This week: Latest TV trends in the UK; Netflix & how their tech gives a big edge
Plus reasons the TV & film industries should be cheerful, despite everything.
Reasons to be cheerful
The Ankler’s Richard Rushfield has done a wonderful state of the industry, where despite the turmoil in the TV and film sectors, he argues there are other signs that should be causing optimism. His focus is Hollywood, however as the old saying goes when the US sneezes the rest of the world catches a cold - so that things are looking up on that side of the pond should be welcome news to the UK production sector.
First and foremost, as he says, audiences are still wanting to watch TV and movies. The art form itself hasn’t lost its appeal, which despite the turmoil and challenges, is an important truth to hold on to. The business model(s) might be taking a battering, but the mass appeal of high quality storytelling of all genres endures.
He also makes the observation that streaming services are developing their own niches which helps audiences identify which subscriptions they want, as well as producers in targeting their ideas to the right platforms:
In fact, the streaming services have, more or less, carved out niches for themselves, if only they would accept them. Netflix is the basic utility, the everything service. Amazon is Dad TV. Apple is moving into the prestige space abandoned by Max. P+ is Middle American. D+ is for families. Peacock seems to be going somewhere slightly younger and quirkier. MAX still remains two distinct services, and one has to wonder if the whole is proving less than the sum of its parts. Admittedly, I’m not quite sure what Hulu’s niche is beyond being a home for FX and Searchlight, but with the merger into D+, that should become moot, albeit more complicated.
He identifies problems that need addressing, such as sharper and more thought through marketing and distribution plans to better '“corral” audiences who have a lot of competing activities vying for their attention. He urges us not to lose our collective minds over artificial intelligence and instead see it as an enhancement to the creative process (with caveats around rights and people being compensated). And comedy - people love to laugh, and it is a genre being overlooked by Hollywood executives.
His state of the industry is a shot in the arm and a rallying cry: “But at our core, high-quality entertainment like Hollywood produces on a massive scale is not just what the world wants. It is what a suffering world needs.”
Do read it - it is funny, insightful and optimistic.
Richard Rushfield, The Ankler, State of the Industry 2024 (subscription required)
Streamers and their competing tech stacks
(A caveat, I’m not an engineer but have worked in product management on streaming platforms).
Bob Iger has been quoted saying that Disney’s streaming technology platforms need to be on ‘Netflix level” (read more in Variety). He said that while Disney+ has “robust video experiences at scale”, they are missing the “gold standard” technology of Netflix that helps drive down costs of customer acquisition and retention.
Anyone who regularly uses Disney+ knows that while the video streaming certainly is robust in that it doesn’t buffer or crash, the rest of the user experience is somewhat rudimentary when in compared to other platforms (and not only Netflix).
While Iger doesn’t outline what he means by ‘technology’, it is assumed it will include a focus on discoverability and recommendations to help drive down marketing, customer acquisition and retention costs. Parents also would welcome (please!) the creation of more nuanced children accounts to reflect Disney’s deep understanding of what content is appropriate for different age groups - rather than the blunt one-or-two-sizes-fit-all approach they’ve had thus far.
However beyond user experience it will be interesting to see how Disney+ and others tackle Netflix and Amazon’s significant competitive advantage of their underlying tech stack, which they’ve both been heavily investing in over the past 10+ years.
While this looks (and is) profoundly complex, the mention of ‘Open Connect’ in the streaming box above represents the competitive advantage that makes it exceptionally hard for broadcasters, networks and studios to replicate without serious investment and technical know how.
In (very very) simple terms, video streaming services costs money to run. This can be split into two broad parts: firstly, the hosting of everything up until the user clicks play on a video, so the website/app interface, logging into your account, the marketing carousels etc etc. And secondly, the distribution of the video itself to the end user who wants to watch it (the point at which a user clicks play). For on demand services, this means getting the video assets to the servers of internet service providers around the world in advance of when a user clicks play, so the ISP only has to deliver it locally rather than go off hunting for a copy of the video when the user asks for it (told you this was simple).
A company pays for hosting of the first part, so the website/app which a user browses around, and then pays to distribute the video content to users via what is called a content distribution network (CDN). These third party CDNs specialise in getting the video content to end users wherever they are in the world in the most efficient way as possible, ensuring the highest quality end-user experience by trying to eliminate buffering and the like. The most popular CDNs for video include Amazon Web Services (AWS), Akamai (which is used by the BBC and ITVX and is rumoured to distribute between 15 - 30% of all web traffic) and Azure (owned by Microsoft), but there are many others all jostling for contracts with the owners of streaming services. AWS is hugely important to Amazon’s business, making up around 75% of Amazon’s operating profit in 2021.
For broadcasters/networks and studios with their own streaming services, they are likely to host their services with one hosting company, and then pay another (or perhaps several others) to be their CDN for the video content. How much they pay to the CDN providers depends on how many streams they distribute to users each year. So each time a user clicks a video it will cost the streaming service, and how much it costs depends on how many users also click the video, how long they watch for and at what quality (so SD video is cheaper to distribute than HD as it is smaller). In other words, the distribution costs are directly related to the amount of video data streamed by users.
