Netflix is going to ride the gaming rocket. TikTok is just getting started. The metaverse is real and so is the threat of the regulatory ax swinging against Big Tech in the aftermath of this year’s mid-term elections.
Those were among the key conclusions about what’s ahead for media, offered up Friday morning in the Variety Intelligence Platform-hosted “Future of Content” presentation that helped kick off the SXSW festival and conference in Austin, Texas.
Andrew Wallenstein, president of Variety‘s subscription data service Variety Intelligence Platform, and VIP senior media analyst Gavin Bridge outlined their vision for the contours of the media and entertainment business in the near future. The pair went deep on the state of the pay TV marketplace amid its transition to streaming, a movie business coming off the ropes after COVID and the rise of video gaming, particularly mobile gaming and E sports, as a massively mainstream entertainment option for a broad range of demos.
The data-heavy presentation touted some eye-popping numbers, including the expectation that 2022 will see more than 2,000 new scripted and unscripted series launched in the ever-expanding global TV universe, up from 1,923 in 2021. Bridge noted that last year marked the first time that major streaming platforms ordered more content overall than traditional linear networks and cablers.
“We’ve reached the tipping point,” Bridge said of streaming’s ascent.
But at the same time, there’s a larger movement happening that makes the focus on new versus old irrelevant.
“We see it as one converged industry,” Wallenstein said. “At the end of the day, media and tech are all about going after mindshare and attention. Both want your subscription dollars and your advertising dollars and they’re all going direct-to-consumer around the globe.”
Wallenstein noted that that pandemic conditions only enhanced the balance sheets and enormous market share commanded by the Big Kahunas of Big Tech: Meta and Alphabet. The tonnage that Facebook and Google represent in both reach and advertising dollars — those two account for more than 50% of all digital ad dollars in the world — is an existential threat to Big Media.
The long shadow cast by the FAANG companies is driving the burst of large- and small-scale M&A around content assets over the past two years. The unprecedented billions being poured into TV and movie production is driving lofty valuations for content creators as the major studios and others dramatically pick up the pace of production to feed hungry on-demand platforms.
“If the media companies want to compete with the sheer scale of the audiences that the tech companies serve, they’re going to have to combine and pool their audiences,” Wallenstein said.
Bridge made a bold prediction about Netflix during his overview of growth drivers within the streaming market. He zeroed in on the rapid expansion of FAST (free ad-supported streaming television) channels that are emerging as content owners look for alternatives to chasing subscription dollars.
Observing that Netflix CFO Spencer Neumann recently seemed to soften on the streaming giant’s long-held stance that its platform will never see the light of advertising blurbs, Bridge mused that the reason has to be the galloping double-digit ad growth predicted for live streaming channels, which hit $13 billion last year. That number is projected to grow 82% by 2025.
“They are going to have ads in the future at some point,” Bridge predicted of Netflix. “Maybe five years? It’s going to happen.”
For the post-millennials in the audience at the JW Marriott Austin, Bridge added a helpful explainer about how linear TV works. FAST channels “are like cable — you pick a channel you want to watch and join it in progress,” Bridge said. “Everyone’s trying to enter this market.”
Among other highlights from the session:
Wallenstein cited the “flip-flop” in the sources of global internet traffic. Before the pandemic, the five biggest tech firms accounted for about 43% of global traffic. But as of last year, the percentage spiked to 56%. “We’re seeing that concentration of power,” he said.
TikTok is where the heat is in social media, in part because its content recommendation engine is so strong. Moreover, TikTok’s path to big-bucks monetization lies in e-commerce, Wallenstein predicted. The China-owned social media platform “is at the epicenter of youth culture,” he said. “There’s nothing like it as a culture force.” He added that the “social commerce trend” is already a $500 billion business. “It’s barely started in the U.S. TikTok will lead the way.”
The prospect of regulatory activity impacting Big Tech in a significant way will pick up after the fall’s mid-term elections, when it’s clear which way the political winds will blow in Washington, D.C. “Biden already said he’ll start a federal review of how foreign-owned apps use consumer data,” Wallenstein said. “Things may seem like they’ve died down but they really haven’t.” What’s more, the threat of Big Tech facing regulatory surgery is not only a U.S. issue.
For a practical example of what the emerging “metaverse” might look like, take a look at social gaming platform Roblox, Wallenstein said. It serves a “young, communal, interactive, game-based audience,” he said.
(Pictured: Gavin Bridge and Andrew Wallenstein)