From Ownership to Access

MIDiA PanelLast Wednesday we held the third MIDiA Quarterly forum, exploring the shift from ownership to access across different media industries. In addition to MIDiA analyst presentations we had panellists from Sky, The Economist, Beggars Group, Reed Smith and Readly. The event was held at The Ministry in London and was a great success. Be sure to make it to our next one! Here are some of the key themes we explored.

Change is a coming

We opened with three quotes that summarise the tensions and transformations taking place in the digital content marketplace:

 ‘The fine wines of France are not merely content for the glass making industry’, Andrew Lloyd-Webber

‘We’re competing with sleep…sleep is my greatest enemy’, Reed Hastings, Netflix

‘Content may still be king but distribution is the queen and she wears the trousers’, Jonah Peretti, BuzzFeed

All three quotes represent very different worldviews and illustrate how different things can look from the perspective of the companies being disrupted, those doing the disruption and those building businesses to harness the disruption. All three viewpoints are simultaneously valid, but the media landscape is changing at rapid pace, and fighting a rear-guard action against change only gives the disruptors a freer rein to, well, disrupt.

access slide 1Across most media industries – music, video and news especially, the future of content monetisation will be built around advertising for the mass market and subscriptions for the aficionados, while additional opportunities exist for one-off transactions within both environments (e.g. Tencent live streaming  Chinese boyband TFBoysand Epic Games selling $100 million a month of virtual items in Fortnite). What is going as a mainstream proposition is selling physical media, though niche markets for collectables will thrive—ironically exactly because of the demise of physical media. In an age without shelves full of CDs, DVDs and games, collectors want a physical manifestation of their tastes.

Music and video are plotting the most directly comparable paths towards access-based models, though there are also some very telling differences:

  • Scale:Globally there were 206 million music subscribers at the end of 2017, compared to 452 million video subscribers. But while subscriptions represented 45% of retail music revenues, it was just 12% of pay-TV revenues. Music though is a far smaller industry than pay-TV (11% of the size), so like-for-like comparisons aren’t always that useful.
  • Concentration:What is worth comparing though, is the degree of market concentration. In music, the top four subscription services account for 72% of subscribers, compared to just 54% for video. And while the long tail for music services isn’t very, well, long, in video there is a vast number of smaller services: there are around 60 different services in the US alone.
  • Variety:While music services largely offer the same catalogue, with the same usage terms at the same price, video is defined by diversity and exclusives. Using the US as an example again, more than half of the services are niche – such as Korean drama, 4K nature, horror, reality – and there are 23, yes 23, different price points.

Aside the different heritages of these industries – consumers are used to paying for different slices of TV content, there is another key reason for the differences: rights holder distribution. In music three big companies account for the majority of revenues; in TV there are dozens of key studios and networks. This means that in video, the distribution companies can play rights holders off each other and effectively set the pace of change. In music, the major record labels shape the market.

This dynamic is what Clayton Christensen outlined in the Innovator’s Dilemma. There are two key types of innovation:

  1. Sustaining innovations:the smaller, more evolutionary changes that companies make to improve their existing products. Every company does this if they can, it’s how to maintain the status quo and grow revenues predictably
  2. Disruptive innovations:these are dramatic, industry-altering changes that rarely come from the incumbents but instead from disruptive new entrants. P2P file sharing was the big one that shook the TV and music industries. TV responded by fighting free with free, by launching services like iPlayer, ABC.com and Hulu. The music industry responded by licensing to the iTunes Music store. One embraced disruption, one fought it.

Talking of disruption, the big existential threat media companies will have to face over the coming decade, is ceding power, willingly or otherwise, to the tech majors (Alphabet, Amazon, Apple and Facebook). Europe’s Article 13aims to offset some of the growing reach of the tech majors, but ultimately these companies will shape the future of media, across both ad supported and subscription models.

