Social Goes Hollywood and What That Means for Investing in Media & Entertainment

Several weeks ago, I discussed how the rapidly evolving digital landscape is changing traditional, and creating new, media and entertainment investment opportunities at Opal’s Family Office & Private Wealth Management Forum.

Digital audiences have shifted how and where they consume content, and streaming services have evolved into award-winning production studios. Possibly more important is looking at the consumption habits of younger demographics like Generation Z. This generation is bigger than the baby boomers, they are constantly connected to screens with access to content, and they have new ideas about their digital footprint. Generation Z chooses to spend a significant percentage of their time consuming content on apps and services such as Snapchat, Instagram and more. This tidal wave of disruptive channels is already encroaching on time spent on traditional media and entertainment channels (read: eyeballs), and the emergence of new platforms that seek to capture Generation Z audiences is showing no sign of slowing down.

Although Snap (Snapchat’s parent company) hasn’t been an over performer on Wall Street, as a company they understand how significant a part of Generation Z’s digital content footprint they’ve become. Generation Z Snapchat users have grown up creating, self publishing, and consuming friend and studio content side-by-side, without adhering to traditional lines of distinction. While it’s true that the majority of content on Snapchat to date has been user generated (UGC), Snap is aggressively licensing original short format video content, in large part through a partnership with investor NBCUniversal.

As reported by Cynopsis, “Stay Tuned,” Snapchat’s first daily news show from NBC News, has over 29 million unique viewers since its July 18 launch.* Alongside spinoffs of “The Voice” and “Saturday Night Live,” it becomes clear that what was once a social network has it’s sights on becoming the channel of choice for Generation Z.

In other words, Snap wants Snapchat to become Generation X’s seamless one-stop shop for content about friends, news, and entertainment. If Snap’s foray into original content is successful, Snapchat has the potential to become one of today’s primary tastemakers, much as MTV was for Generation X.

Update (8/24/17): Snapchat Shows plans to add their own scripted video content to the mix by the end of the year. While head of content Nick Bell stated that Snapchat is more of a complementary service to TV, he acknowledged that they are “capturing the audience who are not probably consuming TV at the same rate and pace of engagement that they once were.” This suggests Snapchat might become more of a direct competitor to broadcast, cable, and streaming services.

Google’s Latest Ad Play: Becoming A Wireless Carrier

 

Last week, Google finalized a deal to become a mobile virtual network operator (MVNO), offering consumers branded mobile services through a partnership with Sprint.

For the uninitiated, a MVNO is essentially any company that buys wholesale mobile services from a physical network operator (ATT, Sprint, T-Mobile or Verizon in the US) and repackages them for retail sale to consumer or business customers.

On the surface, this sounds like a pretty straightforward and safe model, especially for a trusted brand like Google, but succeeding as a MVNO is tricky business, and there are more casualties, including high profile brands like Disney, than there are success stories like Virgin Mobile.

So why is Google doing it?

Google is a pragmatic company, and their play is more about protecting and growing their core revenue stream (advertising) than it is about furthering Android’s already globally dominant market share. As the price of mobile services continues to decrease, and consumer dependency on smartphones and tablets continues to rise at the expense of desktop usage, mobile ads are becoming increasingly important. Despite Google’s already significant percentage of the mobile ad market, they have to be aggressive and creative about channel growth since mobile ad rates are significantly lower than their desktop counterparts.

This leads to two important, related questions…

  1. How does Google plan to succeed?
  2. What’s in it for me, the consumer?

Big Data

Google is an Internet company that makes money from ads when we consume content, not when we make phone calls, so expect big, attractively priced data bundles to facilitate increased consumer data consumption.

Tiers are Falling

We’re already accustomed to inline ads on the web, in mobile apps, etc. (unlike Amazon’s kindle with offers which places awkward ads alongside books), so Google may offer dramatically reduced-cost / subsidized tiers in exchange for additional ad placements. If so, these tiers are likely to be the lowest prices consumers have seen, and expect that the ad solution will be something much more creative than just increasing the volume of ads served.

Hyper(Active) Targeting

In addition to serving ads, Google will have access to a different level of personal information about every subscriber (name, address, credit score to just scratch the surface) for behavioral profiling and targeting. Their subscription agreement may require use of this data, or they may let subscribers opt-in for less expensive service (see above).

Predictions

Google will likely be successful operating as a MVNO, in part for doing the necessary tightrope walk to offer Android handsets on their service while nurturing Android OEMs and carriers, even though their primary play isn’t selling more Android handsets… but that’s not all.

