The ruthless battle between the world’s main video-on-demand firms reached a climax when the Amazon acquired the legendary Hollywood studio MGM (Metro Goldwyn Mayer) in a deal value US$8.45 billion.
The sale of MGM on Could 26 adopted greater than six months of negotiations. The American studio recognized for its roaring lion had been weakened by main monetary difficulties earlier than the pandemic. The extended closure of film theatres was the ultimate nail in its coffin.
Though the MGM studio had a low market worth (estimated at solely US$5.5 billion just a few months in the past), a number of giants of the digital business, together with Apple, have been fascinated about shopping for it. However it was Amazon that received the bid and made historical past by turning into the primary participant within the video streaming business to accumulate a significant Hollywood studio.
In shopping for MGM, Amazon is clearly demonstrating its ambition to dethrone Netflix. The Prime Video service already has practically 200 million customers, which places it near its Californian competitor with 208 million subscribers. The race for the highest spot within the video-on-demand market has by no means been tighter.
As a part of my analysis on discoverability and entry to range in on-line content material, I commonly monitor the transformations and imbalances which can be being introduced on by the digital distribution platforms that management the worldwide marketplace for cultural items and providers.
Amazon takes the lion’s share!
On this age of multi-platform consumption, the simplest means for a corporation to face out and entice audiences continuously looking for novelty and variety is to commonly broaden and renew its catalogue. Within the battle the totally different platforms are waging towards one another to safe unique content material, the power to spend money on the acquisition or manufacturing of unique content material has turn out to be essential ammunition.
A platform that can’t provide sufficient new content material rapidly to achieve and retain subscribers will be unable to compete with its opponents. The Wall Avenue Journal speculated that the acquisition of MGM was an indication that Amazon was having problem producing sufficient content material to fulfill the demand of its Prime Video subscribers.
Within the gigantic video membership that the web has turn out to be, gamers can not rely solely on the standard of their catalogue the best way Apple does with the Apple TV+ service. Within the eyes of subscribers, the variety of titles out there is as necessary, or much more necessary, than the standard of the content material being supplied.
Amazon has acquired a veritable treasure trove to counterpoint its catalogue, having obtained the unique mental property of 4,000 characteristic movies, together with The Silence of the Lambs, The Hobbit, The Wizard of Oz, Rocky, Terminator, The Pink Panther and your complete James Bond assortment. So as to add to that, there are about 17,000 MGM tv applications, together with well-liked collection like Stargate, Vikings and The Handmaid’s Story. This catalogue consists of cinematographic works which have received greater than 180 Oscars and 100 Emmys.
For that matter, the exponential development of revenues generated by e-commerce and cloud providers throughout the pandemic allowed Amazon to triple its earnings in 2020, when the corporate noticed a 44 per cent enhance in income over the yr.
This has left the corporate with a really comfy revenue margin of practically US$11 billion that it may well spend money on producing unique content material. That may permit Amazon to extend its choices by practically 40 per cent over the earlier yr. It has additionally invested practically US$465 million within the first season of the Lord of the Rings collection, thought of the most costly collection within the historical past of tv.
Redrawing the audiovisual panorama
Whereas forecasts anticipated the variety of subscriptions to video-on-demand providers would attain practically one billion worldwide by 2019, demand for these providers as soon as once more boomed throughout the pandemic.
A latest examine by France’s Conseil supérieur de l’audiovisuel concluded that the market is now structured round just a few international digital gamers who’re all stepping up their funding in native manufacturing. In consequence, these gamers are pushing the traditionally dominant gamers to vary their very own differentiation methods by bold takeovers or mergers, editorial positioning, aggregation of unique content material and by increasing their provide.
The dramatic enhance of recent content material can be confronting gamers with the problem of catering to a brand new sort of client (together with a excessive proportion of younger individuals) who commonly subscribes and unsubscribes from one audiovisual service with a purpose to check others.
To have the ability to compete with digital giants, which have gone from being easy distributors and broadcasters to content material producers, Hollywood’s main studios now need to be agile and rethink their enterprise fashions.
The race for subscribers
MGM was one of many final pioneers in American movie manufacturing to not have partnered with an internet video platform or to have created its personal video-on-demand service.
In distinction, Disney acquired twenty first Century Fox in March 2019 and received its palms on the Hulu platform even earlier than launching its personal Disney+ service. The latter handed the 100 million subscribers mark in a single yr with a list that was enriched with content material from Fox, Pixar, Marvel and Lucasfilm Studios.
One other instance: after buying the conglomerate Warner Media in 2018 and launching its HBO Max platform in Could 2020, the telecommunications big AT&T has simply determined to merge its actions with Discovery. This can permit it to take a position extra in unique content material and provide viewers extra selections and new sorts of video experiences.
Amazon’s aggressive technique is sufficient to make Netflix shake in its boots: Netflix’s variety of new subscribers is reducing due to inadequate content material renewal and saturation in sure markets (particularly in america and Canada).
On the identical time, by buying MGM and buying its wealthy catalogue of films, Amazon is assured that its Prime Video subscriber numbers will skyrocket within the coming months or years. Amazon may additionally stop its predominant rivals (Netflix, Disney+, HBO Max, Apple TV+) from exploiting the completely licensed content material in its new catalogue.
Netflix is making ready its response
With a purpose to keep its management place, Netflix should speed up its development in promising markets comparable to French-speaking Africa and diversify its providers by providing new content material. The multinational lately surveyed a few of its customers a couple of new platform known as N-Plus, which may provide the options of a social community (with critiques and feedback that may be shared with buddies or the neighborhood), mixed with a information web site that might embrace podcasts, customized playlists and knowledge on upcoming productions.
There are additionally rumours that Netflix has bold plans to enter the online game market and is contemplating launching a service to compete with Apple Arcade by 2022.
By going past its core enterprise to place itself within the online game business, Netflix could be taking a measured threat. The transfer would permit it to supply interactive leisure with content material that mixes fiction and video video games so it may well interact customers and entice new audiences.
Tchéhouali Future doesn’t work for, seek the advice of, personal shares in or obtain funding from any firm or organisation that will profit from this text, and has disclosed no related affiliations past their tutorial appointment.