The tech majors generated $40.7 billion in ad revenue in Q1 2018 alone, including around $2 billion for Amazon, the global advertising revenue powerhouse that many still aren’t paying enough attention to. The tech majors have already sucked away much of the news industry’s audience and ad revenues; with assets such as YouTube and IGTVthey are competing for radio and TV too. But it is the content and services revenue that media companies need to pay most attention to. With $16.9 billion in Q1 alone – nearly the same as the recorded music market for the entirety of 2017, this is a sector that all four tech majors are taking seriously, very seriously. And even though Facebook is a late arrival to the party, it is making up for lost time with its new music offeringand evolving video strategy.

The reason all this matters for media companies is that the strategic objectives of the tech major are rarely aligned with those of media companies. The tech majors each use media as a means to an end, a tool for driving their core strategy. Access based models underpin the content strategies of these companies who often control distribution and access to consumers via tools such as app stores, mobile operating systems, search and social platforms. Thus, the shift from ownership to access could also translate into a shift towards a tech major dominated media world.

IFPI Reports $17.3 Billion for Recorded Music in 2017  

Today the IFPI released its estimates for global recorded music revenues in 2017. That figure was $17.3 billion representing an 8.9% growth on the $15.7 billion it reported last year. The numbers are bang in line with the numbers MIDiA reported last week ($17.4 billion / 8.5% growth – see here for more) and reflect a year of fantastic growth. The headlines are:

  • Streaming is the fuel in the engine: Streaming revenues were up 37% to hit $6. Billion (this however underrepresents the value of the market as the IFPI groups Pandora under ‘mobile personalization and other’ wiping out the best part of a billion dollars of streaming revenue). MIDiA’s broader definition of streaming puts 2017 revenues at $7.4 billion. Whichever definition you go with, the narrative is clear: streaming is dragging the entire recorded music industry back into growth (all other sales formats are in decline). The recorded music industry is on track to become a streaming industry in all but name.
  • Legacy format decline is slowing:Physical and download sales fell at a slower rate in 2017 than they did in 2016. This, in turn enabled streaming growth to have a bigger impact on overall revenue growth. The legacy formats will decline steadily now until the channel stops stocking them. The first big step will be when Apple turns off the iTunes Music Store. This is something we predicted back in 2015, forecasting that it would happen by 2020. That bet is still looking good.
  • UMG still leads the pack: As major label revenues are a matter of public record via company reports we can calculate 2017 market shares against IFPI 2017 total. UMG comes in at 29.8%, Sony 22.2%, WMG 18.0%, Indies 27.7% and artists direct 2.7%. These numbers are all within a 10thof a percentage point of the results MIDiA published last week. As we reported then, the key takeaways are that UMG still leads the pack, WMG has grown faster than the other majors while artists direct were the single biggest growth driver in 2017. (Note it appears that artists direct now appear in the IFPI numbers though the $100 million difference between IFPI’s and MIDiA’s numbers mean that has come off either the artist direct or indie numbers)

All in all, a stellar year for recorded music revenues, with plenty of growth yet to come, especially as emerging markets start to deliver at scale.

The Spotify Numbers You Won’t Have Seen

One of the core values that we deliver to our clients at MIDiA Research is finding the ‘third number’— the data point that wasn’t reported by a company but that can be arrived at through a process of modelling and triangulation. Next week, we will publish a report that does just this for the numbers presented in Spotify’s F1 filing. The metrics we arrive at help create a more complete picture of Spotify’s performance for investors and rights holders, as well as the impact of core metrics upon other parts of Spotify’s business. In advance of its publication, here are just a few highlights.

spotify metrics

Spotify’s F1 filing paints a picture of a growing business that is improving metrics across the board, with the foundations for a solid couple of years ahead now well built. But there are also a number of challenges:

