The Year Ahead for TV & Video
Three Prognostications for 2018
Belated Happy New Year, TDG readers!
As we all contemplate our New Year’s resolutions, we thought we’d share a few of our predictions for the TV industry in 2018.
1. Peak Netflix
Netflix has dominated the SVOD landscape for several years. Its quarterly results (and stock price) have become a de facto bellwether for the entire broadband video industry, and not without reason.
Domination never lasts, however. Atari so dominated the early days of home video gaming that kids in my neighborhood used to invite each other over to “play Atari” even if they owned another brand of videogame. When the iPad first came out, all the smart analysts assured each other that there was no such thing as a tablet market; there was only an iPad market.
Netflix has certainly had a good run, and its full-year 2018 results will likely be solid, especially in the international realm. At the same time, however, competition for subscribers is bound to intensify.
Disney is the most likely instigator at this point, seeing as the folks from Burbank have already announced their intentions to launch ESPN+ in the spring 2018, and are acquiring key Fox assets including a controlling interest in Hulu.
Amazon is also hot on the heels of Netflix, powered by the massive installed base of Amazon Prime (which could hit 100 million members in 2018). As we’ve discussed previously, Jeff Bezos and company are likely to expand their streaming offerings in 2018, whether via a free skinny bundle as part of Prime or simply an ever-expanding lineup of third party upsell offerings. Either way, consumers are being exposed to additional (i.e., non-Netflix) streaming options at scale.
Bottom line: Netflix will almost certainly be bigger in absolute terms a year from now, but it’s brief quasi-monopoly status in the US general public’s mind will come to a close in the coming year.
2 vMVPDs Gain Traction
Broadband pay-TV services (i.e., vMVPDs) like Sling TV and DirecTV Now are certainly not new at this point. They have, however, been stuck out on the margins of the pay-TV ecosystem, lacking both the subscriber counts and cultural relevance to cross the chasm into the mainstream. That will start to change in 2018.
As we discuss in our new report on The Rise of the Virtual Pay-TV Provider – Analysis and Forecast, the vMVPD market is very real, if not quite the El Dorado some in the industry might wish. A few events are likely to make this much more apparent in 2018.
First, the aforementioned Disney acquisition of Hulu could give a huge shot in the arm to the so-far underwhelming launch of Hulu with Live TV. Whether via constant promotion on ESPN or the exclusive rights to stream Star Wars, Disney has an awful lot of promotional arrows in the quiver.
Second, existing players like DirecTV Now and YouTube TV have had a year to learn and resolve issues with their offerings, and we expect both services to evolve and improve at a rapid clip in 2018. Online services inherently have a faster cycle time than anything one sees on the legacy pay-TV side, and this compounding effect will start paying dividends soon.
Third, Apple remains a wild card in the space. Even though a direct assault on the vMVPD market seems somewhat unlikely, Apple has the ability to influence the space. Just as Apple (finally) put the Amazon Instant Video app on Apple TV in 2017, we expect vMVPD services to become more visible in the Apple ecosystem in 2018, helping the whole category gain credibility with mainstream consumers.
3. VR Remains a Non-Event
Some readers may still be under the mistaken impression that we at TDG are shameless cheerleaders for all things broadband and futuristic. Perish the thought! One telling example of our skepticism and sanity has been our consistent view that VR is going to take a long time to gestate among gamers and other early adopters before it’s ready for prime time.
We expect this long game will continue to play out in 2018, with VR efforts at the Super Bowl and Winter Olympics still firmly in the “cool demo” sideshow stage. At the same time, VR naysayers need to be careful, as standalone VR headsets (i.e., no PC or smartphone required) are likely to hit the market in 2018, paving the way for low-cost VR gaming that will eventually create a sustainable VR ecosystem that includes video content.
There is an ebb and flow to technological and industry change. The big trends in the TV ecosystem (the shift to broadband, the shift to direct-to-consumer models, the continued rise of mobile) are all well established and will continue grinding upward in the New Year. Underneath those megatrends, however, the competitive seas are swirling and the only safe course is to continue to expect the unexpected.
Stick with TDG and stay ahead of the curve.
Joel Espelien is a Senior Advisor for TDG and serves as an advisor and Board Member to the video ecosystem and technology companies. He lives near Seattle, WA.