Google will be agnostic with regard to handsets. We’re about to be in a world where iOS devices (and Windows Mobile and Blackberry too) are made available on a Google branded service, which leaves me wondering about the future Apple’s spartanly branded iPhone. I’m fairly certain this won’t work for Tim Cook and company:

google_iphone

Hulu’s Creating a Phoenix From Someone Else’s Ashes

 

Hulu already has an interesting position in the market, often airing shows the day after they appear on broadcast television. For consumers who are no longer tethered to broadcast schedules because of time-shifting (DVRs, etc.) or other means, Hulu has become a big piece of the cord-cutting puzzle.

While the television industry is known for its impatience with new program franchises taking time to build audiences, there’s relatively little risk for Hulu to leverage the smaller audiences of shows cancelled mid-season considering its non-linear streaming model. Over the past month or so as the list of fall lineup casualties has become clear, Hulu acquired the rights to the remaining unaired episodes of at least two shows:

  • “Selfie:” Average of 1.5 18-49 rating
  • “Manhattan Love Story:” Average of 0.7 18-49 rating

While the ratings weren’t strong enough to save them from the itchy trigger fingers at ABC, that’s a combined total of 7.3M viewers in a highly desirable demographic, which can be quite a windfall for Hulu. Even a dirty top-down conversion of 1% would mean 73,000 new customers, which is $584,000 in monthly recurring revenue or $7M annually. And Hulu plans to release episodes weekly, effectively “setting the hook” to go beyond their 30-day trials for new users.

Although this is a good way to capitalize on what were once considered valueless assets, short-term customer acquisition is probably not Hulu’s endgame. With Netflix and Amazon in the original content game, and broadcast / cable networks starting to announce plans to deliver content over-the-top in 2015, the writing is on the wall, and Hulu is laying a very strategic foundation for the future.

They just got two programming franchises with built in awareness and interest (admittedly too small for broadcast), without incurring production expenses, that they get to test with their total customer base. If one or both franchises perform well enough, Hulu can be in the original programming business without having taken on the expense or risk of R&D using a variation of Netflix’s “Arrested Development” model.

As an added bonus, Hulu likely has the program acquisition fees categorized as a marketing expense since they are officially about customer conversion. Since Hulu can track individual streams by customer account, even if neither program goes back into development, this is still a very measurable marketing program with the high probability of having a positive ROI. That’s a pretty compelling worst case scenario.

Hey Look… Up In The Sky…

Conan BlimpIt’s a bird. It’s a plane. No… it’s super… wait a minute. Yay, it’s Conan!!!

Over the New York City skyline is a piece of one of this year’s most well thought out cross-channel marketing efforts: a drive to the premiere of Conan on TBS.

Flying over the 5 boroughs is a bright orange blimp (that has nothing to do with Nickelodeon). If you see it in the sky, you can check into it using Foursquare, at which time you’ll receive a special Conan “blimpspotter” badge. The badge has no real value, but offers one-click bragging rights when you announce to your friends and followers on Facebook and Twitter that you got something they don’t. I got it on October 20,2010 at 3:34pm. Conan Blimpspotter Badge

Not surprisingly, the Team Coco had the blimp heading over to Yankee Stadium (big audience with open sky access, free TV coverage, you know the drill).

This also benefitted Foursquare, which took advantage of the crowd by distributing a “Swarm” badge to everyone who had checked in once the total reached 50. They even used marketing speak in the email, by calling it a “flash mob” for all us early adopters.

Another piece of the Conan program is a live webcam (that started yesterday — October 20,2010) in the “stairwell of [their] comedy bunker.” You never knows what you’ll get on arrival, but it’s clearly improv in his planned, but random style. As I’m writing this, I’m being serenaded by a 3-piece mariachi band. If only there were margaritas.

They’re doing a wonderful job building buzz, and are demonstrating a much clearer understanding of how to use digital and social media. I’d also wager they are doing it for a fraction of what the Peacock Network spends marketing The Tonight Show.

Conan, Bravo… er… I mean TBS!!!

I look forward to seeing you again on November 8th.

Daily Cancer – The Flintstones

Fred Flintstone Smoking WinstonAt first, it’s frightening to see The Flintstones so grossly hocking cigarettes, but consider two things:

1. If you do a little research, you’ll find that The Flintstones didn’t originate as a kids program.  It was primetime television’s first successful animated sitcom… allegedly patterned after The Honeymooners.

2. A generation ago the health risks of smoking weren’t a concern.  Big tobacco is banned from TV advertising today, but was much more pervasive and acceptable just a few short decades ago.

We have vintage ads on the walls at my company Porterhouse Advertising that include cigarette ads… for us it’s in no small part for the irony and juxtaposition. Two that come to mind… one features Rube Goldberg, the other a Norman Rockwell style image of a Pediatrician with a boy and girl matched to a headline that promotes the brand as the number 1 cigarette choice of pediatricians. Brands withheld from this post.

Times may have, thankfully, changed but this is valuable as a social commentary of 1960 America.