The COVID Bounce: How COVID-19 is Reshaping Entertainment Demand

The economic disruption and social dislocation caused by the COVID-19 pandemic is not evenly distributed. Some business face catastrophe, while others thrive. Across the entertainment industries the same is true, ranging from a temporary collapse of the live business through to a surge in gaming activity. As we explain in our free-to-download COVID-19 Impact report, the extra time people have as a result of self-isolation has boosted some forms of entertainment more than others – with games, video and news the biggest winners so far.

To further illustrate these trends, MIDiA compiled selected Google search term data across the main entertainment categories. The chart below maps the change in popularity of these search terms between the start of January 2020 up to March 27^th. Google Trends data does not show the absolute number of searches but instead an index of popularity. These are the key findings:

• Video streaming: All leading video subscription services saw a strong COVID-19-driven spike, especially Disney+ which managed to coincide its UK launch with the first day of national home schooling.
• Music streaming: Little more than a modest uptick for the leading music services, following a long steady fall – reflecting a mature market sector unlike video, which has been catalysed by major new service launches.
• Video demand: With the mid- to long-term prospect of a lot more time on their hands, consumers have been strongly increasing searches for TV shows, movies and games to watch and play. The fact that ‘shows for kids to watch’ is following a later but steeper curve reflects the growing realisation by locked-down families that they have to stop the kids going stir crazy while they try to work from home.
• Music demand: Demand for music has been much more mixed, including a pronounced downturn in streams in Italy. Part of the reason is that music is something people can already do at any time in any place. So, the initial instinct of consumers was to fill their newfound time with entertainment they couldn’t otherwise do at work/school. As the abnormal normalises music streaming will pick up, as the recent increase in searches for music and playlist terms suggests. Podcasts, however, look like they will take longer to get a COVID bounce.
• Games: Games activity and revenues have already benefited strongly from the new behaviour patterns, as illustrated by the fast and strong increase in search terms. However, the recent slowdown in search growth suggests that the increase in gaming demand may slow.
• News: The increased searches correlate strongly with the growth of the pandemic, but the clear dip at the end provides the first evidence of crisis-fatigue.
• Sports: The closure of all major sports leagues and events has left a gaping hole in TV schedules and the lives of sports fans. The sudden drop in search terms shows that sports fans have quickly filled their lives with other entertainment and have little interest in keeping up with news of sports closures.
• Leaders: Finally, Boris Johnson has seen his search popularity grow steadily with the pandemic, while Donald Trump’s has dipped.

Making Free Pay

2018 was a big year for subscriptions, across music (Spotify on target to hit 92 million subscribers), video (global subscriptions passed half a billion), games (98 million Xbox Live and PlayStation Plus subscribers) and news (New York Times 2.5 million digital subscribers). The age of digital subscriptions is inarguably upon us, but subscriptions are part of the equation not the whole answer. They have grown strongly to date, will continue to do so for some time and are clearly most appealing to rights holders. However, subscriptions only have a finite amount of opportunity—higher in some industries than others, but finite nonetheless. The majority of consumers consume content for free, especially so in digital environments. Although the free skew of the web is being rebalanced, most consumers still will not pay. This means ad-supported strategies are going to play a growing role in the digital economy. But set against the backdrop of growing consumer privacy concerns, we will see data become a new battle ground.

Industry fault lines are emerging

Three quotes from leading digital executives illustrate well the fault lines which are emerging in the digital content marketplace:

“[Ad supported] It allows us to reach much, much deeper into the market,” Gustav Söderström, Spotify

“To me it’s creepy when I look at something and all of a sudden it’s chasing me all the way across the web. I don’t like that,” Tim Cook, Apple

“It’s up to us to take [subscribers’] money and turn it into great content for their viewing benefit,”Reed Hastings, Netflix

None of those quotes are any more right or wrong than the other. Instead they reflect the different assets each company has, and thus where they need to seek revenue. Spotify has 200 million users but only half of them pay.  Spotify cannot afford to simply write off the half that won’t subscribe as an expensively maintained marketing list. It needs to monetise them through ads too. Apple is a hardware company pivoting further into services because it needs to increase device margins, so it can afford to snub ad supported models and position around being a trusted keeper of its users’ data. Netflix is a business that has focused solely on subscriptions and so can afford to take pot shots at competitors like Hulu which serve ads. However, Netflix can only hike its prices so many timesbefore it has to start looking elsewhere for more revenue; so ads may be on their way, whatever Reed Hastings may say in public.

