The medium is the message
As television audiences continue to fall, new media is showing unprecedented adoption and market penetration. GC speaks to some of the key figures behind this transformation to learn if traditional media is facing a new Gutenberg moment.
In-house innovation in media
Since the advent of the printing press in 1440, when Johannes Gutenberg’s invention for the first time allowed information to be disseminated at scale, mass communication has been an instrumental tool for human progress. The printing press laid the foundations for the plethora of forms of media we see today, but modern media and communications are in the midst of another seismic shift.
As printed materials give way to the use of digital distribution, traditional forms of multimedia are facing a similar challenge – with the dominance of so called ‘linear’ television and radio being challenged by new ‘over-the-top’ streaming services.
But it can’t be taken for granted that the proposed ‘new normal’ will be better, or that our existing institutions will be able to reorient themselves around a digital world. New regulatory paths will have to be carved out and new business models will need to be explored. The in-house teams of both new media business looking to hitch a wagon to this revolution, and traditional media companies holding fast against the tide of change, must find ways to match rapidly expanding expectations of efficiency and ease of access.
Cut the Cord
Typical understandings of mass multimedia are predicated on a sender-receiver model, where a broadcaster is able to beam a set of programming to individual receivers. The broadcast is transmitted on the basis that all receivers are uniform and undifferentiated. In turn, it also means that the offering is undifferentiated.
‘What linear does a poor job of, is that it serves the same content in the same way to everyone,’ says Sunjay Mathews, head of legal for North America at sport streaming service DAZN.
‘As a Yankees fan in New York, if I watch ESPN, I get the same shows that a Red Sox fan in Boston is seeing on the same channel. But with streaming, particularly as it continues to develop and evolve, we have the ability to serve very specific content and, more importantly, specific advertising, that speaks to consumers as individuals.’
In the past, this line between the broadcaster and receiver was clearly defined, in large part due to the different technological, infrastructural and financial requirements incumbent on each side. But the advent of the internet has shifted the landscape significantly. The popularity of YouTubers for example, individuals often armed with little more than a webcam and rudimentary video editing software, can outdraw Hollywood-produced blockbuster TV shows with blockbuster budgets.
‘I certainly think that streaming is the future, and that will only become clearer as the industry provides users the total experience they’re seeking,’ says Mathews.
‘The technology is changing so rapidly and evolving so quickly that right now, streaming platforms are able to provide personalised access. Viewership is a custom experience. I do think that what’s going to happen in the future is that we are going to see even more customisability and personalisation.’
The audiences – and the cash underpinning them – have flocked to new media.
But while there is admittedly still a way to go in terms of maturation of the platform, it hasn’t stopped a fundamental shift in demographics from beginning. Between 2012 and 2016, the amount of television watched by US audiences dropped by 19%, with younger generations accounting for the most severe drop: those aged 18-24 watched a full 39% less television over that period.
‘To use sports as an example, viewership has seen dips among the four major US sports in recent years, and a lot of that is demographics. But it’s not that younger people don’t like watching sports: they love sports just as much as previous generations did. It’s just that they might not want to watch a three-hour sporting event, but they are perfectly happy to watch three hours of highlights. Content delivery needs to be adjusted in a way that serves that audience because if you’re not serving the audience and shaping with them, then you’re going to get left behind,’ says Mathews.
The audiences – and the cash underpinning them – have flocked to new media. As of September 2018, YouTube had 1.9 billion logged-in users on a monthly basis; Netflix had over 148 million paying subscribers worldwide having long since become the world’s highest valued media company; Hulu generated $1bn in advertising revenue in 2017.
‘Product and advertising integration, where advertising truly becomes part of the experience to the degree you don’t even realise that you’re being served up an ad, is one of the next steps we’re likely to see with streaming technology,’ says Mathews.
‘There are going to be adverts specific to what it is that you want to see. If you think about it, you’re a brand and you want to speak to the people you can reach, not waste time trying to reach people that don’t care. Equally, if you deliver content, you don’t want to ruin the experience by serving an ad for 30 seconds which can get the message across in 5 seconds, or more frustratingly, serving up the same 30 second ad repeatedly during the course of the viewing experience. That speaks to the huge potential that exists in this space, which is still waiting to be realised.’
One Size Won’t Fit All
While the raw numbers when looked at as a whole will certainly be sending a shiver down the spine of executives from ‘old media’, not all corners of the industry are feeling the pressure equally. Some serving more targeted demographics are doing just fine. Take, for instance, the Spanish language market in the United States, whose habits remain relatively steady compared to the average, according to findings by US market research firm Parks Associates.
