7 predictions about the future of media.pdf

Providing in-depth insight, data, and analysis of everything digital. BI Intelligence

7 PREDICTIONS ABOUT THE FUTURE OF MEDIA

1. DIGITAL WILL INHERIT THE EARTH

DIGITAL MEDIA CONSUMPTION IS GROWING, EVERYTHING ELSE IS SHRINKING

US Consumer Media Consumption Share

Source: eMarketer

43.2%

40.9%

14.0%

6.6% 5.8%

35.2%

12.0%

2.9% 3.3%

TV Radio Print Other

2011 2012 2013 2014 2015

Desktop/laptop

Digital

30.0%Mobile

And averages do not tell the whole story

THE SHIFT IS GENERATIONALTop 5 Media Mentions Among All Adults, 2013

Source: Ofcom

0 20 40 60 80 100

TotalAged16-24Aged25-34Aged35-44Aged45-54Aged55-64Aged65-74Aged75+ WatchTV

Readnewspapers/magazines

Listentotheradio

Goonlineonacomputer/laptop/netbook/tablet

Useasmartphone

GENERATIONS HAVE A PREDICTABLE LIFE CYCLE

Source: Goldman Sachs

First digital native generation(s)

Already 45% of population and largest share of earners

Profoundly different media habits

MILLENNIALS AND GEN Z

26

16

0

5

10

15

20

25

30

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Hourss

pent

18-24 TV VIEWING DOWN ~30% IN 4 YEARSTraditional TV* Viewing Trends Among 18-24 Year-OldsWeekly time spent in hours, based on total 18-24 population

*Traditional TV refers to all live + DVR/time-shifted TV viewing during the quarter. Source: Nielsen

Meanwhile

DIGITAL MEDIA CONSUMPTION GROWING EVERY YEAR, ESPECIALLY MOBILE

Source: comScore Media Metrix Multi-Platform & Mobile Metrix; US, Total Audience

476,553 480,967 550,522

409,847621,410

778,95477,081

97,440

118,299

Jan-13 Jan-14 Jan-15

Totalm

inutes(M

M)

Desktop MobileApp MobileBrowser

MOBILETIMESPENT

Growth In US Digital Media Time Spent

MILLENNIALS CHECK THEIR PHONES EVERY 10 MINUTES

Source: Kana Software

Source: Zogby Analytics, cited by KPCB (Mary Meeker LinkedIn slideshare)

THEY KEEP THEM IN REACH 24 HOURS A DAY

My smartphone never leaves my side, night or day

87.0%

12.0%2.0%

Agree Disagree Notsure

Source: Zogby Analytics, cited by KPCB (Mary Meeker LinkedIn slideshare)

THEY CHECK THEM FIRST THING IN THE MORNING

When I wake up, the first thing I do is reach for my smartphone

80.0%

18.0%

2.0%

Agree Disagree Notsure

So heres a glimpse at the past, present, and future of media

THE PAST (~2000): 3% DIGITAL

Source: Ofcom

0%10%20%30%40%50%60%70%80%90%

100%

Smartphone

Computer/laptop/tablet

Radio

Print

TV

THE PRESENT (~2015): 40% DIGITAL

Source: Ofcom

0%10%20%30%40%50%60%70%80%90%

100%

Smartphone


Radio

Print

TV

THE FUTURE (~2030): 80%+ DIGITAL

Source: Ofcom

0%10%20%30%40%50%60%70%80%90%

100%

Smartphone


Radio

Print

TV

2. SUBSCRIPTIONS FOR THE WIN!

Remember when pundits said digital content had to be free

because no one would ever pay?

4.04.8

5.87.3

9.2

11.5

2014 2015E 2016E 2017E 2018E 2019E

Billion

sUSD

STREAMING VIDEO SUBS CLIMBING FASTStreaming Video Subscription RevenueUS

Note: Includes video services that stream long-form TV and movie length content (e.g. Netflix and Hulu). Does not include short-form video content services (e.g. YouTube).

8.711.4

14.016.5

18.720.6

2014E 2015E 2016E 2017E 2018E 2019E

Billion

s

MUSIC SUBS ARE CLIMBING FASTStreaming Music Paid Subscribers US

Source: BI Intelligence estimates based on historical data from the RIAA

AdverZsing

SubscripZons

$-

$20

$40

$60

$80

$100

$120

Q113 Q213 Q313 Q413 Q114 Q214 Q314 Q414

Millions

EVEN PRINT SUBS ARE CLIMBING FASTNew York Times Digital Revenue Global

Source: The New York Times

The new pundit story is that theres one right model subs or ads

The truth is that both work, as do a la carte sales.

Most media companies have dual revenue streams.

