Can big media make it online?

Disney, Fox, Turner - almost everyone is launching their own streaming service. What does this mean for Netflix, Hulu or Amazon and for consumers?

In August this year, Disney announced it was moving out of Netflix when its deal with the streaming service expires in 2019. In the same year the $55.63-billion media giant will launch its own streaming service offering Marvel superheroes, Star Wars and other characters. Earlier this year, in April the $28.5-billion 21st Century Fox launched Fox Now, a streaming service that offers all its five networks — Fox, Fx, National Geographic, Fox Sports and Fox News. The news is that the Cartoon Network part of the $11.3-billion Turner Broadcasting will launch its own streaming service in Asia by the first quarter of 2018.

Disney, Fox, Turner are among the world’s largest media firms. As they start turning their back on aggregators such as YouTube, Netflix, Hulu and Amazon, what does it mean for both the business and consumers? The question has special relevance for India. It is one of the world’s fastest growing streaming markets at 422 million people online and about 300 million on smart devices. At last count, it had more than 30 video apps. Star India’s Hotstar is the second largest after Google’s YouTube. Almost every major media firm has launched or is launching a stand-alone app — Sony Liv, Voot (Viacom18), AltBalaji (Balaji Telefilms) and others. Most will whisper they have started cutting back on how much and what programming they put on YouTube.

Globally or in India, going direct-to-consumer could potentially have three major consequences — a rise in ad rates, a robust building of subscription revenues and the formation of vertically and horizontally integrated monoliths. But first the backdrop.  

In the US, streaming services took off because they offered consumers what they wanted and when they wanted it, at $8-12 a month against $80-120 on cable. So Netflix was built on content from Disney, Time Warner and others. In 2013 came the first Netflix original, House of Cards, a huge success. The sheer numbers — the $8.83-billion Netflix has 104 million subscribers across the world — meant that Netflix originals were discovered quickly. Soon, Amazon and now Apple, Facebook and even YouTube are getting into the game. The dynamics are different in India — there is no price arbitrage between cable/DTH and streaming services and the market is way behind the US. But the growth trajectory and trends remain the same.

Originals pit aggregators such as Netflix and now Facebook’s Watch against the media biggies. From distribution platforms they become competitors. Now as the big guys start getting into the streaming business, the blurring of lines that began with House of Cards has intensified. Brian Sullivan, president and chief operating officer, digital consumer group, Fox Networks, says, “We are trying to marry the power of apps with the power of the television experience and offer all content from all networks in one place.” 

But it raises the bogey of vertically and horizontally integrated monoliths that control creation, carriage and curation. Disney, for example, is in television, films and animation. But its media business is actually just the engine that drives the top line and profitability of its theme parks and consumer merchandising business. Should media companies enjoy this kind of power across segments? You could argue that Facebook and Google are platforms that also curate/create content and earn a disproportionately huge share of the global online ad revenues. They are now the world’s largest media firms. This duopoly has a vice-like grip on online audience and revenues. Big media getting into the game could add to competition and choice and eventually reduce their duopoly power. 

It could, if the two other things happen as anticipated: If the media majors can build up subscription revenues and if direct traffic helps them get better ad rates. Typically, doing direct deals with advertisers could improve rates by two to five times, say media managers. 

Will so many brands confuse the consumer? Sure they will, for now. Eventually, every market will have about five to seven brands left — whether they would be media, tech, telecom firms or large aggregators is anybody’s guess. 

Twitter: @vanitakohlik