  • User growth: Spotify experienced strong growth between Q4 2015 and Q4 2017, increasing its subscriber base from 28 million to 71 million, its ad supported users from 64 million to 92 million and its total monthly active users (MAUs) from 91 million to 159 million. Set in the longer-term context, Spotify’s subscriber growth trajectory indicates it is well up the growth curve, with 2014 representing the earlier growth phase and Q1 2015 the point at which the inflection point occurred. Since Apple Music entered the market in mid 2015, Spotify has seen growth actually increase, and over the period added more net new subscribers by the end of 2017 (49 million) than Apple Music did (34 million).
  • Streams up, but inactive subscribers also: Engagement is growing, with subscribers playing an average of 630 streams a month in 2017 compared to 438 in 2015. Over the same period ad supported users increased average monthly streams from 119 to 222. The net result was 195.4 billion streams in 2017 compared to 59.6 billion in 2015. However, inactive subscribers (i.e. subscribers plus ad supported users minus MAU) grew from one million in Q1 2016 to four million in Q4 2017. Though this is a long way off the ‘zombie users’ problem that Deezer has historically suffered from due to inactive telco bundles, it is a metric Spotify will need to keep on top of.
  • Churn down…: Throughout 2016 and 2017 Spotify progressively reduced its churn rate from 6.9% for Q1 2016 to 5.7% in Q4 2017. This is despite churn being pushed up by the super trials and thus reflects a solid improvement of organic retention across Spotify’s paid user base. In a March investor presentation, CFO Barry McCarthy argued that as Spotify’s subscriber base matures, life time value (LTV) and gross profit will increase, with more subscribers sticking around for longer.
  • …but not out: Despite quarterly falls, churn remains a core issue while Spotify is in growth phase and is acquiring portions of subscribers who try out the service but realise it is not for them. On an annual basis churn 18% in 2017, down from 18.5% in 2016. These lost subscribers totalled 12.8 million in 2017, up from 8.9 million one year earlier. Spotify added 23 million subscribers to its year-end total in 2017 but, including churned out subscriber the total subscribers gained was 35.8 million. Thus, churned subscribers accounted for 36% of all subscribers gained. This process of getting more subscribers in than out is common to all premium subscription businesses and is particularly pronounced when a service is in growth phase, as is the case with Spotify. It is even more pronounced in contract-free subscriptions. Pay-TV and mobile companies have the benefit of long-term contracts to minimise churn. The fact that Spotify reports churn at all is creditable. McCarthy’s old company Netflix got so fed up with investors’ reactions to churn that it stopped reporting it all together.
  • Super trials: Spotify’s subscriber growth has not however been linear. Heavily discounted trials offering three-month subscriptions for $1 have been pivotal in driving strong user growth spikes each quarter in which they run. On average, Spotify’s global subscriber base grew by a net total of 2.8 million each quarter between Q4 2015 and Q4 2017 in the quarters that these ‘super trials’ were not running, but by 7.5 million in the quarters that they did.
  • Non-linear growth affects all regions: In 2016 and 2017, Spotify’s European and North American subscriber bases each grew at an average of one million subscribers in quarters without trials and three million and two million respectively in quarters with them. Thus, Spotify’s organic net monthly subscriber growth in each of these regions was around 330,000. A similar trend appeared in Latin America – where net subscriber growth doubled in each trial quarter from one to two million. The impact is more dramatic in rest of world, where rounded net subscriber growth was flat in all quarters without trials and more than one million in quarters with.

Despite the joint effects of subscriber bill shock and reduced margins, super trials are clearly net positive for Spotify’s business. When it later decides to fade them out in more mature markets – namely when it switches from user acquisition to user retention mode – Spotify will be able to quickly improve both margin and retention.

Barring calamity, Spotify looks set to have a strong 2018 in terms of growth across subscriptions, MAUs and revenue. If it continues its current operating strategy Spotify should reach 93 million subscribers by the end of 2018. By comparison, Apple Music is likely to have hit around 56 million subscribers by Q4 2018, with its rate of net new monthly subscribers having increased to 2 million in 2018.

