This week’s Future of TV Briefing recaps the first half of 2022 for the TV, streaming and digital video industry and what it may portend for the second half of the year.
The key hits:
- Netflix’s subscriber loss has been the lowlight of the year so far.
- But Netflix’s and Disney+’s announced forays into advertising highlighted the streaming ad market’s ascendance.
- TV ad measurement has been a mixed bag.
- Short-form video platforms are being pushed to share revenue.
- Programming costs are under the microscope, which may not be entirely bad news for producers.
Downturn, unfortunately, would be an appropriate description to summarize the first half of 2022 for the TV, streaming and digital video industry. Then again, upturn — or at least upheaval — would also apply.
While Netflix’s subscriber shedding signaled the streaming industry approaching a rough patch and TV advertising’s measurement shift has similarly slowed, Netflix’s and Disney+’s announced forays into the advertising market and Warner Bros. Discovery’s completed merger is turning up the competition. And then TikTok’s rollout of a revenue-sharing program and YouTube’s addition of ads to Shorts are upping the ante in the short-form video space. Then yet again, the economic downturn could introduce enough friction into the overall ad market as well as streaming services’ programming budgets to slow these upturns — or to turn the TV, streaming and digital video market into an all-out fight.
Two years after the streaming surge, the subscriber free-for-all has ebbed a bit. In the case of Netflix, it has ebbed a lot. The dominant subscription-based streamer’s first-quarter subscriber loss and its forecast of an even larger loss in Q2 was the story in the industry in the first half of 2022.
However, Netflix’s competitors haven’t run into such rough ground in getting subscribers. Disney+, for example, accumulated more subscribers than analysts expected in Q1. Meanwhile, the completed merger of Discovery and Warner Bros. sets up for the combined company to combine its respective flagship streamers into an even more formidable competitor.
The second half of 2022 will show whether Netflix is the bellwether for a broader streaming downturn. For its part, Disney has said it expects Disney+’s subscriber growth to accelerate in the second half of the year. But the company made that projection in early May. While inflation and interest rates were already on the rise at that time, the economic headwinds have intensified in the interim and could slow that growth if people reevaluate their streaming budgets to free up money as their costs of living increase. Case in point: the average price of a gallon of gas in the U.S. was $4.47 within a week of Disney making its projection. It has gone up to $4.80, as of this writing.
If Netflix’s subscriber growth struggle was the first half’s low light, then the highlight was the streamer’s announcement that it will add an ad-supported tier, which followed Disney+ making a similar announcement in March. The additions of Netflix and Disney+ stand to make streaming even more attractive to advertisers, which have been moving money to streaming but continue to spend many more ad dollars on traditional TV.
The additions of Netflix and Disney+ to join the likes of NBCUniversal’s Peacock and Disney-owned Hulu in the ad-supported market is set to usher streaming into its broadcast era. On the one hand, the timing may be just right. Cheaper, ad-supported tiers could help the streamers to attract and retain cost-conscious subscribers dealing with the economic downturn. On the other hand, advertisers are also dealing with that downturn, which may make them reticent to risk making bets on newer options or push them to seek out emergent opportunities in order to create competition and bolster their bargaining positions in the event the downturn worsens next year.
TV advertising measurement may not have experienced as many ups and downs so far in 2022 as it did in 2021, but it’s remained a rollercoaster. At the start of the year, the talk centered around which non-Nielsen measurement providers might advertisers and TV networks shift to in this year’s annual upfront negotiations. But that conversation has quieted.
As many of the industry’s measurement experts said last year, shifting to a new measurement system is a slog, and so it has been. Both buyers and sellers continue to kick the tires on various measurement providers and expect to eventually support multiple providers as currency options. But this measurement makeover is currently mired in the messy work of assessing the different measurements and methodologies, establishing baselines from which to set media plans moving forward and integrating the different measurement providers into buyers’ and sellers’ ad tech systems. A silver lining is that this test-and-learn period is likely to prolong into next year and provide some relative stability amid all the surrounding upheaval.
The short-form vertical video market has been on an ever-steepening climb for the past few years. And the slope of TikTok and its copycats Instagram Reels and YouTube Shorts is still steep. But so is the pressure for these platforms to start to share revenue with creators.
This topic came to a head earlier this year when longtime creator and VidCon co-founder Hank Green posted a video calling out the platforms’ creator funds — through which creators receive money as rewards for posting popular videos — for capping the financial upside for creators as creators help to make these platforms even more popular. Since then, TikTok has started a revenue-sharing program called Pulse, though it only launched last month and is limited to the top 4% of videos on the platform. Meanwhile, Instagram and YouTube have talked around adding ad revenue-sharing programs for their short-form video products but have yet to actually announce any.
