2021 Predictions: The year of the immersive web

As we approach the end of 2020 it is time to look forward to what 2021 may bring. MIDiA has published the fifth edition of our Annual Predictions report which clients can read here. There are 27 predictions in the report, but I am sharing a few of them here. MIDiA has a pretty good track record with its predictions; 79% of our predictions for 2020 were correct.

These are the seven meta and cultural trends that we believe will shape 2021: 

  1. The immersive web
  2. Recessionary impact
  3. The great reaggregation
  4. The return of synchronous experiences
  5. Social consumption and micro communities
  6. Video streaming as a cultural catalyst 
  7. The end of influencers

The immersive web

Web 1.0 was an information dump; web 2.0 added multimedia and social. Now we are entering the third phase, which MIDiA terms the immersive web. As is usually the case with big epoch shifts, this will not be a clear and sudden change but instead a steady change – a change that is, in fact, already happening. The immersive web is characterised by environments in which we do not simply conduct extensions of IRL activity (e-commerce, video calls) but ones that create behaviours and relationships that only, and can only, exist within these environments. Apps and platforms like Roblox, TikTok and Discord are early iterations of the immersive web, but merely hint at what will come. The trend will be driven by Gen Z, who have grown up with social apps from the playground onwards. Gen Z relies more than any previous generation on such apps for social interaction and expression, forming muscle memory for digital-first relationships. The COVID-19 lockdown measures have accentuated this shift, further solidifying Gen Z’s receptivity to future immersive web experiences.

Music

Here is a short version of some of the trends we expect to shape music in 2021:

  • The start of an artist economy: Streaming is a song economy of which the scale benefits rights holders far more than creators. The industry needs to work towards a collection of models that work for artists. Components could be micro-communities (see below), sounds platforms, ticketed live streams, skills marketplaces, and virtual merch. 
  • The rise of micro-communities: Niche is the new mainstream. The next phase of this market dynamic is the emergence of micro-communities; small audiences of dedicated fans who almost consider it an honour-bound duty to support their artists. 
  • The creator tools revolution: Creator tools, particularly music production and collaboration, will be one of the most important market shifts in 2021. Companies like Splice, LANDR and Output will continue to build scale in 2021, changing both the culture and business of music. 
  • Live streaming professionalises: With live unlikely to be anything close to full capacity until the latter part of 2021, live streaming will be used by a growing body of artists as a genuine revenue driver, rather than the audience engagement role it played in much of 2020, driven by increased professionalisation, better distribution and more sophisticated monetisation.
  • Music continues to deliver as an asset class: Although the pandemic dented music publishing’s long-term growth story, music catalogues retain strong appeal as an asset class, not least because they are performing better in relation to many asset classes that have been hit hard by the pandemic and that look vulnerable to the coming recession. The imbalance between supply and demand remains, so expect prices paid to continue to accelerate. 
  • UGC continues to accelerate: User-generated content (UGC) music revenues reached $4 billion in 2020 and will push up to $4.9 billion in 2021. The crucial difference between UGC music now compared to five years ago, is that the focus is on genuine user creativity rather than users simply uploading others’ music.

2020 was a year like no other in modern times, with the impact on digital entertainment both pronounced and creating the foundations for accelerated innovation in 2021. Whatever may happen to the global economic and health outlook, digital entertainment will go through further dramatic change in 2021.

Apple to launch subscription bundle – we called it!

In MIDiA’s 2020 Predictions report published in December 2019 we predicted that tech majors would start creating subscription bundles, with Apple leading the fray. Lo and behold, news has just come out that Apple is working on ‘Apple One’ – a multi-genre subscription bundle that will include Apple Music, Apple TV+, Apple Arcade and Apple News+.

This is what we said back in December:

“Expect Apple to experiment with paid bundles. Adding TV+ to its student Apple Music package is another test case and may soon see Arcade folded in also. With a global recession looming, Apple and Amazon will be well placed to grow market share.

We called it!

So why is Apple doing this, and why now?

With smartphone sales slowing, Apple needs another growth driver to maintain revenue growth. It is making this move now because, one, it needs the transition to start soon, and two, it is looking to profit from the recession. Standalone digital subscriptions are contract-free and so are vulnerable to cancellation. Additionally, they skew towards Millennials – the segment most likely to be hit hardest by any workforce reductions. Consumers who find themselves having to tighten their belts will not want to simply ditch their digital entertainment, however – it has become too important to them. So, a multi-subscription, value-for-money bundle will become particularly appealing during a recession. Apple is thus hoping to pick up price-sensitive subscribers during the economic downturn.

Apple also has an ace up its sleeve: device bundles. As we wrote in December:

“Currently, Apple’s mix of premium, standalone subscriptions are educating its user base that they have a clear monetary value. Apple will start to bundle these together with devices in order to maintain revenue growth in its otherwise slowing device sales segments. The initial bundling of Apple TV+ for free for one year may help acquire market share but it also lays the ground for a more comprehensive and structured bundling strategy. By tying subscriptions into long-term, need-to-have relationships – i.e. phones and shipping – […] tech majors could gain at the expense of standalone subscriptions.

