“The growth in streaming, coupled with the movement of eyeballs to social platforms, is creating a talent arms race among media, entertainment, telecommunications, technology, and any other company involved in the business of making and delivering content,” says Henry Topping, a Korn Ferry senior client partner who specializes in media, entertainment, and sports. “The competitive landscape is rapidly tilting in favor of organizations that can leverage data to develop new direct-to-consumer products.”
Topping says success in the future of digital media will hinge on organizations being able to engage and keep consumers on their platforms. For traditional media companies, that is no longer simply a creative decision. It is a complex equation involving programming, marketing, data and analytics, and distribution.
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Netflix may grab headlines for all the money it spends on series like Stranger Things and Orange Is the New Black, but its main competitive advantage comes from building its business around a content-rich subscription direct-to-consumer model. It invests heavily in its product—the design, the interface, turning data into meaningful insights—all with the goal of making it as easy to watch as much Netflix programming as possible. And it has obviously been successful, with nearly 140 million streaming subscribers worldwide who watch one billion hours of its content.
But operating on that scale requires a mindset shift from looking for mass hits to collecting as much content as possible to serve a broad swath of consumer interests. “Whenever someone tells me we have too much content, it’s generally because they have not yet worked direct-to-consumer online,” says Robert Kyncl, YouTube’s chief business officer. “Working at scale is completely different than working at a bespoke network.” And Kyncl should know—more than 1.9 billion logged-in users visit YouTube monthly. They watch more than one billion hours of video daily and upload roughly 400 hours of new video every minute. By comparison, most of the big names in traditional firms, such as CBS and ESPN, have a far smaller audience of subscribers for streaming services.
“Right now, operators of the ‘skinny bundle’ and traditional media companies’ direct-to-consumer models are still challenged in achieving the scale needed to substantiate it,” says Brian Angiolet, senior vice president and chief content officer at Verizon. “The underlying economics are still more supportive of the old way.”
Angiolet says that for new entrants and traditional companies, marketing and distribution talent will be critical to achieving the scale needed for these new offerings. He says a broader marketing skill set that includes knowing how to build customer relationships and apply key data analysis and product bundling is needed to manage the brass tacks of daily sales and subscriber turnover. Indeed, for any media company building up its business today that can seem monumental, considering how quickly people now sign up for one service with a hot show—and then drop it for another service with a different new series.
For their part, tech companies, unlike most traditional media firms, have built their culture and structure to deal with this rapid-fire model on a large scale, responding quickly to consumer demand. Another big plus: they have reams of data on what people are watching on their platforms, when, and for how long. Big traditional media companies, meanwhile, are left to make decisions about what content to produce through a combination of ratings, focus groups, and “gut feel.” “Our approach is data informed and very iterative,” says Kyncl. “Sometimes it leads to unconventional answers.”
To their credit, it isn’t as if big media hasn’t been trying to change—mostly through some impressively sized mergers. In the last two years alone, AT&T spent $80 billion to buy Time Warner while Disney picked up 21st Century Fox for $70 billion, among others. In its case, Disney plans to go head-to-head with Netflix by bundling Fox content with Pixar, Marvel, and other content into a new streaming service. AT&T’s Time Warner deal is driven more by the philosophy of vertical integration, with content creation, distribution, and platform converging to deliver an exclusive user experience.
Either way, the underlying motive in these deals is to get more informed about what is winning or not in the digital battle for eyeballs. “That’s what these deals are all about, and getting the talent and organizational design right for the newly combined assets is mission critical,” Topping says.