If you are not yet a MIDiA subscription client and would like to find out how to get a copy of the forthcoming seven-slide report and accompanying dataset, email stephen@midiaresearch.com

Radio Is Streaming’s Next Frontier

This week MIDiA held its latest quarterly research and networking event at Gibson Brands Showrooms in the heart of London’s West End. The event was heavily over-subscribed and was a great success (there are some photos at the bottom of this post).

The event combined a presentation from Pete Downton, deputy CEO of our event sponsor 7digital, a keynote from myself and a panel of leading industry experts. Here are a few highlights of my presentation.

radio blog slide

Streaming music has got where it has today largely by being the future of retail and replacing the download model, which in turn replaced the CD model (though vestiges of both remain). That premium model will continue to be the beating heart of streaming revenues for the foreseeable future but will not be enough on its own. The next big opportunity for streaming is to become the future of radio, which incidentally is around double the size of the recorded music market. In doing so, it will be a classic case of disruptive insurgents stealing market share from long-standing incumbents.

The opportunity for streaming is to build ad revenue around the younger audiences that are simply not engaging with traditional radio in the way that previous generations of young music fans once did. As the chart above shows, radio’s audience is aging and has an almost mirror opposite demographic profile to streaming. What is more, radio’s audience is declining by around one percentage point each quarter. It might not sound like much, but you normally do not measure change in terms of consistent quarterly trends. Instead there is normally quarterly fluctuation. So, this is nothing short of a major decline.

However, what is interesting is that free streaming is not growing by the same rate radio is declining. Instead, what is happening is that radio and streaming audiences are co-existing, with many that have spent a long time doing both eventually shifting all of their listening to streaming. Added to this, older consumers tend to embrace change more slowly than younger audiences. So, radio’s older listener base effectively acts as a disruption buffer.

What all this means is that radio is facing an existential threat like no other but it has some time to get its house in order, to identify how it can meld the best of the radio model with streaming experiences to start its fight back. And make no mistake, radio has so many unique assets that streaming does not (local content, talk, news, sports, weather, travel, brand personality etc.) and Apple’s underwhelming success with Beats 1 shows that hiring a bunch of radio people and launching a station does not guarantee success. Nonetheless, streaming services will get there. And Spotify’s recently launched Pandora-clone in Australia indicates just how serious the radio frontier is to streaming.

For more (a lot more!) data and analysis on how radio and streaming are facing up against each other, check out our new report Radio – Streaming’s Next Frontier: How Streaming Will Disrupt Radio Like It Did Retail which can be purchased directly from our report store here and is also available immediately to MIDiA clients as part of our research subscription service.

MIDiA Radio Event 1MIDiA Radio Event 2

Facebook Has Got An Instagram Problem

Mark Zuckerberg dropped a bit of bombshell during the Q4 2017 earnings call. He announced that Facebook daily active users (DAUs) have fallen across some key markets, including the US. COO Sheryl Sandberg elaborated:

“In the US and Canada, these changes contributed to a DAU decline of 700,000 compared to Q3. We don’t see this as an ongoing trend, but we do anticipate that DAU in this region may fluctuate given the relatively high penetration level.”

Facebook attributed the fall to the newsfeed changes it has made to improve the quality of relevance of content users see, and to mitigate against trends such as fake news. While these will certainly have played a role, there is a bigger, more fundamental factor driving the decline: Facebook has an Instagram problem. Or, to be more precise, Facebook has a messaging app problem.

blog slide

Messaging apps are the third phase of platforms on which digital audiences congregate. First came websites, then social networks and now messaging apps—which collectively accounted for 7.7 billion monthly active users (MAUs) at the end of 2017, up from 6.6 billion in 2016 and 5.5 billion in 2015. This is a massive segment that continues to grow at pace.

