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The Year Ahead. Our Fearless Predictions For 2019, Part 1 of 2

It’s that time of year again, time for us to get out our crystal balls and predict the future. Before you laugh, remember that we were spot on last year about the beginning of the end of Facebook.

So with that in mind, here are the first six of our 2019’s predictions, look for Part 2 next week.

1. The Further (And Faster) Decline of Facebook

While nobody likes Facebook anymore, it’s not going to implode overnight.

But wow, do people ever not like it.

And no, Watch is not going to help, even though they got their act together enough to run an ad for one of their shows during ABC’s New Years Eve countdown show. (Though we’re thinking that a goodly number of people who saw that ad wondered if the Facebook Watch kept time as well as the Apple Watch.)

Mostly it just seems like people are done with Facebook. In North America and Europe, anyway. They’re spending less time on it, using it less and it’s feeling more and more like an obligation (“how else am I going to keep up with my extended family?”) than something people are excited to check in on and use.

And then there’s the fact that younger Gen Zers are avoiding “Mombook” completely.

Don’t write Facebook the Company off though: they still own Instagram and Whatsapp, both of which have a fair bit of life left in them.

Still, the effects of all of Facebook’s numerous privacy violations and the general sense that they could care fuck-all for their users (not to mention all the lying it turns out they’ve been doing) are out there and the new conventional wisdom is that they’re more evil than clueless, so the future—long term and short term—does not bode well for them at all.

PRO TIP: Unless you’re a DTC brand selling something sort of trendy (e.g. Away suitcases) put your ad dollars elsewhere.

2. vMVPDs Continue To Boom

vMVPDs grew from around 4 million subscribers in early 2018 to around 7.5 million by the end of the year. We expect that growth rate to continue and then some. vMVPDs are basically the promise of TV Everywhere fulfilled—the ability to watch linear TV on any and every device, to stop and be able to pick up where you left off on any device, and to access your cloud-based DVR and VOD library from any device.

In other words, everything Netflix has been offering since 2011. 

They’re not skinny bundles anymore either, they’re more like mesomorph bundles with 80+ channels including local broadcasters and RSNs. And if the problem people had with traditional MVPD bundles is that they offered “Kmart service for Nordstrom prices” with confusing, outdated interfaces and confusing, outdated pricing, vMVPDs offer “Nordstrom service for Kmart prices”—well-designed interfaces, simple month-to-month pricing plans and artificially low prices.

Which is why we think they will continue to grow even more rapidly in 2019.

“You mean I get this beautiful interface on my Roku, all the channels I want, no yearly contract—all for half of what I’m paying now?”

Kind of hard to turn that down, even if you’re not an early adopter type.

One development we do see is that skinny bundle options will return for people who are doubling down on the new “Flixes” but still want a way to watch news and sports. That bodes well for the vMVPDs that offer that and not so well for those that don’t (Philo.)

PRO TIP: We’re feeling good about services like Hulu Live TV, YouTube TV and FuboTV that have put time and money into their interfaces and into getting local broadcasters and RSNs on board. That sort of mesomorph bundle is what’s going to bring all those not-so-early adopters on board, because they’ll be getting the same programs only for less money and with a better UI. They’ll tell their friends that they’ve “cut the cord” but we’ll know they really haven’t, they’ve just cord-shifted. (You knew we were going to throw that in there at some point.)

3. Netflix and Amazon take on movie studios

This took on a life of its own this past month, with Netflix promoting Roma on both the app and in theaters, and the brouhaha about the number of viewers who tuned in to see the Sandra Bullock movie Bird Box. (Suffice it to say there was more buzz for Bird Box than for any movie currently in theaters, regardless of how many people actually saw it.)

Point being that Netflix and, to a lesser extent, Amazon, are tapping into the fact that people are kind of done with movie theaters and are happy to watch the latest releases at home on their own big screen TVs.

That gives both companies the opportunity to start nosing out bigger studios in terms of getting mainstream talent and it gives Netflix a way to reinvent itself at a moment when it’s going to see a lot of competition in terms of original series at the same time almost all of its very popular library content goes walking out the door.

The theater chains and studios really brought this upon themselves though: my screen at home may not be all that big, but at least no one’s head is blocking my view, and I don’t need to pony up $20 for a tub of stale popcorn and a bottle of Dasani water. And let’s be real: Bird Box owes a lot of its buzz to the fact that there was nothing in theaters this month that anyone was all that excited about seeing. AKA, there’s a limit to how many superhero movies any one human can watch.

PRO TIP: Look for the movie industry to fight back tooth and nail—this is a battle for survival for them—so watch them try and strike similar deals via Disney+, Warnerflix, Hulu and Appleflix, and to make the Oscars a focal point of all this controversy. It’s probably too late though: viewers aren’t really seeing much of a difference between movies and TV shows, both in terms of quality and in terms of who is acting in them and directing them, so why should where they actually watch them matter. That, and don’t discount the appeal of a 96-inch 4K screen.

