Tag Archives: Streaming

A SWOT Analysis of the Music Industry

(My first post can be found here.)

While some parts of the Music Industry are caught in a downward spiral, streaming services along with the new Direct to Fan platform have done well in adapting to the disruptive technologies in our society today.  So where does the Music Industry stand as a whole? In order to answer this question we must do what all businesses do when they need to see where they stand, and that is we conduct a SWOT (Strengths, Weaknesses, Opportunities, and Threats,) Analysis for the Music Industry.

 

Links:

Streaming music sales in the US beat CDs for the first time

Adele Is Said to Reject Streaming for ‘25’

Apple to end Beats Music on November 30

That’s Business, Man: Why Jay Z’s Tidal Is a Complete Disaster

Recording Studios Face Uncertain Future

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.”

Can I Stream TV Shows and Not Go to Jail?

Have you ever tried to search for a full movie on YouTube back when you were in middle school? How about googling “blank show”, “episode blank” and hoping to find a somewhat low quality version of that TV show that Netflix doesn’t have? Hypothetically speaking if you did do these things some of your favorite sites were, projectfreetv, putlocker, megavideo and so on. Sure you feel a little dirty clicking through so many unnecessary ads and every time you find the episode you’re looking for on a site you don’t recognize you pray to a higher power that you don’t get a virus. But hey, it’s not your fault Netflix’s contract with CBS expired and now you can’t finish season 3 of Scrubs via your paid subscription.

Despite monopolizing the streaming industry the truth of the matter is Netflix can’t do it all. Someone somewhere is going to want to watch a show or movie that Netflix either does not support or no longer supports due to contract expirations and lack of renewals due to low user viewing. Therefore, there is market demand for alternatives in television streaming. Today we have Amazon Prime, Hulu and HBO Go and a market research study done by Nielson earlier this year shows that 30% of American households today are subscribed to one streaming video service. Of them only 10% are subscribed to two services and only 2.6% are subscribed to three. As the survey suggests few people who already pay for a service are inclined to pay for another one let alone a third, and so now we have a market of streamers who want to enjoy on demand content without having to pay for it.

Unavailability of content and refusal to pay more for another streaming subscription are the backbone reasons why there is a market for unlicensed streaming content. A study done by Business Insider and Survey Monkey shows that these reasons are indeed the primary drivers.

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Now the question becomes, is streaming unlicensed content online illegal?

No.

Jim Gibson, director of the Intellectual Property Institute at the University of Richmond law school and others argue that accessing and streaming unlicensed content is generally legal. Although downloading and or distributing unlicensed media content is illegal. Now how do host sites such as Putlocker and Megavideo getaway with hording so much unlicensed content and not get prosecuted? The site must be able to pass “the inducement rule”. A test created in a 2005 Supreme Court Ruling stating that a company or website can only be held accountable for distributing unlicensed content if it clearly encourages users to infringe a copyright. Gibson further explains,

“It does very much depend on the marketing and the uses [these sites] are encouraging …. You know, GM can make a car. You can use it as a getaway car in a bank robbery, or you can use it to get work. So we don’t say that GM is on the hook just because it provides a technology that can be used illegally,” Gibson said. The same goes for streaming websites.”

These sites are simply providing a technology for their user base and so there is nothing wrong in the eyes of the law for a user to use a website as intended.

Streaming unlicensed content is neither illegal here in the U.S or in Europe, on June 5th 2014, the Court of Justice of the European Union (CJEU) ruled that streaming illegal content online is legal in Europe.

“EU copyright exemptions for temporary copies applies to viewing and streaming online. Viewing or streaming, the court says, is different to making a copy and would be exempt from copyright laws, but the copies “must be temporary, that they must be transient or incidental in nature and that they must constitute an integral and essential part of a technological process” , as reported by digital-digest.com

Crawling the web in search for that one movie or TV show your subscriber does not offer is indeed legal but highly not advisable. Most of these sites have pop ads after pop up ads that not only ruin the viewing experience but also could cause a virus to be downloaded to your computer. On top of this the quality of the content will always be stripped down and you can never guarantee you will be able watch the entire stream due to potential errors in the upload.

Stream with caution and just remember downloading is definitely illegal.

 

 

Pandora and Music Labels Finally Agree?

Since its conception in January, 2000, music labels and Spotify have been at odds. Even last week, Pandora announced it would pay $90 million to settle a lawsuit over royalties for artists who recorded music before 1972. Because of a legal loophole, Pandora was able to play songs on the internet radio services without paying royalties to artists. While Pandora has been at odds with labels, they agree with labels about one thing.

They hate Spotify.

Spotify and other streaming services of its kind have been growing, effecting the music industry in different ways every year. According to Nielsen’s 2014 Report, only 257 million albums, CD or digital, were sold. This was an 11 percent drop from 289 million the previous year. Streaming, however, has 78.6 billion audio streams with 85.3 billion video views. This is an exponential increase from the previous year. The numbers clearly show that consumers are leaning more towards streaming their music, instead of buying digital tracks or albums.