When the sector first started emerging, Facebook could have battened down the hatches and played a defensive hand. Instead, it did what the bravest companies do: it decided to disrupt itself before the competition did. The result: Facebook is now the global leader in the mobile messaging space, with a 2017 global market share of 49%, up from 43% in 2016 and 41% in 2015. It has done such a good job of transitioning its audience that 77% of Facebook’s total audience now use at least one messaging app. But, the problem with messaging apps is that no one has really worked out how to monetise them yet. And that’s a doubly big problem for Facebook because the more time that its users spend on lower monetised messaging apps, the lower the ad revenue yield. So, the more successful that Instagram and WhatsApp become (neither of which are included in Facebook’s active user numbers) the worse off Facebook itself becomes.

Hiking ad rates hides the impact

Right now, Facebook has got enough velocity in its core ad business to absorb the DAU drop. Q4 ad revenue grew by 26% on Q3, only one percentage point less growth than it recorded one year prior. But, until Facebook gets better at monetising its messaging apps, ad revenue will increasingly feel the pinch. This is why Facebook spent much of its earnings call talking about how it is increasing the relevance of advertising, improving targeting and improving user experience, so that it can charge advertisers more. For the midterm, it will hide the impact of the messaging app shift.

Longer-term though, Facebook needs a more robust solution. It cannot rush monetisation of its messaging apps as this will risk alienating users, especially in the more personal environments of WhatsApp and Messenger. Instagram will be the core focus of ad revenue growth, as this has already proven to be a natural home for branding. Facebook is also confident it will be able to build upon its initial base of business users of WhatsApp. All of this will take time though. So, it will need to be complemented with other efforts.

If it looks like a duck

Back in our November 2016 report ‘Facebook The Media Company: If It Looks Like A Duck’, we correctly predicted that Facebook would start to feel the impact of messaging app growth on its core platform. We also predicted that Facebook would start calling itself a media company, but that it would say it was a media company unlike any other. Sure enough, one month later that’s exactly what Zuckerberg did.

There is a serious point to this analyst gloating though; Facebook needs its media company strategy to start paying dividends. It is busy finalising music rights deals and is building up its video arsenal. For music, expect (ad supported) music-based social communication to find a home in messaging apps. For video, expect the messaging apps to start acting as virtual TV programming guides and remote controls for what will likely be a semi-scheduled ad supported and premium video offering. As we said in our 2016 report:

“Media companies beware, there’s a new player in town and it’s betting big, real big.”

This blog post is an excerpt from MIDiA’s forthcoming report ‘Facebook’s Instagram Problem: Building Media Strategy In A Fragmented Audience World’.

Join Us At ‘Radio Is Streaming’s Next Frontier’

I’m very pleased to announce that MIDiA is hosting a special industry event on Wednesday 7th February at Gibson Brands in central London, in partnership with 7digital. The event ‘Radio Is Streaming’s Next Frontier’ is going to explore how in 2018, streaming music is going to start impacting radio just like it has spent the last few years replacing downloads. Streaming spent the first phase of its life being the future of retail, it will spend the next phase becoming the future of radio.

In this free-to-attend event we will present some of our latest research, including exclusive data, ranging from big picture trends through to tactical data, such as exactly how much each streaming service is affecting each radio station.

In addition to my research presentation there will be panel discussion from industry experts:

Is Streaming and Radio a Zero Sum Game?

Moderator: Zach Fuller

Panellists:

  • Jeff Smith: head of Music, Radio2 and Radio6
  • Pete Downton: deputy CEO, 7digital
  • Chris Baughen: VP Content and Formats, Deezer

After all this there will be drinks and networking. The event was publicised to MIDiA clients and newsletter subscribers first so there are only a few places left. So, RSVP your slot here now!

Hope to see you there, and watch out for a sneak peak of some of the research soon.