FREEMIUM IS OFTEN THE BEST APPROACHPaid Digital Subscribers As % Of Total Digital Users

Source: BI Intelligence estimates

25%22% 21%

5% 5%3% 2%

0%

5%

10%

15%

20%

25%

30%

SpoZfy Hulu WhatsApp Pandora MatchGroup NYT LinkedIn

3. (NATIVE) DIGITAL ADVERTISING WILL CONTINUE TO THRIVE

The best definition of native ads

Ads that fit the way content and stories in the medium are consumed.

NATIVE ADS

In digital, search and scroll are the dominant ways content is consumed.

BEHOLD THE POWER OF NATIVE DIGITAL ADS

Note: Based on GAAP revenue. Source: Company Filings, BI Intelligence estimates

Google

FacebookYahoo

AOLTwiber

$0

$5

$10

$15

$20

$25

Billion

s

Digital Advertising Revenues Global

Read, watch, and listen are also digital formats.

But the experience is different than in legacy media.

Native digital brand ads will increasingly take advantage of the digital difference.

4. THE EXISTENTIAL CRISIS OF AD BLOCKING WILL RESOLVE ITSELF

BUT CAREFUL WHAT YOU WISH FOR

AD BLOCK USAGE IS RISING

Source: Adobe, PageFair

21 3039

54

121144

181198

Jan10 Jun10 Jan11 Jun11 Jan12 Jun12 Jan13 Jun13 Jan14 Jun14 Jan15 Jun15

Adblock Monthly Active UsersIn Millions

ESPECIALLY AMONG MILLENNIALSShare Of Global Internet Users Who Have Blocked Ads In The Past Month, By Age

Source: GlobalWebIndex

35%

31%

24%

22%

17%

0% 5% 10% 15% 20% 25% 30% 35% 40%

16-24

25-34

35-44

45-54

55-64

Source:GlobalWebIndex

AND TECHIES

Note: Estimated to nearest 5% increment Source: PageFair

30%25%25%

20%20%20%

15%15%

10%10%10%

5%

GamesTechnology

ComicsAdult

EntertainmentSportsNews

BusinessLifestyle

LocalFinanceTravel

Ad-Block Usage Rates, By VerticalGlobal

There is a lot of self-interested finger-pointing, moralizing,

and rationalizing going on from all parties.

If all ads are blocked, most free content will cease to exist.

ONE THING IS CLEAR

So what will happen?

Quality will improve!

Publishers, platforms, and advertisers will focus more on user experience and choice.

People will choose to view ads from, and/or subscribe to,

publishers and platforms they like.

These decisions will not all be voluntary.

5. THE NEXT BIG PLATFORM IS

As smartphones get boring, everyone is hunting

for the next big platform.

Many candidates have been suggested glasses, watches, cars, virtual reality

None of these will be the next big platform.

Smart glasses flopped.

Smartwatches havent entirely flopped, but no one will be reading, watching,

or listening to media on them anytime soon.

Cars wont become media and communications platforms

other platforms will be used inside them.

VR is promising, but its still too early.

VR INSTALLED BASE STILL SMALLEstimated Global Virtual Reality Headset Shipments

Source: BI Intelligence estimates, 2015

-

5

10

15

20

25

30

2015E 2016E 2017E 2018E 2019E 2020E

Shipmen

ts(M

illions)

Complicated to use

Screen resolution low

Display often nausea-inducing

Prices steep

AND EXPERIENCE STILL LEAVES MUCH TO BE DESIRED

Messaging apps!