Bundling used to be the sole domain of Telco’s but the tech majors are looking to get in on the act. Apple can use Apple One to increase device prices, e.g. pay $200 more to get an iPhone with a lifetime of unlimited music, video, games and extra cloud storage. By doing so it both increases device revenue (and after all, Apple is still a device company and is measured that way by investors) and taps into an entirely different purchase decision cycle. Devices are need-to-have and if you are in the market for a high-end device, adding on 15% for unlimited content is a much easier sell than trying to sell the subscription standalone.

In doing all of this, Apple is of course taking a leaf out of Amazon’s book. Amazon has built the core of its streaming businesses around the Prime bundle. In doing so, it has the additional benefit of creating a recession-proof bundle (everyone still needs to buy stuff) – one which is proving its worth already, if it’s incredibly successful Q2 is anything to go by. As we enter the recession, standalone subscriptions like Spotify and Netflix are vulnerable to increased churn. Apple and Amazon will be waiting to pick up the pieces.

The Meta Trends that Will Shape 2019

MIDiA has just published its annual predictions report. Here are a few highlights.

2018 was another year of change, disruption and transformation across media and technology. Although hyped technologies – VR, blockchain, AI music – failed to meet inflated expectations, concepts such as privacy, voice, emerging markets and peak in the attention economy shaped the evolution of digital content businesses, in a year that was one to remember for subscriptions across all content types. These are some of the meta trends that we think will shape media, brands and tech in 2019 (see the rest of the report for industry specific predictions):

  • Privacy as a product: Apple has set out its stall as the defender of consumer privacy as a counter weight to Facebook and Google, whose businesses depend upon selling their consumers’ data to advertisers. The Cambridge Analytica scandal was the start rather than the end. Companies that can – i.e. those that do not depend upon ad revenue – will start to position user privacy as a product differentiator.
  • Green as a product: Alphabet could potentially position around environmental issues as it does not depend as centrally on physical distribution or hardware manufacture for its revenue. For all of Apple’s genuinely good green intentions, it fundamentally makes products that require lots of energy to produce, uses often scarce and toxic materials and consumes a lot of energy in everyday use. Meanwhile, Amazon uses excessive packaging and single delivery infrastructure, creating a large carbon footprint. So, we could see fault lines emerge with Alphabet and Facebook positioning around the environment as a counter to Apple and potentially Amazon positioning around privacy.
  • The politicisation of brands: Nike’s Colin Kaepernick advert might have been down to cold calculation of its customer base as much as ideology, but what it illustrated was that in today’s increasingly bipartisan world, not taking a position is in itself taking a position. Expect 2019 to see more brands take the step to align themselves with issues that resonate with their user bases.
  • The validation of collective experience: The second decade of the millennium has seen the growing success of mobile-centric experiences across social, music, video, games and more. But this has inherently created a world of siloed, personal experiences, of which being locked away in VR headsets was but a natural conclusion. The continued success of live music alongside the rise of esports, pop-up events and meet ups hints at the emotional vacuum that digital experiences can create. Expect 2019 to see the rise of both offline and digital events (e.g. live streaming) that explicitly look to connect people in shared experiences, and to give them the validation of the collective experience – the knowledge that what they experienced truly was something special but equally fleeting.
  • Tech major content portfolios: All of the tech majors have been building their content portfolios, each with a different focus. 2019 will be another year of content revenue growth for all four tech majors, but Apple may be the first to take the next step and start productising multi-content subscriptions, even if it starts doing so in baby steps by making Apple original TV shows available as part of an Apple Music subscription.
  • Rights disruption: Across all content genres, 2019 will see digital-first companies stretch the boundaries and challenge accepted wisdoms. Whether that be Spotify signing music artists, DAZN securing top tier sports rights, or Facebook acquiring a TV network. These are all very different moves, but they reflect a changing of the guard, with technology companies being able to bring global reach and big budgets to the negotiating table. Expect also more transparency, better reporting and more agile business terms.
  • GDPR sacrificial lamb: In 2018 companies thought they got their houses in order for GDPR compliance. Most consumers certainly thought they had, given how many opt in notifications they received in their inboxes.
    However, many companies skirted around the edges of compliance, especially US companies. In 2019 we will see European authorities start to police compliance more sternly. Expect some big sacrificial lambs in 2019 to scare the rest of the marketplace into compliance. They will also aim to educate the world that this is not a European problem, so expect some of those companies to be American. Watch your back Facebook.
  • Big data backlash: By now companies have more data, data scientists and data dashboards than they know what to do with. 2019 will see some of the smarter companies start to realise that just because you can track it does not mean that you need to track it. Many companies are beginning to experience data paralysis, confounded by the deluge of data, with management teams unable to decipher the relevance of the analysis put together by their data scientists and BI teams. A simplified, streamlined approach is needed and 2019 will see the start of this.
  • Voice, AI, machine learning (and maybe AR) all continue on their path: These otherwise disparate trends are pulled together for the simple reason that they are long-term structural trends that helped shape the digital economy in 2018 and will continue to do so in 2019. Rather than try to over simplify into some single event, we instead back each of these four trends to continue to accelerate in importance and influence. 

For music, video, media, brands and games specific predictions, MIDiA clients can check out our report here. If you are not a client and would like to get access to the report please email arevinth@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