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Free Report: Lyrics Take Centre Stage In Streaming Music

We are pleased to announce the publication of a brand new, totally free, Streaming Music report. In this report, we present the findings of an exclusive consumer survey fielded in November 2017 to consumers in the US, UK and Germany, deep diving into streaming behaviours and the growing role that lyrics is taking. The report download link can be found at the bottom of this post.

The report includes data on:

  • Overall music consumption and streaming behaviours
  • Weekly Active User (WAU) penetration of all key streaming music apps
  • Tenure splits of streaming users by streaming service
  • Consumer attitudes towards lyrics
  • Lyric users by tenure length of individual streaming services
  • The relationship between lyrics users and streaming loyalty
  • Key drivers for using lyrics, with gender splits

Here is an overview of some of the findings of the report that we wrote on behalf of LyricFind.

INFOGRAPHIC V 1.1

Streaming music has put the audience in control, letting music fans choose what, when and where they listen. One of the most dramatic changes that streaming has enabled is the expansion of music from a lean-back, linear experience into something far more engaging and interactive. Now fans lean forward to choose the songs they want, build playlists, comment and share. Lyrics are centre stage in this shift, transforming from static-print-hidden-away-inside-album-sleeve notes, to a dynamic extension of the music itself. Lyrics permeate the streaming music ecosystem, from websites, through YouTube and Vevo to the streaming services themselves.

Whereas lyrics in the analogue era used to be domain of music aficionados, in the streaming era they are a mainstream behaviour for audiences as diverse as they are widespread. The motivations are similarly varied, with the most cited being to know the words (81%) followed by being able to sing along (72%). Among streaming services users who are music subscribers, penetration of lyrics usage rises to 88%. What is more, lyrics have a strong link with music subscriber loyalty among 91% of all music subscribers that have been using lyrics for more than three years.

However, many lyrics users want more out of their lyrics experiences, with 56% of subscribers wanting lyrics to be in time with songs. Younger users, in particular, are raising their expectations, with 16-24 year olds the most likely to want new lyrics features.

Streaming is transforming music consumption across the board

Music consumption is in the midst of a transition period, with streaming rapidly ascending to become the dominant format. As with any transition, the old world coexists with the new, due to old habits dying hard and older groups of consumers changing behaviours slower. Thus, we see radio (66%) and free streaming (43%) as the two dominant forms of music consumption. Crucially, a strong overlap exists between the two: 72% of streamers listen to radio and 47% of radio audiences stream music. This indicates: a) that the transition will pick up pace, as nearly half of radio listeners are already swapping out some of their radio listening time for streaming; and b) that there currently remains enough that is different between radio and streaming for the two to coexist. The biggest takeaway though, is that streaming has a massive amount of growth potential ahead of it.

Lyrics are an integral part of the streaming experience

Lyrics are at the centre of the streaming music experiences: 79% of all music streamers use lyrics, rising to a comprehensive 88% of music subscribers. Wanting to know the words to songs is the main driver, with 65% of music subscribers stating this as their reason for using lyrics. Next, 55% of subscribers and 51% of free streamers said they wanted to be able to sing along with their favourite song. More social activities like singing with friends and karaoke score relatively lowly, indicating that lyrics are a very personal and integral part of how music fans interact with music.

Lyrics have a clear correlation with music subscriber tenure and with churn. The longer that consumers have been music subscribers, the more likely they are to use lyrics, while consumers that have cancelled their subscriptions are much less likely to use lyrics. Across Deezer, Spotify and Google Play, an average of 98% of subscribers with three plus years tenure use lyrics. This contrasts with lyrics penetration among churned out subscribers, with an average of just 60% across the same three streaming services. The importance of lyrics features is further underscored by the fact that 55% of streaming lyrics users say they are more likely to pay for a streaming service that ‘has great lyrics features’. For music subscribers overall, the rate is 43%, rising to 48% of Deezer users and 52% of Tidal users.