The three currencies of digital content

Consumers have three basic currencies with which the can pay:

1. Attention
2. Data
3. Money

Money is the cleanest transaction and usually, but not always, comes with a few strings attached. Data is at the other end of the spectrum, a resource that is harvested with our technical permission but rarely granted by us fully willingly, as the choice is often a trade-off between not sharing data and not getting access to content and services. The weaponisation of consumer data by the likes of Cambridge Analytica only intensifies the mistrust. Finally, attention, the currency that we all expend whether behind paywalls or on ad supported destinations. With the Attention Economy now at peak, attention is becoming fought for with ever fiercer intensity. Paywalls and closed ecosystems are among the best tools for locking in users’ attention. As we enter the next phase of the digital content business, data will become ever more important assets for many content companies, while those who can afford to focus on premium revenue alone (e.g. Apple) will differentiate on not exploiting data.

Privacy as a product

So, expect the next few years to be defined as a tale of two markets, with data protectors on one side and data exploiters on the other. 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. Amazon is the interesting one as it has a burgeoning ad business but not so big that it could opt to start putting user privacy first. The alternative would be to let Apple be the only tech major to differentiate on privacy, an advantage Amazon may not be willing to grant.

The topics covered in MIDiA’s March 27 event ‘Making Free Pay’.The event will be in central London and is free-to-attend (£20 refundable deposit required). We will be presenting our latest data on streaming ad revenue as well as diving deep into the most important challenges of ad supported business models with a panel featuring executives from Vevo, UK TV and Essence Global. Sign up now as places are going fast. For any more information on the event and for sponsorship opportunities, email dara@midiaresearch.com 

How Blackberry’s and Playstation’s Problems Will Shape Paid Content Strategies

Research In Motion, the company behind Blackberry, are watching the dust settle on one of the biggest challenges the company has faced.  The prolonged email and BBM service outage may prove to have even more dramatic impacts on their long term prospects, with confidence fatally shattered for many consumers.  Sony will have been grateful for so much of the spotlight to be shone on RIM’s troubles as they found themselves victim once again to a security breach.

Security breaches, Denial of Service attacks, service outages and other such disruptions may have diverse causes but they have two crucial things in common:

• They disrupt the consumer experience, simultaneously  damaging consumer confidence
• They could often have been prevented with more effective preventative measures by the companies affected

All of this may seem distant from paid content strategies, but the impacts will soon be keenly felt, particularly at the costing phase.  When services are proposed, whether by a start-up or by a division of a large corporation, budgets and costs are never as big as people wished they were.  That is just the nature of doing business and technology builds.   Business casing, revenue modelling, cost forecasting are always balancing acts and security is rarely one of the first technology investments on people’s minds when building content services.

Security for content services has traditionally played a role similar to motor insurance when buying a car: you know you are going to need to take it out, and you know that its cost will be impacted by the car you buy, but the majority of your time and energies are spent researching the car.  Insurance is the afterthought.  Though of course you still have to pay the full amount else you cannot legally drive the car.  And here is where the analogy splits: with content service builds, if you find that you have allocated more than you expected to user features or content licenses you can make up the shortfall by reducing the costs on less visible components such as security.

This is all great for consumer product experiences: we get more features, more content, more supported devices etc. But those days are now numbered.  The ROI of great product experiences disappears if you lose customers because of service disruptions.  Just ask Sony and RIM.

RIM and Sony are the pivot points

Of course many other companies than Sony and RIM have been getting hammered by DOS attacks, security breaches and outages (Soundcloud was a recent victim).  But they are the landmark events.  They are the global scale events which will become industry reference points around which future strategies will pivot.

Now CTO’s and security experts will be given a much bigger voice in the earliest stages of planning content services.  If you are a start-up expect VCs to start wanting to see security expertise on your team and robust contingency plans in your business case. If you are building a service within a larger organization expect the CTO to start calling many of the shots.

Whatever your situation, expect to start having to allocate much more of your budget on security, and because content owners are unlikely to slash their license fees to help companies pay for security investments, user functionality will be hit hardest.  The end result for consumers will be safer, but less exciting content products.  Not the most enthralling of prospects…