‘While pay-TV penetration has declined among US broadband households, adoption has remained steady among Spanish-bilingual households over the past few years,’ says Brett Sappington, senior director of research at Parks Associates. Cord cutting does not have the same impact in Spanish-language households as it does for the larger broadband population. In fact, most of their recent pay-TV changes have been upgrades to more expensive services.’
That’s not to say that there is no space for the over-the-top model in the Latin American market: Hemisphere Media Group, the only publicly traded media company in the US that specifically targets the Hispanic and Latin populations, launched a Spanish-language digital subscription service, Pantaya, in 2017. But the primary focus at Hemisphere remains on its traditional offerings, with the over-the-top space seen as augmentative.
Not all corners of the industry are feeling the pressure equally.
Similarly, National Public Radio – better known in the US as NPR – has found that rather than looking to replace its traditional offerings, which remain impressively popular and robust, building out a suite of ways to host and access content has negated the need for an overhaul in fundamental structure and strategy.
‘Radio still reaches 92% of all US adults every week. That’s more than any other platform, including television. And this isn’t just an audience of older Americans: broadcast radio reaches 93% of those aged 25-54 and 91% of those aged 18-34. Rather than witnessing the death of radio, we see an audience that wants to be able to access our content whenever they want it and wherever they are,’ says Jonathan Hart, chief legal officer at NPR.
‘So we meet our audience where the audience is. 103 million Americans access NPR content every month, across broadcast radio, podcasts and our digital properties. Our news magazines, Morning Edition and All Things Considered, are among the most listened-to radio programmes in the country. In the spring of 2018, Morning Edition had a weekly audience of 14.2 million listeners and All Things Considered had a weekly audience of 13.8 million listeners. Nearly 39 million users access npr.org each month and nearly 23 million people listen to our podcasts each month, making NPR far and away the most listened-to US podcast publisher.’
As media companies begin to grapple with increasingly diverse portfolios, in-house teams are left with the challenge of providing advice on areas that may not have always been a part of the regular media landscape. Further, they’re required to advise on technology that hasn’t even been properly regulated yet.
‘My biggest challenge as NPR’s chief legal officer is keeping up with the relentless pace of innovation at NPR. Supporting innovation is a much heavier legal lift than supporting a mature business. We have to do both,’ says Hart.
‘Our mature broadcast business remains our key driver of reach and engagement. But, as I noted above, we are committed to meeting our audience where our audience is, whether they’re reading text or streaming audio or video on npr.org or a member station website, listening to podcasts, accessing content on one of our mobile apps, or listening to audio on a smart speaker. And we have to do all of it very well, despite the resource constraints that naturally come with being in non-commercial, public media.’
At DAZN, Mathews finds himself in a similar position, but looks towards the positives and opportunities provided by treading into the unknown.
‘In a traditional, linear space, the legal questions you are asked are the questions that have been asked for the last 40 years: TV has been around for a while and, these regulations are now crystal clear and more importantly, there’s been a lot of litigation around it to further explain and identify how the grey areas are likely to be resolved,’ he says.
TV and movie revenue lost to piracy increased from $6.7bn in 2010 to $31.8bn in 2017.
‘For me, here at DAZN, I can’t say the same because some of the regulations have not yet caught up, and for the ones that have, the court cases haven’t been raised, tried or settled yet because we’re so on the fringe. But to me, that’s how I provide my value.’
This new normal in media and entertainment law has put the spotlight too on the types of skills required to be successful in the industry. When looking to recruit and hire new team members, Hart says that what may have worked before, won’t be fit for purpose for long.
‘Familiarity with technology is now an essential skill for media lawyers. As a company that is determined to meet its audience where the audience is, we need lawyers who understand each of the distribution technologies we use and aren’t afraid to figure out the ones we’ll be adopting next,’ he says.
‘And because perfect digital copies of copyright-protected content can be made almost effortlessly and can be distributed worldwide almost instantaneously, familiarity with intellectual property law is essential.’
Piracy on the Airwaves
The obvious downside to the breaking of the sender-receiver barrier heralded by new media, as Hart says, is the ease by which broadcasts and streams can now be reproduced and shared illegally. The medium by which the content is being delivered is open enough to make reproducing the content easy. The doomsayers decrying the collapse of music industry profits have spilled over into video, and you don’t need to look far to read about anxious content producers fretting over whether or not their work will be profitable given there will always be free (and illegal) alternatives to enjoying the product.
‘Piracy is one of the biggest parts of my job. Sports rights are expensive. And you pay such a high premium for them, it’s disheartening that people are watching that content for free – especially if you have a good value proposition,’ says Mathews.
