO Max, NBCUniversal, and other streaming apps, it’s worth remembering that in the past 20 years of media, we’ve seen a continual unbundling and re-bundling of content. For those paying attention, one comment from James Barksdale, the former CEO of Netscape, has seemed especially prescient in regards to the media and entertainment ecosystem:
“… there’s only two ways I know of to make money-bundling and unbundling” — James Barksdale
Music has moved from bundled (albums), to unbundled (single songs, iTunes), to centrally bundled (Spotify, Apple Music). News and magazines have similarly moved from bundled (print subscriptions), to unbundled (free digital access), and are currently transitioning back to bundles (digital subscriptions). We’re also in the early stages of both video games and even movie theaters evolving into bundled, subscription models as opposed to single-transaction businesses.
While cable subscribers once begged to pay for only the channels that they watched, Netflix spoiled viewers by aggregating some of the best TV and film content of all time in a one-stop-content-shop that cost customers a fraction of the price of a cable subscription.
As consumers navigate this shifting media landscape, they’re coming to terms with the possibility that they’ll need to subscribe to more and more services for entertainment. It’s not unrealistic that your average consumer will be paying regular monthly subscriptions for music (1 subscription), video on demand (2 to 4+ subscriptions), news (2 to 3+ subscriptions), audiobooks and podcasts (??? subscriptions), and cloud-gaming services (who knows?).
If the history of media (or James Barksdale) tells us anything, it’s that there will eventually be a re-bundling of this video content, perhaps in something that looks like Cable 2.0. Perhaps though, it won’t just be video content that’s re-bundled. What if instead services across these entertainment categories are bundled and offered to users at a discount? This seems to be the future that tech companies are strategically planning for.
For comparison sake, here are the current media assets for both media and tech conglomerates across filmed content, music, publications, gaming, and other media:
Media conglomerates currently have a heavy concentration on TV and film studios, cable channels, and filmed content brands, which are historically the most profitable of media endeavors. Tech companies, on the other hand, have taken more distributed and measured approaches to the media content they’ve become involved with. Until recently they’ve been unwilling to riskily invest the vast amount of capital necessary to compete with “old media” on original filmed content like movies and TV series.
Tech companies are becoming media companies
Partially driven by Netflix envy, the rest of “FAANG” (Facebook, Apple, Amazon, and Google) have all devoted significant resources and capital to building out their media strategies in recent years.
It should be no surprise that Apple’s offerings are the most well-branded and easy to understand from a consumer perspective: Apple Music, Apple News+, Apple Arcade, and Apple TV+.
Apple Music is rather straightforward — offering subscribers access to 50 million+ songs for a $9.99 monthly subscription.
Apple News+, which launched in March 2019, offers subscribers “full access to hundreds of magazines and leading newspapers,” including the Wall Street Journal, for $9.99.
Apple TV+, posed to launch this November, has recently been rumored to be priced at $9.99 a month for access to a handful of exclusive shows. While the company is reportedly spending $6 billion+ on original content from well-known creators like Steven Spielberg, Oprah Winfrey, and J.J. Abrams, the volume of content available won’t be anywhere near that of Netflix, Hulu, Amazon Prime Video, Disney+, HBO Max, CBS All Access / Showtime, or NBCUniversal’s eventual streaming app. Some speculate that Apple will instead distribute this premium content for free in the Apple TV app, using it as an anchor to become a de facto TV hub for consumers, and then re-selling subscriptions to other video services through Apple TV Channels while taking a cut of the revenue.
Apple’s offerings are the most well-branded and easy to understand from a consumer perspective.
While three out of four of these services are just launching this year, don’t be surprised if they are soon offered as a discounted bundle, simply as “Apple Entertainment,” or “Apple Media.”
Despite acquiring YouTube all the way back in 2006, Google has fumbled most of its media plays to date, and isn’t the best at conveying its offerings to consumers. How many people can explain the difference between YouTube, YouTube Red, YouTube Premium, and YouTubeTV? For clarity — YouTubeis the ad-supported free platform, YouTube Red no longer exists, YouTube Premium is an $11.99 ad-free version of YouTube that includes YouTube Music and allows for downloading videos, and YouTubeTVis a $49.99 a month virtual-MVPD — basically a cable subscription through the internet. Very straightforward.
That said, Google’s recent announcement of its Stadia cloud game-streaming platform demonstrates that the Alphabet company continues to have ambitions across media categories, specifically capitalizing on the company’s cloud infrastructure. Stadia will allow gamers to play a selection of games from their Chrome web browser, Chromecast, or Pixel phone over the internet instantaneously, without needing to download. While Stadia at launch won’t be a “Netflix for gaming,” subscribers to the $9.99 a month Stadia Pro service will earn a free game every month they remain a subscriber. There’s potential for Stadia to eventually offer unlimited access to a selection of games for subscribers.
Subscribe with Google, launched in 2018, is essentially a “single sign-on” for subscribing to digital publications through your Google account and payment methods, in lieu of registering for each individual subscription.
Google’s media strategy across categories is more disjointed than Apple’s, but there remains potential for the company to bundle a YouTube product (Premium or TV), Google Play Music, a Stadia subscription, and perhaps a selection of publications available through Subscribe with Google for one monthly fee.
For its part, Amazon has a foothold in video (Amazon Prime Video / Prime Video Channels), music (Amazon Music Unlimited), books and magazines (Kindle Unlimited), gaming (Twitch /Amazon Game Studios), and other audio (Audible). The retail giant bundles some of these services into Amazon Prime, the $119 a year membership that primarily offers fast and free shipping on goods purchased through Amazon, while others require additional subscriptions.