Despite the limitations of TikTok’s program, if it proves to be lucrative for creators, it could cut into Instagram’s and YouTube’s attempts to undercut the platform. On the other hand, if Pulse has a hard time finding a pulse, it could push TikTok creators even more to seek out revenue opportunities on other platforms, such as by starting YouTube channels or licensing their short-form clips for use on Snapchat.
Programming and production
Given the economic downturn and subscriber growth struggles, some TV network and streaming service owners have begun reining in their programming costs. Warner Bros. Discovery has pulled back on scripted programming for its cable TV networks. And Netflix reportedly plans to debut fewer new original programs.
This downturn, however, has a potential upside for producers. While distributors spending less on shows may put more pressure on producers to get shows sold, the distributors’ newfound asceticism could open them up to more favorable arrangements for producers, such as co-financing deals that enable producers to retain rights to shows and sell them in secondary windows and international markets to revive the back-end revenue that had evaporated as companies like Netflix sought to own shows outright.
What we’ve heard
“As things move toward ad-based, I think you’ll see more [inexpensive, light-hearted programming]. High-priced, premium content which is super dark and scary, it’s harder to sell add time to that stuff.”
— Production executive
How to reel in views on Instagram
As with TikToks and YouTube Shorts, Instagram’s short-form video format Reels is helping creators to quickly amass sizable audiences on the Meta-owned platform. Karen X. Cheng (@karenxcheng), for example, has gained 30,000 followers on Instagram from a single Reel. In an interview during VidCon last month, Cheng provided some pointers on what can make a Reel reel in the views.
Show the behind the scenes
Cheng would post Reels featuring cool shots or beautiful scenes to little fanfare. But then she began to show the creation of those clips first — sometimes using unremarkable iPhone-filmed footage — and the videos captured people’s attention.
Use AR filters
“The algorithm is very, very friendly to AR filters right now,” Cheng said. For this reason, she has started creating her own AR filters. “My first-ever AR filter, that Reel is now the most-viewed Reel on my page,” she said. As of this writing, the video has more than 30 million views.
Numbers to know
$1 million: How much money NBCUniversal secured in upfront ad commitments for Peacock.
75%: Percentage ownership stake of The CW that Nexstar is in talks to acquire.
$3.99: Monthly price for a subscription to Snapchat’s imaginatively named Snapchat+.
73%: Percentage share of subscribers to NBCUniversal’s Peacock who pay for the ad-supported tier.
51%: Percentage share of surveyed advertisers who said they plan their linear TV buys before their connected TV buys.
The long game for short-form video creators’ businesses
Short-form vertical video platforms like TikTok, Instagram Reels and YouTube Shorts have proven to be a shortcut for creators to accumulate large audiences. But what’s the long game for the creators’ businesses?
During VidCon — the digital video industry’s annual gathering — Digiday spoke with creators and industry executives about the current business priorities for creators. Topping the list seems to be diversifying their mix of platforms and revenue streams, including developing income sources outside of video. For more, watch the video above.
What we’ve covered
GroupM’s Bharad Ramesh explains why TV advertising’s measurement shift is only getting started:
- While TV’s measurement shift has stilled on the surface, a lot of work is going on behind the scenes to test providers.
- GroupM has been running tests with more than a dozen clients with an eye toward deciding which to support early next year.
Listen to the latest Digiday Podcast here.
The crypto crisis has created an advertising vacuum:
- Linear TV ad spending across the five largest crypto advertising in the U.S. fell by 64% from February 2022 to May 2022.
- The crypto ad drop follows an ongoing slump for the cryptocurrency market.
Read more about the crypto ad market here.
For many influencers, speaking out on Roe v. Wade is an obvious choice:
- A number of influencers have made TikTok videos about why they’re speaking out on Roe v. Wade.
- The influencers are not concerned about losing brand deals as a result.
Read more about influencers’ Roe v. Wade stances here.
What we’re reading
Netflix sticks to its strategy:
Despite overcoming its historical aversion to advertising, Netflix’s efforts to address its recent subscriber shedding are not drastic enough in the eyes of entertainment industry observers, according to The New York Times.
Mask mandates return to Hollywood productions:
The rising number of COVD-related hospitalizations in Los Angeles County has triggered a clause in the film and TV industry’s health and safety protocols to require cast and crew members to wear masks while indoors, according to Deadline.
Starz set for spinoff:
Lionsgate plans to spin off Starz into its own company as soon as August, and the standalone TV network and streaming service owner will likely need to acquire or merge with others, such as AMC Networks and A+E Networks, in order to be a viable competitor, according to CNBC.
Hollywood’s rising production costs:
Supply chain issues and rising inflation have led costs to build movie and TV show sets to increase by at least 15% compared to a year ago, according to The Hollywood Reporter.
Nielsen’s rivals close the gap:
Comscore and VideoAmp have started to plug into Mediaocean’s billing platform, which will make it easier for advertisers and TV networks to use the measurement providers as currencies in lieu of Nielsen, according to Ad Age.