For platforms like DAZN, the focus is on individuals taking their paid-for sports feed and sharing it online for free via illegitimate websites. For other platforms, such as Hemisphere’s Pantaya and the likes of Netflix, it’s the possibility that the original video files will be uploaded to file sharing sites or other illicit peer-to-peer platforms.
While exact numbers are difficult to come by, consumer research firm Statista reported that TV and movie revenue lost to piracy increased from $6.7bn in 2010 to $31.8bn in 2017 and a projected $51.6bn by 2022. The figures dampen expectations that the accessibility of the likes of Netflix would take the wind from the sails of pirates around the world.
‘For us, there are ways you can combat piracy,’ says Mathews. ‘The first is knowing that you’re never going to eliminate it. No matter how good you are, no matter if you do everything right, there will always be somebody somewhere streaming your content illegally.’
Sometimes the piracy is being facilitated by competitors.
This is a common and practical sentiment – multiple GCs interviewed for this feature used the same analogy: ‘You know the carnival game Whac-A-Mole? It’s like that,’ muses Hart.
‘There are also technology solutions rights holders can use; video can make use of content ID and third parties can identify where your content appears on sites like YouTube and Facebook and move to get them taken down immediately,’ continues Mathews.
‘The main issues I see with addressing piracy with legal action are firstly, how do you identify the target? And you can imagine with these streaming links, it’s often impossible to identify who it is. Secondly, you have the problem of even if you are able to identify the person, they may not even have the means to pay a penalty.’
‘My conclusion is that I see a shift in terms of the legal remedy being used by the rights holders. They focus increasingly on prevention rather than punishing those responsible. We can threaten them if they post a link to Twitter or Facebook, and tell them that we know that what they’re doing is illegal and more importantly, what they are doing is making consumers have to spend more – pointing out that we have a great value proposition, and it’s usable, but if you continue pirating, you are hurting your fellow consumer.’
‘The final point is, having a product that is so good and affordable, and the experience so seamless that there is no point in suffering through the lack of quality of an illegal stream. We need to have our quality be so crisp, and integrate so many options that watching illegally becomes a far inferior and not worthwhile experience. But as I said, it all comes back to the value proposition.’
‘If someone is okay squinting their eyes and watching a poor quality picture of, for example, the Premier League, with foreign-language commentators, then we are never going to acquire them as a subscriber. But if we give them a good value proposition that they can use to watch Chelsea or their preferred team, with great definition and great usability, then we have created a product that will combat piracy by itself.’
Another layer of difficulty in this area is that sometimes the piracy is being facilitated by competitors: those who hold rights to distribute content in other jurisdictions but haven’t taken care to stop those in the US and elsewhere from accessing them, for instance by ensuring their platform is region-locked – a practice known as geo-blocking. Alex Tolston, executive vice president and general counsel of Hemisphere Media Group, elaborates:
‘Let’s say it's a Turkish product, they’re licensing all over the world. And while we demand that their co-licensees are geo-blocking the licensed content for their territories, we are constantly seeing broadcasters in Latin America who make the product available either on a catch-up basis or through one of their streaming platforms that are in violation of their geo-blocking restrictions, and they’re not putting in the protections that are needed to avoid infringing on other’s exclusive rights.’
‘As over-the-top platforms and other SVOD, AVOD, TVOD and other digital alternatives to linear become viable alternatives to traditional television viewing, licensors and licensees around the world are becoming more and more sophisticated on the segregation of rights being licensed. As this digital transition evolves, the protection of the IP that is being granted to licensees becomes more and more crucial. My hope is that the industry moves forward with a uniform preventative technology that is able to manage the distribution of worldwide rights that are being granted digitally from crossing the territorial boundaries; some inroads are being made with respect to piracy, but a uniform solution really doesn’t exist on the internet today to deal with the shifting landscape of rights management.’
Another factor is that the success of the over-the-top model may be everyone’s undoing. As competitors begin to replicate Netflix’s pioneering subscription model, rights holders have more choice as to where their content lands. The result is that instead of several giant troves of content, consumers will be forced to fracture their spend among many competing service providers. This may ultimately kill the benefits which drove the initial success of streaming platforms: convenience.
TDG Research, a US media market intelligence firm, reported in 2018 that all major television networks in the US will offer a direct-to-consumer streaming service by 2022.
‘These are early signs of an emerging media tribalism,’ says Mike Berkley, senior adviser at TDG and chief author of the report. ‘Major networks will increasingly reserve their best titles for their own direct-to-consumer services, which will help drive total network DTC subscriptions close to 50 million by 2022.’
Mathews, however, predicts that the market will do what it always has: adapt and thrive.
‘I have no idea what the future will hold but what I do think is right now there are a lot of people cutting cords and buying more subscriptions.’