LyricFind - cover

Lyrics Take Centre Stage In Streaming – LyricFind – Report

MIDiA Is Hiring

2017 was a big year for MIDiA, during which we expanded our team, coverage and revenues. We also added many fantastic new companies as clients and launched our suite of cloud data tools: Fuse.

But we have even bigger plans for 2018. To kick the year off, we are hiring for three new posts in our London office. These are:

  • Senior Analyst, Video
  • Lead Developer
  • Global Account Executive

Visit our careers page to find out more about any of these roles

The Top TV Shows Of 2017, And The Inexorable Rise Of Netflix

This is a guest post by MIDiA’s Tim Mulligan (also my brother!)

For the past 15 months MIDiA Research has been tracking every quarter more than 60 leading TV shows across the US, UK, Canada and Australia. With the fragmentation of TV audiences and the rise of streaming video services like Netflix and Amazon Prime Video that are notoriously guarded with their data, it is becoming progressively more difficult for TV companies and advertisers to know just how popular individual TV shows actually are. Many are increasingly turning to social media as a guide to popularity, but these are demographically skewed. For example, the audiences of Facebook and Twitter are both older, so rankings based on these platforms skew results towards shows that are popular among older consumers. This is why the likes of The Walking Dead and Game of Thrones usually top such rankings. (More than half of the audiences for both shows are aged 35 and above, compared to, for example, just 36% for 13 Reasons Why).

This is why we developed the MIDiA TV Show Brand Tracker, surveying 3,500 consumers, to track popularity of shows with a neutral and objective methodology. The results provide a unique view of which shows are resonating with consumers in the streaming era.

MIDiA Research Top TV Shows Of 2017CBS’s The Big Bang Theory tops MIDiA’s Brand Tracker rankings with an average 45% fan penetration across all of 2017. The Big Bang Theory tends to underreport on Twitter and Facebook rankings but has topped our list in each quarter in every market except for the UK where it is shunted into third place by the BBC’s Sherlock and ITV’s Broadchurch. CBS also takes second spot with 41% fan penetration, holding the same position in the US and Australia, but slipping to third in Canada and sixth in the UK.

2017 was a massive year for HBO’s Game of Thrones with season 7 premiering in July, which drove a three-percentage-point spike in fandom in Q3 – up to 33%. Game of Thrones is a top-four show across all four markets surveyed. Although Game of Thrones is HBO’s only show in the top 20, the network has three other shows in the Top 40 including Westworld (which maintained strong fandom despite having aired in December 2016, suggesting that season 2 will get off to a strong start in 2018).

The BBC is one of the strongest performing networks with three shows in the top 20. AMC’s The Walking Dead takes sixth position with 27% penetration, but fandom varies markedly by market, slipping to just 10th in the UK.

Perhaps the biggest story of 2017 is the rise of Netflix as a TV network. Netflix, with seven, has more shows than any other in the top 40, though only two are in the top 20 (Stranger Things and House of Cards). Superhero shows have been a big win for Netflix with Jessica Jones, Luke Cage and Daredevil all in the top 40. But, the one to pay attention to is 13 Reasons Why at number 23, driven largely by 16-24-year-old viewers. In the post-linear schedule world Netflix has learned how to super serve audience segments with shows that are ‘prime time’ titles within its service that would not be able to occupy prime time slots on broadcast TV because their appeal to older audiences is limited.

Stranger Things was Netflix’s biggest hit of 2017, taking eighth spot overall, but first among 16-19 year olds and second place for 20-24 year olds. Netflix might have built its revenue business around 25-44 year olds but it is winning the programming battle for younger millennials. Traditional TV networks should pay heed.

If you would like to learn more about MIDiA’s TV Brand Tracker and how to get access to the data, email us at info@midiaresearch.com 

MIDiA Research Predictions 2018: Post-Peak Economics

With 2017 drawing to a close and 2018 on the horizon, it is time for MIDiA’s 2018 predictions.

