Evan Shapiro’s media universe maps are legendary, and as part of our upcoming series of Special Reports on the Emerging Smart TV Ecosystem he’s created one outlining that corner of the world for us.
Over the past year, I have embarked on a painstaking avocation-turned-vocation of mapping the universe of media and entertainment. It’s painstaking for a few reasons: first, mapping an ecosystem as fast-changing as media means you are literally never done; second, there are no agreed upon metrics for the proportionality or range of these maps, so no matter how often I update them, someone is always dissatisfied; third, within each region of my original Media Universe Map, if you zoom in, there is always another map to make.
Hence, at the request of my friends at TV[R]EV, my newest map: The CTVerse.
This is a zoom-in on a region of the Media Universe I have visited often of late, and one in which anyone in TV, film, gaming, and advertising will be spending an increasing share of their time, over the coming years of their careers – at least if they want those careers to be successful.
As has been detailed elsewhere in this publication, a large portion of TV viewing is now on Connected TVs (CTVs) and Connected TV Devices, and audiences will continue to migrate to these platforms rapidly over the next five years. In fact, according to Nielsen’s latest Total Audience Report, the ONLY TV viewing devices that saw an increase in usage in 2020 were internet Connected TV Devices (connected or “smart” TVs and dongles).
When I was asked to map the CTV Universe, I assumed it would simply require an update of my existing Media Universe Map – just add some planets for LG, VIZIO, etc., and call it a day.
This did not turn out to be the case.
When you embark on a journey to the CTV world, you find yourself immersed in an expansive and global realm, involving not only a host of manufacturers in China, but also local TV sellers in every region on earth, controlled by myriad regulations, countless local streamers in every local language, and an emerging, heated war, among the biggest companies in media and tech, for control of the next great entertainment frontier – the CTV Operating System.
Unlike smart phones, which emerged suddenly as a whole new category of consumer electronics, with brand-new operating systems in place (even before there was content for them), the emergence of “Smart TVs” has been a slow, plodding evolution, invented in fits and starts by companies like early innovators Philips and LGE, furthered by Original Equipment Manufacturers (OEMs), then invaded by Connected Device Makers, becoming a mishmash of Operating Systems for TVs, different Operating Systems for streaming on TVs, dongles and consoles, which circumnavigate CTV streaming OS by providing streaming OS externally. In short, as described elsewhere in this publication: it’s a fucking mess. And it’s about to get messier.
In creating the CTVerse Map, I hoped to visualize the following:
- The current CTV ecosystem is chaotic – for consumers, programmers, and advertisers
- Despite conventional wisdom, there are no truly dominant players in the device space. Yes, Samsung sells the most TVs – yet they still only command 14% of the worldwide market. Sure, Roku and Fire TV are HUGE, in the US. Yet both are relatively small when you truly zoom out worldwide
- A relatively small handful of content providers wield an enormous amount of leverage
- But they are not the only story – the regional programmers shown on the map are ONLYthe largest in their countries, and just a fraction of the real options
- There is a looming battle between content streamers who also make CTV devices (e.g., Amazon and Google), and CTV device makers who are also now programming channels (e.g., Roku, VIZIO, Samsung), game console makers with large install bases AND access to capital and IP (e.g., Sony and Microsoft)
- Globally, there is an enormous underserved and potentially lucrative market of Connected TVs called ‘Other’ – currently representing 42% of the worldwide CTV market
- The next big, global war for eyeballs will actually be for dominance of the crucially under-discussed and seemingly unsexy part of the ecosystem: The CTV Operating System.
With all that in mind, I constructed the map, and sized the various players on it, using a combination of three factors:
- Install Base: The number of users the service, system, or device maker serves
- Business Model: CTV OEM (including dongles, consoles, and TVs), CTV OS, SVODS, AVOD
- Power: An approximate representation of the leverage each player has in the market and firepower they have for the coming battles.
In short, the CTVerse is designed as a Game of Thrones-y heat map of power. Important facts to consider when consuming the map:
- Nearly all conversations about the CTV business focus on the US only. Stop doing that. The vast majority of CTVs are manufactured outside the US. There are literally billions of people who don’t live here, most of whom watch TV. The biggest area of growth for nearly all the players on this map will come from regions not named America.
- Netflix and Disney have the power to make or break a new device maker or operating system. Netflix refuses to grant access to their app to OEMs who make fewer than one million units per year. Disney has a similarly rigorous qualifying process to grant access to their apps. Imagine trying to sell a device that does NOT have those two services right now. Prime is nearly at this level of power and HBOMax is headed in that direction with international rollout of their SVOD, but no one commands near the leverage of the Flix and The Mouse.
- That said, Amazon has many powerful fingers in many leverage pies, (CTVs, AVOD, SVOD and consumer electronic sales), and uses them to poke everyone else in the eyes.