4. The FASTS take off even faster

FASTS—Free Ad-Supported Streaming TV Services like the Roku Channel and TubiTV were the Cinderella story of 2018: no one expected them to take off as quickly as they did. But with their reduced ad loads and emphasis on hit movies from the 80s and 90s, they seem to have found an untapped niche. (The continued popularity of older library content is yet another reason we worry about that $15 billion everyone is spending on originals.)

We expect the FASTS to enjoy even more success this year as (a) word of mouth grows and (b) more people buy Rokus, Fire TVs, smart TVs and similar devices in order to watch all those Flixes. The FASTS have been very smart about promoting themselves on those devices (especially, for obvious reasons, the Roku Channel) and as viewers’ monthly OTT bills start aggressively heading north, the FASTS provide a free alternative, which many will find appealing.

PRO TIP: Advertising on FASTS is almost all addressable, so if you have good first party data on your customers and you’re looking to move product, then the FASTS are an excellent bet. Figuring out OTT advertising isn’t easy (look for the TVREV special report later this month) but right now it’s a great and relatively low cost way to reach your target audience with creative units that are a lot more impactful than banner ads.

5. As the new Flixes launch, churning becomes the norm and Disney takes an early lead

This is the year that the OTT landscape changes permanently and goes mainstream. Three new billion dollar services—Disney+, “Warnerflix” and “Appleflix” are due to launch, pumping as much as $10 billion worth of new original programming into the ecosystem and taking on the existing players, Netflix, Amazon and Hulu. We expect that there will be very attractive introductory deals on the Disney and Warner services, and that many viewers who already have SVOD subscriptions will take advantage of them.

With all these new choices and new monthly charges, there will also be a great deal of churn, as the following conversation plays out in the heads of millions of viewers : “Wow, my TV bill is bigger now than it ever was. I should just get rid of some of these services for a few months, so long as I’m not watching them. It’s not like there’s any sort of penalty and I can always resubscribe when [INSERT NAME OF SHOW HERE] comes back on in a few months.”

So look for a lot of churn. Especially once those introductory deals expire.

On a similar note, we expect Disney+ to be the most successful of all the newcomers. It’s got the Disney name, a somewhat differentiated product offering (family-friendly entertainment) and, most important, it’s got a wide range of series people are already familiar with, everything from superheroes to a series based on High School Musical.

And that’s the thing: people like “Comfort Food TV.” They like watching shows that are familiar because there’s a lot less risk involved and because they know their friends and family have likely seen them or know about them too. (We’ll get to the risk with all the new originals in part 2.)

But Disney comes into this battle with a huge advantage, thanks to how familiar so much of their programming already is, and how much of it they actually have. It’s also much easier to promote shows that are known quantities—rather than trying to explain to viewers what the show is about, all you need to do is let them know it’s coming and when. We suspect that’s going to be a huge advantage for Disney this year.

PRO TIP: Look for someone—likely a device manufacturer like Roku—to start bundling the various Flixes together, maybe even with a vMVPD. So that in return for a full year or even two-year commitment, viewers get the equivalent of a 20% discount. And the Flixes get a lot less churn.

6. Apple’s TV programming bombs

While we’re thinking good thoughts about Disney+ and all three flavors of Warner (especially if they keep the HBO brand on it,) we’re a lot less hopeful about Apple TV.

Right now it looks like Apple’s plan is to create an aggregator app, something similar to Amazon Channels, that allows viewers to subscribe to multiple SVOD apps and manage their subscriptions and payments from one easy-to-find location.

That’s a smart idea, as people trust Apple and likely already have their credit card info stored from their iTunes account.

So our problem isn’t with the aggregator app, it’s with that billion dollars plus worth of programming that Apple is commissioning from major stars like Oprah Winfrey, Steven Spielberg and Jennifer Aniston.

Because right now, it looks like the only way to watch it on an actual TV set (and remember, over 80% of long-form OTT programming is watched on an actual TV set) will be via the Apple TV device.

Which is a $179 investment that offers no clear benefits over a Roku or Amazon Fire TV stick, both of which sell for $150 less. That’s something consumers have most definitely taken notice of, as Apple TV lags way behind both Roku and Amazon in terms of both sales and installs.

That means there aren’t going to be a whole lot of people who can watch Apple’s new shows. Nor, it seems will there be much incentive for anyone to do so. There have been reports, like this one in the Wall Street Journal, that Apple’s programs are “expensive NBC,” e.g., mainstream and fairly tame. And in a year where you can keep your Roku and watch $15 billion worth or original programming (and thousands of hours worth of popular reruns) on the other five major SVOD services, that’s not a very hopeful note.

PRO TIP: If Apple does the unexpected and launches apps for Amazon and Roku, then there’s a much better chance their TV app will succeed. Though it still raises the question of what exactly the Apple TV app will look like. Will it be sort of like Showtime or HBO only without all the movies? Or something else? We’ll know soon enough, and given that Apple is a smart company, things may change dramatically in the interim.

 

That’s plenty to read for one day, look for Part 2 tomorrow.