Prime Video is the product that most consumers are likely aware of and is essentially a “Netflix competitor” that similarly produces original television and movies like The Marvelous Mrs. Maisel, Transparent, and The Big Sick,in addition to hosting a catalog of popular licensed content from other studios. While most users likely have access to Prime Video through Amazon Prime, the service is also available as a standalone for $8.99 a month.
Prime Video Channels is Amazon’s video subscription re-selling service, offering users a centralized hub for their subscriptions to other video services like HBO, Showtime, CBS All Access, MLB.TV, and over 100 other services. Important to note — this is also the business model that many believe Apple is pursuing with Apple TV+, as mentioned above.
Twitch, which Amazon acquired for around $970 million in 2014, is the leading live-streaming video platform for gamers. Viewers can watch content for free, and Amazon Prime subscribers also get access to additional benefits and one Twitch channel subscription through Twitch Prime for free. Additional Twitch channel subscriptions, which support the creators and streamers behind channels and come with additional benefits, are available in different tiers for $4.99, $9.99, and $24.99 a month. Amazon is also developing and publishing games directly and is reportedly working on a cloud gaming service, which would take advantage of its AWS infrastructure and Twitch audience.
Amazon Music Unlimited is yet another music streaming service, and is available outside of the regular Amazon Prime membership for $7.99 a month.
Kindle Unlimited is Amazon’s subscription service to “over 1,000,000” book titles and “this month’s popular magazines,” that once again falls outside of the standard Prime membership, for $9.99 a month.
Amazon also owns Audible, which it acquired for around $300 million in 2008. The service, which offers a library of audiobooks, is available for a $14.99 a month subscription outside of Amazon Prime.
Is there a point where Amazon also bundles Amazon Music Unlimited, Kindle Unlimited, a TBD Cloud Gaming Service, and Audible into the standard Prime subscription (which already includes Prime Video and Twitch Prime) as a justification to raise prices in exchange for more value? Perhaps.
While Facebook is undoubtedly behind in the race to a full entertainment bundle, recent news shows that they’re thinking more seriously about it. Historically, the platform has primarily relied on users, publishers, and brands to post and share content for free, profiting off of the eyeballs and data that this content generated (to the demise of many digital publishers). Now the company looks to be considering paying for high-quality content. According to the WSJ, Facebook has approached publishers with offers to license their content in a forthcoming “News” section inside the Facebook app.
Facebook is also testing out re-selling video subscriptions to users, similar to Amazon’s Prime Video Channels and Apple’s likely TV offerings. Facebook has spent some resources on video through Facebook Watch and Facebook Live, but has generally had trouble becoming a meaningful hub for video content, and even adjusted its home feed algorithm to feature less video content last year.
Facebook’s biggest bet in media is in the gaming space through Oculus, the company’s multi-billion dollar bet on AR/VR. Much of the content and experiences available for Oculus’ VR hardware products cost $10+ through the Oculus store, though there’s potential for a bundle or subscription service down the road. Facebook also hosts Facebook Gaming, another live-streaming platform for gamers competing with Twitch, YouTube Gaming, and Microsoft’s Mixer, which just paid big to sign the mega-popular streaming star Ninja.
Since Facebook has historically been a free product for users (while nonetheless monetizing their attention and engagement), it seems to be in a different position than Apple, Google, and Amazon, all of whom are charging significant subscription fees for their media content. Instead, Facebook’s ambitions in media appear to be keeping users in the ecosystem with high-quality content in order to sustain or grow engagement and time spent within the platform. That said, there’s always the potential for Facebook to turn on direct monetization of its users through some sort of subscription product which may include media products.
Media companies try to compete in video with scale
For the most part, the largest media companies are focused first and foremost on winning the video war. This has led to a period of sustained consolidation, with AT&T purchasing DirecTV and Time Warner, Disney acquiring most of the assets of 21st Century Fox, and Viacom and CBS merging once again. The primary driver of this consolidation has been a desire to reach the scale of content and IP to compete in the video streaming world — not necessarily to diversify media categories or investments. There will likely be further consolidation, with content holders like Lionsgate and MGM more likely to be acquired in the near-future than publishing groups or video game publishers.
As seen in the graphic above, the largest U.S. media conglomerates are primarily invested in filmed content. Comcast NBCUniversal also owns news outlets; ViacomCBS owns a handful of publications and the book publisher Simon & Schuster; AT&T Time Warner’s properties include a game studio and CNN; and Sony also has Sony Music (a label group) and PlayStation in its arsenal. While some internal bundling will occur among these conglomerates (see: Disney’s recently announced Disney+, Hulu, ESPN+ bundle) those assets aren’t likely to build more-inclusive or valuable entertainment bundles than the potential that Apple, Google, Amazon, and perhaps even Facebook have the opportunity to build.
Who (bundles) the (bundles)?
While tech and media companies fight it out with different content offerings, strategies, and business models, there are also opportunities for the independent market leaders in each category to partner with each other to offer their own bundles and compete more effectively with both tech and media companies. What would a Netflix + Spotify + Medium / Scroll + EA Access bundle look like? These services are each focused on one specific area, and can’t offer their content as loss leaders for other business units as Apple, Amazon, Google, and Facebook have the comfort of doing.
Consumers frustrated by the upcoming disaggregation and unbundling of some of their favorite content would be served well to remember a world in which they had to purchase albums at $10 a piece or more to listen to their favorite music, pay an average cable bill of $85 a month, wait for paper copies of their news and entertainment subscriptions, and purchase video games and movies a la carte. Netflix and Spotify have spoiled a generation with unbelievable value propositions not likely to be seen again anytime soon. Perhaps the silver lining is that the next re-bundling will be multi-media.
All Rights Reserved for Mike Raab