Did you feel the earthquake that hit the television business today? You should . . .
I’ve long used the geologic concept of plate tectonics as a metaphor for the television business. Like the earth’s giant crustal plates that seem immovable in the face of enormous geophysical pressures, the television business has resisted the forces of technology and consumers’ embrace of streaming. But just as the plates eventually shift — often in cataclysmic earthquakes — the TV business has just yielded to the unrelenting pressures of change.
Witness three manifestations of this rupture:
- Disney is taking full operational control of Hulu, following its acquisition of Fox and an agreement with NBCU, the other co-owner of the streaming service. Disney CEO Bob Iger called Hulu the third prong in the company’s direct-to-consumer strategy. Hulu long appeared to be nothing more than a curious science experiment for these broadcasters. And it seemed as likely to be smothered in the cradle, if it became too threatening to the traditional TV model, as become a successful new entertainment service.
- Disney’s Iger further elaborated on this strategy at the MoffetNathanson Media & Communications Summit this morning. While saying that the cable bundle was still important, he diplomatically noted that the 150-channel bundle doesn’t look as appealing as it used to in the eyes of consumers. He continued to explain that Disney is not purposely trying to damage the bundle but does have to come to grips with reality that this trend can’t be stopped from happening. Translation: “Winter is coming. Time to prepare our Valyrian steel swords.”
- Speaking of HBO, AT&T’s WarnerMedia unit also announced today a major shift in its distribution strategy: It will run episodes of its popular shows first on its streaming service expected to launch this fall, ahead of when the episodes are available on cable. Cable’s fate is following that of House Baratheon.
Nothing short of a magnitude 8.0 earthquake could cause the San Andreas-scale crack in the tight, interdependent relationship between content owners and the cable, satellite, and fiber TV distributors that the moves of these two leading content companies reveal.
But this is just the beginning, as this seismic event sets off a series of even greater disruptions:
- Cord cutting grows from a trickle to a torrent. Very few consumers have completely canceled their traditional TV service: The vast majority added streaming subscriptions while merely paring back their bundle. Up to this point, streaming didn’t offer all the content that consumers needed in order to satisfy their video entertainment appetite, but these moves will at last give consumers the confidence to drop traditional TV services.
- TV shifts from mass reach to mass precision. Streaming services know at least the household watching, and may know the individual, depending on their profile management. So no need for advertisers to buy spots reaching adults 25–54 when they want households that own dogs. We will see the fulfillment of P&G CMO Marc Pritchard’s dream of “mass reach with one-to-one precision.”
- Mass marketing thinking dies — finally. For all the talk of data and targeting out of one side of marketers’ mouths, out of the other side they bemoaned the lack of “scale” of over-the-top (OTT) — i.e., it wasn’t “mass” enough. Subconsciously, marketers have remained slaves to the idea that they need to get their brand in front of everyone. That mindset will shift to doing the harder work of defining multiple demographic, psychographic, behavioral, or emotional segments that are truly brand prospects, then aiming for 100% reach against each, without regard to the reach against the total population.
What doesn’t get disrupted: the power and importance of video at the heart of every brand’s advertising strategy.