SO THE NEXT BIG PLATFORM WILL BE

Source: Salesforce

MESSAGING IS AT THE HEART OF THE MOBILE EXPERIENCE

Smartphone Activities Performed At Least Once Each Day

24%

30%

43%

46%

57%

62%

75%

76%

90%

91%

GecngdirecZons

Watchingvideosormovies

Reading

Listeningtomusic

Playinggames

Gecngnewsalerts

Socialnetworking

Searchingontheinternet

Textmessaging

Accessingemail

SOCIAL NETWORKS ARE BIG

Source: Companies, BI Intelligence estimates

Monthly Active Users

Global

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15

Millions

Top4SocialNetworkingApps

BUT MESSAGING APPS ARE ALREADY BIGGER


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15

Millions

Top4SocialNetworkingApps

Top4MessagingApps

Monthly Active Users

Global

0

100

200

300

400

500

600

700

800

900

1000

WhatsApp Messenger WeChat Viber LINE Snapchat Tango Kik KakaoTalk

Monthly Active UsersGlobal, Q3 2015

THE TOP 4 HAVE ALMOST 3 BILLION USERS


FACEBOOK OWNS TWO PLUS INSTAGRAMFacebook Messenger Monthly Active Users Global

Source: Company, BI Intelligence estimates

0100200300400500600700800900

4Q111Q122Q123Q124Q121Q132Q133Q134Q131Q142Q143Q144Q141Q152Q153Q15

Millions

SNAPCHAT HAS 200 MILLION AND COUNTING

0

50

100

150

200

250

4Q111Q122Q123Q124Q121Q132Q133Q134Q131Q142Q143Q144Q141Q152Q153Q15

Estimated Snapchat Monthly Active UsersGlobal, millions


YOU CAN DO EVERYTHING IN THESE APPS

Calls Chat GIFs

Games SZckers VoIP

Taxi E-commerce Music

Video Payments URLBar/Search

UZliZes QRCodes

GENERATION DIGITAL IS NUTS ABOUT THEM% Of Smartphone Owners Who Use Messaging AppsUS

Source: Pew Research Center, March 17-April 12, 2015

49%

37%

24%

18-29

30-49

50+

6. TV NETWORKS WILL SOON FEEL NEWSPAPERS PAIN

TRADITIONAL TV HAS PASSED ITS PEAKHouseholds With Pay TV Vs. Subscription OTT, U.S., 2010-2015E, Millions

Leichman Research Group, US Census Bureau, Activate analysis

99 100.9 100.8 99.3 9897.1

23 2833 38

4350.3

0

20

40

60

80

100

120

2010 2011 2012 2013 2014 2015E

PayTVHouseholds DigitalSubscripZon(OTT)Households

PAY TV SUBSCRIBERS ARE SHRINKINGCable TV Subscribers (US)

Source: Leichtman Research Group

48.0

48.5

49.0

49.5

50.0

50.5

51.0

Q114 Q214 Q314 Q415 Q115 Q215

Millions

VIEWERSHIP IS FALLING Primetime Household TV Ratings

Source: Nielsen

4.8

5.0

5.2

5.4

5.6

5.8

6.0

6.2

2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Nielse

nHo

useh

oldRa

Zng(%

Of

Househ

oldsW

ithTVSetsW

atching) Big4USTVNetworksAverage

Meanwhile

NETFLIX ~70 MILLION AND GROWINGNetflix SubscribersEstimates in millions, Global

Source: Netflix

DomesZc

InternaZonal

01020304050607080

Q32012

Q42012

Q12013

Q22013

Q32013

Q42013

Q12014

Q22014

Q32014

Q42014

Q12015

Q22015

Q32015

Millions

012345678910

2011 2012 2013 2014 2015E

Millions

HULU ~10 MILLION AND GROWINGHulu SubscribersEstimates in millions, Global

Source: Hulu, BI Intelligence estimates

AMAZON PRIME ~45 MILLION AND GROWINGAmazon Prime MembersEstimates in millions, Global

Source: Deutsche Bank, Company reports

0

10

20

30

40

50

2011 2012 2013 2014 2015E

Millions

-510152025303540

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Millions

Global US

APPLE TV 35 MILLION+ AND GROWINGApple TV Installed Base

Source: BI Intelligence estimates

58%

73%83%

89%

63%68%

63%

42%

Age18-24 Age25-34 Age35-54 Age55+

Percen

tRea

ch

FourTVNetworks Facebook

FACEBOOK REACHES MORE 18-24 THAN FREE TV

Source: Nielsen

Facebook vs. TV Daily Reach US

NETFLIX IS WATCHED MORE HOURS PER MONTH THAN ALMOST EVERY OTHER NETWORK

Total Hours Of Viewing, Per Month Per Network

Liam Boluk, MEDIA REDEF

NETFLIX HOUSEHOLDS WATCH 60 HOURS OF NETFLIX PER MONTH, 2X ANY NETWORK GROUP

Source: Liam Boluk, MEDIA REDEF

YES, TV STILL DOMINATES VIEWING TIMEUS Consumer Time Spent On Video Per Month, 2015E, Hours

Source: Digitalsmiths, eMarketer, GfK, Sandvine, Nielsen, TDG, Activate analysis

TradiZonalTV72%

SubscripZonTV14%

Ad-Supported9%

PaidDownloads5% Total:177hours

BUT DIGITAL VIEWING UP ~100% IN 3 YEARS

Source: Digitalsmiths, eMarketer, GfK, Sandvine, Nielsen, TDG, Activate analysis

3.57.5 15

PaidDownloads AdSupported SubscripZon

2012

8

16.5

25

2015E

Monthly Consumer Time Spent On Video, U.S., 2012-2015E, Hours

And the TV audience is increasingly a specific demographic

MSNBC and CNN: 60 Broadcast Networks: 62-64

FOX News: 68

MEDIAN VIEWER AGE

Convenience.