- Today’s biggest players may not be tomorrow’s, and very few companies are able to dictate their own fates. Five years ago, Google Chromecast was the #2 CTV device maker in the US with 20% market share. By 2020, they had been replaced by Amazon’s Fire, who combined with Roku to control 75% of CTV Devices in the US. TCL had 0% market share of Smart TVs in the US in 2017. They are now at 15% and got there by licensing TV Operating Systems from Roku and Google. In 2017, Hisense had 0% share of CTVs in the US. They now have 5%, and similarly got there by licensing CTV OS from Roku and Android. Recently though, Hisense has focused on their own OS, Vidaa, demonstrating a move away from partnering and towards battling for their own share of the OS market.
- Samsung is huge. But they are not growing. Samsung has a 32% share of Smart TVs sold in the US – basically identical to what they had in 2017. However, their share of Connected TV devices sold worldwide has dropped from 23% in 2015 to approximately 14% in 2020. They have begun to move into other areas of revenue, such as licensing their CTV OS, Tizen, to other OEMs and TV brands, but have met with resistance since they are seen a humongous competitor to these companies. Like Roku, Samsung has launched their own programming platform, Samsung TV Plus, as a way to generate advertising dollars.
- For all the talk about Roku and Fire TV, LG is the second largest CTV company on earth, and is incredibly powerful outside the US. They too have launched a programming platform for ad sales, and are also licensing their CTV OS, WebOS, to smaller OEMs and CTV brands – and have met with similar hesitation as Samsung, for the same reason.
- TV sales are entirely about price, not features. As such, being an OEM – for both TVs and dongles – is a very low margin business. That is why Samsung, VIZIO, LG, and Roku have all moved fastly into the FAST business. Data and ad sales are the two most important areas of revenue growth for them. This is also why OEMs worldwide are exploring new types of partnerships with CTV OS Platforms. Amazon is reportedly paying $10 per unit for OEMs to use their Fire OS. Google has reportedly done the same for Android TV.
- Think about that for a second – 250 million TVs sold per year. And, as the CTVerse Map shows, 42% (100m) do not have a locked-in TV OS. Who has the resources to pay for access to those screens, even if it means losing money per transaction for years? Trillion-dollar tech companies, whose primary businesses are NOT TV sales, but rather access to data and eyeballs.)
- Amazon has two services that wield nearly as much programming leverage as Netflix and Disney: Prime and Twitch. Google has one in YouTube. Both these Trillion Dollar Death Stars also have other powerful leverage over OEMs – search and shopping – which they use to “convince” manufacturers to use their OS.
- Apple has ceded the CTV battle to others – at least for now. Their high-priced devices did not meet the market need. However, between AppleTV+, their OS and their unlimited cash, do NOT count Apple out.
- If anyone out there knows how many paying subscribers AppleTV+ and Peacock have, please submit them to my anonymous tip-line. The Pentagon can now tell us about Area 51, yet these numbers are still Top Secret intel.
- Roku is the darling of the US CTV market. They control more than 35% of the CTV device market, and about 20% of TV streaming in the US. BUT… they are nearly nonexistent outside the US, and do not seem able to gain a toehold internationally. The big reason for this: Brightscript, Roku’s application development language, which is quite complicated and relatively expensive to develop for. If you are a major content programmer in Europe, Asia, South America, or Africa, with relatively full distribution to CTVs such as Samsung, LG, Fire TV, or Chromecast/Android, there is little incentive to create an expensive and difficult-to-design app for Roku who commands a very small (and shrinking) share of viewing. And there are no indications that Roku is open to adapting Brightscript to be more developer-friendly in other territories. In fact, just the opposite.
- Those big four – Samsung, LG, Amazon, and Google – have mountains of cash on hand to spend or lose reaching scale. THIS is why Roku is going all-in on the Roku Channel, original programming, and ad sales in the US: It’s the best place for them to score growth in the next few years.
- Netflix, Disney, and Amazon have enormous leverage as programmers worldwide. BUT in each market, the leading LOCAL TV networks (remember those) retain tremendous loyalty as well as regulatory support, and the leading LOCAL SVOD/AVODs hold significant leverage as well. There, they can draft off kingmakers Netflix and Disney to determine which CTV players win in their region.
- Both Sony and Microsoft hold not insubstantial places in the CTV markets, with products not primarily intended to be CTVs, for now.
So, with that context, here are my Top Ten predictions for where the CTVerse Map will take us in the next five years:
- THE NEXT BIG BATTLE IS NOT OVER SUBSCRIBERS, TVS OR DONGLES… IT’S OVER OS.
- The next big stage of growth in ads worldwide will be CTVs. Control the operating systems and you can control the ad dollars. Google and Amazon are two of the three biggest ad platforms on earth. They have major CTV OS platforms and billions to spend. They both WILL go all-in on CTV OS.