But first, on how we did last year, our 2017 predictions had a 94% success rate. See bottom of this post for a run down.

Music

  • Post-catalogue – pressing reset on the recorded music business model: Revenues from catalogue sales have long underpinned the major record label model, representing the growth fund with which labels invested in future talent, often at a loss. Streaming consumption is changing this and we’ll see the first effects of lower catalogue in 2018. Smaller artist advances from bigger labels will follow.
  • Spotify will need new metrics: Up until now Spotify has been able to choose what metrics to report and pretty much when (annual financial reports aside). Once public, increased investor scrutiny on will see it focus on new metrics (APRU, Life Time Value etc) and concentrate more heavily on its free user numbers. 2018 will be the year that free streaming takes centre stage – watch out radio.
  • Apple will launch an Apple Music bundle for Home Pod: We’ve been burnt before predicting Apple Music hardware bundles, but Amazon has set the precedent and we think a $3.99 Home Pod Apple Music subscription (available annually) is on the cards. (Though we’re prepared to be burnt once again on this prediction!) 

Video

  • Savvy switchers – SVOD’s Achilles’ heel: Churn will become a big deal for leading video subscription services in 2018, with savvy users switching tactically to get access to the new shows they want. Of course, Netflix and co don’t report churn so the indicators will be slowing growth in many markets.
  • Subscriptions lose their stranglehold on streaming: 2018 will see the rise of new streaming offerings from traditional TV companies and new entrants that will deliver free-to-view, often ad-supported, on-demand streaming TV.

Media

  • Beyond the peak: We are nearing peak in the attention economy. 2018 will be the year casualties start to mount, as audience attention becomes a scarce commodity. Smart players will tap into ‘kinetic capital’ – the value users give to experiences that involve their context and location.
  • The rise of the new gate keepers part II: In 2018 Amazon and Facebook will pursue ever more ambitious strategies aimed at making them the leading next generation media companies, the conduits for the digital economy.

Games

  • The rise of the unaffiliated eSports: eSports leagues emulate the structure of traditional sports, but they may have missed the point. In 2018, we’ll see more eSports fans actually seeking games competition elsewhere, driving a surge in unaffiliated eSports.
  • Mobile games are the canary in the coal mine for peak attention: Mobile games will be the first big losers as we approach peak in the attention economy – there simply aren’t enough free hours left in the day. Mobile gaming activity is declining as mainstream consumers, who became mobile gamers to fill dead time, now have plenty of digital options that more closely match their needs. All media companies need to learn from mobile games’ experience.

Technology

  • The fall of tech major ROI: Growth will come less cheaply for the tech majors (Alphabet, Apple, Amazon, Facebook) in 2018. They will have to overspend to maintain revenue momentum so margins will be hit.
  • Regulation catches up with the tech majors: Each of the tech majors is a monopoly or monopsony in their respective markets, staying one step ahead of regulation but this will change. The EU’s forced unbundling of Windows Media Player in the early 2000s triggered the end of Microsoft’s digital dominance. 2018 could see the start of a Microsoft moment for at least one of the tech majors. 

2017 Predictions

For the record, here are some of our correct 2017 predictions:

  • Digital will finally account for more than 50% of revenue
  • Spotify will still be the leading subscription service
  • eSports to reach $1 billion
  • Streaming holdouts will trickle not flood
  • AR will have hype but not a killer device.
  • VR players will double down on content spend
  • Google doubles down on its hardware ecosystem plays
  • 2017 will not be the year of Peak TV
  • Original video content to arrive on messaging apps

Here are some that we got wrong or were inconclusive:

  • Tidal finally sells ($300 million stake from Softbank was a partial sale – full sale likely in 2018)
  • Apple will launch an Apple Music iPhone – didn’t happen but the Home Pod may be the bundled music device in 2018 (see below)
  • Spotify will be disrupted – it actually went from strength to strength with no meaningful new competitor, yet