While labels and artists hated Pandora for royalties, they all agree that Spotify’s music service gives consumers too many options. While Pandora allows its listeners to listen to virtually any song, these songs are picked by the service. In addition to this, Pandora breaks up these songs with advertisements. On the other hand, Spotify let listeners listen to ANYTHING they want for AS LONG as they want. Pandora CEO Brian McAndrews said during Thursday’s earnings call, “I think one of the challenges for the industry, I think, and for Spotify is how many of those teens are actually paying for it? And an on-demand model is meant to be paid for and subscribed to.”

McAndrews brings up a point. According to Spotify, there are sixty million overall active users of the service, with fifteen million paying users. Spotify offers a “freemium” option that has advertisements, but users are still allowed to listen to anything they want anytime. This freedom is hurting Pandora, and bringing up not only licensing issues, but questions about streaming in the future. In addition to this, Spotify still isn’t even a profitable. In 2011, Spotify brought in revenue of $236 million, with a net loss of $57 million.

Spotify isn’t the only company facing net loss. Pandora is too, with a net loss of $20 million in 2012. How do these companies effectively pay artists, but still make a profit? Many say that we should get rid of streaming services all together. Others say we should all just “suck it up” and agree to pay $10 a month, helping the industry go and supporting artists, with no “freemium” option.

Peter Kafka of Re/code translated Pandora’s earning’s call, and their issue with Spotify, in a great way. “Look, it would be bad if our free, not-on-demand service had to compete with free on-demand services forever. But those things are as bad for the music industry as they are for us, so we bet (we hope!) they’re going to go away.”

While it’s obvious these services aren’t going away, it’s going to be interesting to see what happens.

The Fall of Blockbuster

The Video Rental Industry was a six billion dollar industry. It was created in 1978 by Video Station in Los Angeles, California. Like other advancing industries, Mom and Pop video rental stores gave way to major chains, such as Major Video Corporation, Palmer Video, and Blockbuster. These chains boasted gigantic tape selection, sometimes in the tens of thousands. The independent stores could only stock one to two thousand copies on the shelves. Blockbuster could afford to charge less and have more copies of the hits. As of 1988 the company brought in $70,000 monthly and 26% of that was profit. The New York Times claimed that it was “bent on becoming the McDonald’s of video stores”. It was reported that the company was so strong that it feared antitrust law when it attempted to buy Hollywood Entertainment Corporation, back in 2004-2005. The company was so big that it was almost considered a monopoly, and the consumer’s protection needed to be considered. In the end, these fears were never realized. The company declared bankruptcy and collapsed. So how did this giant monopoly-like corporation go from 9,000 locations to less than 300? Disruption.

 

Disruption is the displacement of established technology which, often times, creates a new industry. Blockbuster and the entire video rental industry became one of the biggest victims of disruption in the past two decades. In the beginning, with its unique rental policy, the company solved the problem of rental VHS theft and led the industry for years. Viacom bought Blockbuster for $8.4 billion dollars in 1994, the equivalent of $24.26 billion dollars in 2015, and then Blockbuster successfully goes public in 1999, raising over $465 million in its IPO.

Two years earlier, entrepreneur Reed Hastings, is frustrated after getting fined $40 in late fees. This became part of the inspiration in his next decision, the founding of Netflix. As Blockbuster was making over $700 million in late  fees in 2000, Netflix had just started mailing out DVD’s to customers. Of all the mistakes the video rental store made, the biggest was declining to purchase Netflix. Multiple offers were made in 2000, but Blockbuster declined to pay $50 million for the upstart. Netflix, not discouraged, would go public in 2002 and continue to be a creative force.

The creative destruction was no longer on the side of the Blockbuster, and the company had to play catch up. There were several attempts by the video rental store to react to Netflix’s newfound success. In an attempt to compete with Netflix, the company launched its own DVD mailing service in 2004. Netflix would sue for patent infringement, forcing Blockbuster to pay $4.1 million. To make the company look more attractive, Blockbuster began to give a week grace period for rentals in 2005. This led to a flatter operating income for the year, and so to compensate the company decreased its marketing budget. The company would create its own streaming service, Blockbuster on Demand, and one-dollar DVD rental machines to compete with Redbox, but it was too little too late. The company was de-listed from the stock exchange in 2010 and filed for chapter 11 bankruptcy. DISH Network purchased the company in 2011 and closed the last of the distribution centers.

The problem was that Netflix disrupted the industry. As technology advanced, that company led the charge towards customer-oriented, convenience oriented movie renting. As this history shows, the company kept trying to fight the tide, but not on their own terms. Blockbuster went from the greatest to gone in less than a decade, peaking in power in the mid 2000’s and then bankrupt by 2011. So what can be learned from the Blockbuster story? Never settle. Innovation is always around the corner and one company policy can give away to a whole new set of consumer demands. Netflix now carries the torch in the media world. While Blockbuster was falling, Netflix would continue to disrupt the industry. The next post will discuss the rise of streaming further, elaborating on how streaming services established their footing in the industry and how disruption persisted.

In the next part we will discuss the rise of streaming and the persistence of its disruption.