This is where Netflix and Amazon Prime Video’s advantage comes in (and also the BBC, which has been investing in its own CDN for nearly a decade.)
Amazon obviously owns Amazon Web Services, and therefore they don’t have additional external costs to distribute their content. For Netflix, they appear to host everything before you click play on a video with Amazon Web Services (AWS), which has been estimated to cost Netflix approximately $300m a year. However, everything after a user clicks play is distributed on their own proprietary CDN called ‘Open Connect’, which has cost an estimated $1bn to develop over the past 10 years.
A Streaming Media article from October 2023 said: “Unlike its peers, Netflix has made a substantial capital investment to establish its own CDN, consisting of over 17,000 servers strategically spread across 158 countries. This network is uniquely designed to bring content physically closer to end users, ensuring efficient content delivery.”
When Netflix’s success is discussed, the focus is often on the content, talent deals, marketing, customer data and algorithm intelligence. And while all of that is important, their technical approach going back more than a decade is also massively significant, however doesn’t get as much recognition.
“One of the reasons why Netflix is the leader in this market and has the number of subs they do [...] is something that pretty much everybody outside of the technical part of this industry underestimates, and that is Open Connect,” Dan Rayburn, a media streaming expert and principal analyst with Frost & Sullivan, tells The Verge.
So you can see why Iger et al are focussed on technology as an area requiring serious effort. Recently, Elaine Low went through all the job listings in Hollywood, and 44% of jobs at Disney alone were for tech roles (and there was only one creative role).
So while Disney+, Max, Peacock, All4, ITVX and the like can improve and enhance their content offering and user experience of their websites/apps, playing catch up with Netflix/Amazon on distribution & their tech stack will require serious and game-changing levels of investment and technical expertise.
Read more:
Streaming Media: Netflix’s System Architecture Represents A Rare Competitive Edge
The Verge has an excellent long read and explainer into Netflix’s Open Connect investment from 2021
Elaine Low’s piece for the Ankler on job listings in Hollywood (subscription required).
Thinkbox shares its new trends in TV
Thinkbox, who represent commercial TV in the UK, held a TV trends event last week. The whole presentation is worth watching (only 35 minutes, not even a commercial broadcast hour which does feel like an oversight), plus the slide decks are available online at the same link above.
A few notable insights:
The TV set remains an important viewing device for high quality content, and of the time spent watching, 71% is linear TV, 9% is BVOD (video on demand content from broadcasters such as All4 or iPlayer), 15% is SVOD (subscription VOD services like Netflix)
Video on demand is driving increased viewing of entertainment, drama and film, while linear is still dominated by news, sport, documentaries and current affairs
Viewing behaviours seem to have stabilised somewhat across all devices - yes the shift to VOD from linear continues, and there has been a slight downturn in the number of SVOD subscriptions
TikTok & YouTube viewing isn’t necessarily cannibalising broadcaster/SVOD viewing, rather appears to be in addition to long form broadcaster/SVOD content. In other words, we are spending more time watching content overall, rather than substituting TikTok/YouTube for broadcaster/SVOD content.
Having said that, when you look at the difference in the top 30 titles in the UK population overall and the 16 - 34 demo, you do see a clear difference. Overall, UK produced content from the broadcasters dominates the top 20 titles, with only three titles from the SVODs making the cut (Clarkson’s Farm from Amazon and The Night Agent & Beckham from Netflix). In comparison, for the 16 - 34s age group, only eight of the top 30 titles are from UK broadcasters.
Other interesting pieces
The new UK tax relief explained by film tax credit expert Sam Ampah (who has also written a helpful guide on how it works) - listen to Sam on the Filmmakers’ podcast
UK trade body Pact has issued a set of principles for using AI in production. They include recommendations such as respecting copyright and valuing human creativity. Read more, subscription required.
Variety VIP+ has a piece exploring the streaming market in Africa, describing it as the “the continent where Netflix has real competition”. The market leader is Showmax, which has 20m subscribers. Showmax’s parent company Multichoice spent $1bn on original locally produced content in the last year alone, in comparison with Netflix, who spent $175m since 2016 on African-produced content (and this week, Canal+ upped its bid to buy Multichoice to $1.8bn). Considering Africa is the fastest growing continent in the world, on paper should be a place for streamers to focus on especially as subscriptions are maturing in other territories. However, broadband penetration is low (less than 10%) and there are complexities around payments and access, making things less than straight forward. Read more subscription required
Variety also has a piece on The Traitors; the differences in the UK/Australia and US formats, and the benefits (and limitations) of blending reality stars with unknown contributors Read more
Matt Belloni and Lucas Shaw of Bloomberg discuss the changes for film at Netflix and Disney - listen to the Puck podcast here
BBC Studios on the hunt for a new production chief (possibly titled chief creative officer) - names in the mix according to Broadcast are Nat Geo’s Tom McDonald, STV Studios boss David Mortimer, ITV Studios’ Angela Jain and MGM’s Dom Bird. Read more subscription required.
Crimecon - for the crime producers out there, Crimecon says it’s a weekend long event in Nashville dedicated to crime including TV series and podcasts. Read more.