- Apple, Microsoft, Facebook (not on the map… yet), Tencent, and Alibaba will all also likely get into the OS game, and will improve the ecosystem for the combination of TV and gaming. With dollars shifting to CTVs quickly – and 42% of the ecosystem at play – there are a LOT of spoils for this war. Watch for major acquisitions, deals, and tricks from these seven Trillion Dollar Death Stars in the coming years. However, as Hisense has proven of late, relationships with smaller OEMs and CTV brands are remarkably transactional in nature. Which is why…
- Somebody is gonna buy Roku. They have had several amazing years in a row. I can also argue that their CTV interface is the most user-friendly in the market. But that differentiator is disappearing quickly. And the OS War will have many fronts, especially overseas, where Roku is not fortified. The war will take tens of billions of dollars to fight, and, as highlighted above, these are dollars Roku seems uninterested (at least for now) in spending to adapt their developer language. With Microsoft, Apple and Facebook gearing up to fight for the world’s living rooms against Amazon and Google, it is just a matter of time until one of these companies (or the recently rumored Comcast, or sleeping SVOD giant Tencent) is going plunk down enough of a premium to make it worth Roku’s while.
- Samsung will have some decisions to make in all this context. It is unlikely regulators would allow them to buy Roku. Nor do they seem interested in such a move. BUT, buying a content company like NBCU, Lionsgate, ViacomCBS, or AMCN would be a game-changer for them and help them flip the leverage switch the other way. Don’t be surprised if they do.
- Consolidation will also rumble through programming as well. I cannot foresee a world five years from now where ViacomCBS, Lionsgate, JIO, Fubo, DAZN, AMCN, Crown, or Univision all remain independent companies. I am not saying all of them will be acquired in the next sixty months. I am also not not saying it.
- With oligarchical, monopolistic companies like Google and Amazon focusing their photon lasers on TV OS, many smaller OEMs may look to more independent, less- threatening partners for their OS. While I don’t see a global CTV alliance forming, I do believe the industry will seek out OS providers NOT connected to programmers or Death Stars (trillion-dollar tech companies), to find user-friendly platforms designed for the next generation of TV viewing. Two such examples are Germany-based Netrange and Foxxum. While neither have the install base or market cap of Amazon, Roku or even Fubo, both are currently providing elegant, intuitive, white-label CTV OS to numerous OEMs in hundreds of territories. Foxxum’s OS and interface are a true advancement in UI and UX, which many TV brands outside the US are currently using as a differentiator, giving the company a market share in Europe that is below only LG and Samsung. If Hisense (5% of CTVs worldwide) or TCL (5% of CTVs worldwide) decided to make them their OS vs Android or Roku, it would give them leverage in the market, while de- levering direct competitors. If BOTH companies went with Foxxum, Netrange or some other small white-label OS, it would change the worldwide OS War overnight. Now, imagine if those two companies plus 20% of ‘OTHER’ in the CTVerse chose to align with a small white-label OS – if just to stave off Google and Amazon. Will it happen? I can’t say. But IF it does…
- No one company has more than 14% of the TV OS market right now. There is a ton of upside for that changing. For programmers, it means fewer app updates. For advertisers it means more reliable data and a far easier system to generate the kind of reach they seek. For consumers, it means substantially easier translation of services from one location to the next. In my humble opinion, within the next five years, at least one company, and likely two companies, will consolidate share on this scale. One path is via acquisitions. The other is coalescing smaller players and the ‘OTHER,’ either by paying them, or by providing a better solution. The downside: fewer, rich, powerful companies (aka Trillion Dollar Death Stars) could wind up with a controlling stake in CTV OS the way they do in digital advertising. But that has not seemed to be problem in the past.
- The most likely outcome is that Google, Amazon, and Samsung will each find ways to get there. And in doing so, they might improve the CTV experience for all. My hope, however, is that neither Amazon nor Google accomplish it, as they both have far too much power already.
- Whatever your opinion of the CTVerse Map or my previous predictions, know that this is 100% true: The CTV Universe is about to see a frenzied level of adoption and evolution. As Generation Z moves out on their own by the millions every year, many will be buying their first new TV. I have studied this generation enough to know they do not do anything like the generations before them. They are in the market for one thing: Change. New brands, new platforms, and new ways of consuming content will find fertile ground with these new heads of households. So be prepared for updates to this map often.
In fact, I will be unveiling a far more detailed version of the CTVerse in a session at Techcrunch Disrupt this fall. Until then, if you want a high-res copy of the current CTVerse you can find it here. If you want a high-res copy of my newly revised Media Universe Map, you can find it here.
If you have thoughts or suggestions for either map, please hit me up at firstname.lastname@example.org