Author Archives: Danielle Andreani

Disruption Occurring in the Media and TV Industry

Throughout the entire semester, we’ve detailed the disruption of the media and television industry. From the rise of video giants like Blockbuster to their ultimate demise, we’ve seen how seemingly untouchable businesses can fall victim to disruption. The current landscape shows mainstream use of online streaming services. These platforms provide consumers with not only more convenient options, but increased offerings tailored to viewer preferences. With the widespread adoption of these services, along with other platforms that offer services similar to cable at a cheaper price, more consumers than ever are cutting the cord.  Watch a summary of our findings below:

 

To learn more about the processes and programs we used to facilitate our learning, click here.

Here’s our take on how to adapt to these disruptive times in the media and television industry.

 

Before there was streaming, there was cable

It’s really obvious to trace the disruption of the media industry to Netflix and similar streaming services. Everything was perfectly fine before that, right? It is so easy to ignore the fact that disruption began long before Netflix became mainstream; it began with the growth of cable television.

First, let’s clarify the distinction between broadcast television and cable television. Broadcast television consists of NBC, ABC, CBS, FOX and to an extent, CW. These channels have the largest reach in terms of viewing households, the standard by which reach is measured for television. It is also a very diverse audience that watches, they are measured in terms of the number of adults between the ages of 18-49 watching a program. In terms of how an advertiser chooses to spend their dollars, broadcast channels are sort of a necessity, but may not always be the most efficient use of money. These commercial spots are often tens of thousands of dollars each, if not more.

Cable television however is much more niche in their viewer composition and in the type of programming they offer. Cable TV allows advertisers to reach a more targeted market due to the nature of their programming. The viewers of these channels can be guaranteed on bases such as women between the ages of 25-49 or men between the ages of 18-34.

In addition to allowing advertisers to spend their more dollars more efficiently in targeting, the cost per commercial spot on cable television is significantly cheaper than its broadcast counterparts. So while the reach of cable television may not be as great, it a lot cheaper and a lot more efficient in terms of advertising spend.

There are hundreds of cable channels available to viewers; and because of this, viewers have hundreds of options when it comes to choosing what to watch. The increase in available cable channels has fragmented viewers and ratings alike. There is an ongoing competition between the networks to put out the best programming to attract viewers to their network. There is a big push for fresh, new programming every new season, and this has led to more failed freshmen series for each network. It is rare for a TV series to achieve lasting success in such a competitive landscape.

The Impact of Original Programming

With the rise of streaming services such as Netflix and Amazon Prime Instant Video, consumers have been exposed to new, innovative programming from these providers. These original programs are created exclusively to air on that platform and be viewed by its subscribers. This breaks from the traditional model of shows airing on broadcast or cable television, and later being put on the streaming service after each season has aired. Programs like Orange is the New Black and Transparent have not only captured large audiences, but have also been nominated and award several awards traditionally reserved for traditional television programs. Just this past year, Orange is the New Black was nominated for three Golden Globes awards and for three Primetime Emmys. Uzo Aduba, a supporting actress in the series, won a Primetime Emmy for Outstanding Supporting Actress in a Drama Series. Transparent, an Amazon Original, won two Golden Globes, five Primetime Emmys, and was nominated for an additional six Primetime Emmys. Between Netflix and Amazon Prime Instant Video, the two took home a total of 46 nominations for Primetime Emmys. This demonstrates how original programming on streaming services are starting to contend with traditional television shows airing on broadcast and cable networks. Within just a few years of introducing original programming, streaming services have gained major traction with their shows.

Traditionally television networks and their programs have been guided by ratings of its shows. Nielsen data is used track the number of households watching a particular program, and this information is used in accessing not only how successful a show is, but how to price the advertising space in that program. Since there are only a limited number of primetime spots in each network’s lineup, there is high pressure to have high-rating shows in an effort to maximize advertising revenue. This has led to an extremely fragmented industry with new networks popping up in an effort to achieve a piece of the success. TV critics have begun to call this era the “Golden Age of Television” due to the amount of new, original programming that came out this year. Broadcast and Cable networks aired just over 300 original programs this year, compared to 24 from the streaming services. With the influx of new programs and competing channels, the ratings for individual shows continue to drop each year. This has also made it extremely common for new programming to fail within the first season due to lack of sufficient ratings. Viewers are overwhelmed with choices, and the decreased ratings show that. Along with decreased ratings comes less advertising revenue for the networks as well.

The advantage streaming services such as Amazon Prime Instant Video and Netflix have is that they are able to create content that appeals to viewers, rather than advertisers. There is no longer the constant worry of having to achieve sufficient ratings for a show since the providers aren’t reliant on advertising revenue to sustain themselves. Instead, the streaming services are able to produce shows that consumers are interested in. Netflix uses user data to not only help to serve customers, but to also find out what customers are interested in and produce original content that appeals to them. This has led to Netflix having an extremely high success rate in their original programming. Having consumer centered content has also turned into an integral way for Netflix to retain current customers. Ultimately, Netflix and Amazon Prime Instant Video are focused on gaining and maintain subscriptions. The popularity of their shows does not matter as much to them as does the engagement of the viewers. Reed Hastings, the CEO of Netflix, has declared that “Netflix company isn’t interested in the ratings of its original – or licensed – content.” This model allows streaming services to provide content that caters exclusively to the viewers desires. Traditional networks do not have the flexibility to change their model and keep up. Networks are still reliant on ratings and held responsible by advertisers.

Of course, where there is success, other players tend to come into effect as well. The latest rumored company to enter the field is Apple. While there is not much information out yet, there have been reports of Apple meeting with Hollywood executives to discuss creating original content.

Original programming from streaming services could be the incentive that consumers are looking for to finally cut the cord of their cable subscription. With consumer tailored content, and not being reliant on advertising revenue, Netflix, Amazon, and soon Apple are poised to exploit the cord-cutting market.

 

In the next post, we will discuss “cord-cutting.”