This is the continuation of the strategic battleground in the media industry the lines of battle are drawn here.
If your ead the earlier post, this post focuses on the strategy in the content creation aspect of the value chain -
Content is a hits-based business and is a key driver to user acquisition. Owning strong content brands creates demands from consumers and can create complementary revenue models from consumer goods. This provides a stronger negotiating position for the content owner. However, it is also be a huge cost to discover new shows that attracts large audiences. According to Film LA, pilot production costs have been increasing.
The number of pilots produced reached 186 during the 2012/13 cycle, the objective is to discover popular content since this is the biggest leverage that content owners have when negotiating with content packaging and content distribution companies. Likewise, for companies that provide the connected device, whether that be decoders, set top boxes or direct to TV broadcasters, popular content drives sales and subscriptions. This is one of the main factors that have driven new companies into content production such as Amazon, Microsoft, Netflix etc. because existing content creators may not be willing to provide the rights to their content to these new companies due to reasons such as exclusive digital deals, or bundled digital rights in different territories, or simply because these new digital services are competing with their own. For Amazon, Microsoft and Netflix to acquire larger subscription bases, they need to both license existing popular content and produce enough unique popular content to attract consumers.
Viewing behavior has also changed. Short form content on mobile devices occupies the most time used, and with mobile usage increasing, the demand for short form content increases. This has resulted in new content production companies focused on user generated content such as Maker studios (recently under acquisition by Disney) and Awesomeness TV (acquired by dreamworks). Maker Studios house 50,000 channels on YouTube which makes this method much more scalable and cost efficient in terms of content acquisition.
Services such as YouTube have spawned a new generation of video consumption habits particularly with the millennial generation. Millennials are increasingly moving over to online and mobile video content and on more ‘snackable’ content.
User-generated snackable content has become a main driver of video viewing for the millennial generation and is a direct competitor to non-hero shows. Since production of snackable content can be cost efficient, start-ups are looking to move into this space, from individuals creating YouTube channels to multi-network companies that are packaging them up.
Snackable content isn’t purely focused on TV, but also on digital platforms, in particular the rise of mobile has grown the relative audience for short-form video, and since traditional TV has never focused its strategy on short-form digital content, it left an opportunity for new companies to develop this space.
Since owning content is a key asset in negotiation and user acquisition, we are seeing vertical integration from platforms and distributors moving into this space in an attempt to attract more consumers, alongside new players looking to build a foothold in this field. Yahoo! recently announced 2 original comedies, along with Sony in support of it Playstation, and Amazon studios have been running for a few years . In particular, Yahoo have subscribed to Nielsens’ Netratings service to measure internet audience as a method to attract more advertisers to their video products.
Content Creation Strategy
For content creators having a vast library of popular content, this enables them to strategically choose whom to license their content to. It is in their interest to maintain as much competition further up the value chain since that will provide them with more options to monetize as competing platforms/services look to license the best portfolio of content to drive users. A prime example is House of Cards, they licensed the content to Netflix for exclusive rights to stream the content online first, afterwhich the content owners were able to license further rights to other buyers such as Comcast, ensuring that they can try to maximize value from their content whilst maintaining competition for the content.
For companies that exist in the other parts of the value chain, there are a few reasons to expand into content creation. If your platform is servicing a growing and evolving segment of the market such as mobile, snackable content or adapting to changing user viewer habits; new content may need to be created to service the platform. If exclusive or original content is seen as a driving factor for user acquisition, it also makes sense to create content to ensure there is a unique offering to potential users.