WHY IS DIGITAL TV GROWING?

We can watch what we want to watch when we want to watch it

on any screen.

WHY IS DIGITAL GROWING?

So whats going to happen?

First, ignore people who say TV will die.

Old media dont die. They just find their niche(s). See radio and print.

There are three key parts of TV and two of them are thriving.

1. Digital TV networks will continue to thrive

iTunes

Neilix

AMC

$0$2,000$4,000$6,000$8,000

$10,000$12,000$14,000$16,000$18,000$20,000

2007 2008 2009 2010 2011 2012 2013 2014

(Millions)

ITUNES AND NETFLIX ALREADY DWARF AVERAGE CABLE NETWORKS

Source: News Reports, Company Filings

Cable Network vs. Digital Content Revenue 2007-2014

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

2007 2008 2009 2010 2011 2012 2013 2014

(Millions) CBSAd

YouTubeAdRevenue

AMCNetworksRevenue

CBSAdRevenue

YOUTUBE REVENUE CLOSING IN ON BROADCAST NETWORKS

YouTube Ad Revenue Vs. CBS Ad Revenue And AMC Networks Revenue

Source: News Reports, Company Filings, BI Intelligence estimates, BofA Merrill Lynch Global Research

2. Access providers will continue to thrive unless (until?)

real price competition

CABLES FUTURE IS BROADBANDCable Subscribers Millions By Service (US)

Note: Select major cable providers Source: Leichtman Research Group

50 50 50 50 49 49 49 49 4949 4950 51 51

52 53 5354

Q313 Q413 Q114 Q214 Q314 Q414 Q115 Q215 Q315

TV Broadband

6.9 12.325.5 32.3

45.555.6

79.689.8

108.4125.0

144.2

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

WIRELESSS FUTURE IS BROADBANDWireless data service spending in the US(Billions, USD)

Source: TIA

3. Traditional TV networks will go through ~decades of pain

Money follows eyeballs.

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

InM

illions

Print Online

WHEN EYEBALLS LEFT PRINT THIS HAPPENED Newspaper Ad Revenue (Print vs. Online)

Source: Newspaper Association Of America, *Estimate

THERE ARE TOO MANY NETWORKSChannels Receivable And Watched Per TV HouseholdUS

Source: Nielsen

129.3 136.4151.4

168.5 179.1189.1

17.3 17.7 17.8 17.5 17.8 17.5

2008 2009 2010 2011 2012 2013

AverageTVChannelsReceived AverageTVChannelsWatched

THERE ARE TOO MANY (MEDIOCRE) SHOWSAverage original TV series each year vs. survival rate

Source: Liam Boluk, MEDIA REDEF

So get ready for years of consolidation and pain.

PayTVSubscripZons$103.1

TVAdverZsing$67.0

AdSupported$7.7 SubscripZon

$5.5

PaidDownloads$2.0

$185.3BTotal

FORTUNATELY, TV IS AWASH IN MONEYRevenues, U.S., 2015E, USD Billions

Source: BIA/Kelsey, Digital TV Research, eMarketer, Google, Hulu, Netflix, PwC, SNL Kagan, Statista, Digital Market Outlook, TDG, Activate

So theyll suffer in style.

7. POWER AND WEALTH WILL BE MORE CONCENTRATED THAN EVER

$66.0

$48.8

$27.4

$13.8 $13.3 $12.5$5.5 $4.6 $3.2 $2.5 $1.6

Google Disney TimeWarner

CBS Viacom Facebook Neilix Yahoo Ganneb AOL NewYorkTimes

(Billions) -8.2%YoY

-9.7%YoY

-4.6%YoY

8.7%YoY

58.4%YoY

0.8%YoY

-3.7%YoY

10.3%YoY

8.4%YoY

25.8%YoY

-1.3%YoY

DIGITAL MEDIA IS THE NEW BIG MEDIA2014 RevenueSelect Media Companies

Source: Company Filings, BI Intelligence estimates

And big media companies are now distinctly medium-sized.

$233.7

$132.4 $127.1

$68.8 $66.0

Apple AT&T Verizon Comcast Google

Billion

s

27.9%YoY

2.9%YoY

5.4%YoY

6.4%YoY

10.3%YoY

THIS IS THE NEW BIG2014 RevenueSelect Media Companies

Source: Company Filings, BI Intelligence estimates

THANK YOU!

Sign up for BI Intelligence to get more content like this...

Subscribe to Business Insiders research service to get rich analysis and key insights on todays most relevant topics in the digital landscape:

http://read.bi/intelligence

7 predictions about the future of media.pdf

Documents

Transcript of 7 predictions about the future of media.pdf