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Providing in-depth insight, data, and analysis of everything digital.
BI Intelligence
7 PREDICTIONS ABOUT
THE FUTURE OF ME...
1. DIGITAL WILL INHERIT THE EARTH
DIGITAL MEDIA CONSUMPTION IS GROWING,
EVERYTHING ELSE IS SHRINKING
US Consumer Media Consumption Share
Source: eMarketer
4...
And averages do not tell
the whole story…
THE SHIFT IS GENERATIONAL
Top 5 Media Mentions Among All Adults, 2013
Source: Ofcom
0	 20	 40	 60	 80	 100	
Total	
Aged	16...
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 me...
26	
16	
0	
5	
10	
15	
20	
25	
30	
Q1	
2011	
Q2	
2011	
Q3	
2011	
Q4	
2011	
Q1	
2012	
Q2	
2012	
Q3	
2012	
Q4	
2012	
Q1	
2013...
Meanwhile…
DIGITAL MEDIA CONSUMPTION GROWING EVERY
YEAR, ESPECIALLY MOBILE
Source: comScore Media Metrix Multi-Platform & Mobile Metr...
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 smart...
Source: Zogby Analytics, cited by KPCB (Mary Meeker – LinkedIn slideshare)
THEY CHECK THEM
FIRST THING IN THE
MORNING
When...
So here’s 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/lap...
THE PRESENT (~2015): 40% DIGITAL
Source: Ofcom
0%	
10%	
20%	
30%	
40%	
50%	
60%	
70%	
80%	
90%	
100%	
Smartphone	
Computer...
THE FUTURE (~2030): 80%+ DIGITAL
Source: Ofcom
0%	
10%	
20%	
30%	
40%	
50%	
60%	
70%	
80%	
90%	
100%	
Smartphone	
Computer...
2. SUBSCRIPTIONS FOR THE WIN!
Remember when pundits said
digital content had to be free
because no one would ever pay?
Oops.
4.0	
4.8	
5.8	
7.3	
9.2	
11.5	
2014	 2015E	 2016E	 2017E	 2018E	 2019E	
Billions	USD	
STREAMING VIDEO SUBS CLIMBING FAST
S...
8.7	
11.4	
14.0	
16.5	
18.7	
20.6	
2014E	 2015E	 2016E	 2017E	 2018E	 2019E	
Billions	
MUSIC SUBS ARE CLIMBING FAST
Stream...
AdverZsing	
SubscripZons	
	$-				
	$20		
	$40		
	$60		
	$80		
	$100		
	$120		
Q1	13	 Q2	13	 Q3	13	 Q4	13	 Q1	14	 Q2	14	 Q3...
The new pundit story is that there’s
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 APPROACH
Paid Digital Subscribers As % Of Total Digital Users
Source: BI Intelligence estimat...
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
Goo...
“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	 30	 39	
54	
121	
144	
181	
198	
Jan	10	 Jun	10	 Jan	11	 Jun	11	 Jan	1...
ESPECIALLY AMONG MILLENNIALS…
Share Of Global Internet Users Who Have Blocked Ads In The Past Month, By Age
Source: Global...
AND TECHIES
Note: Estimated to nearest 5% increment
Source: PageFair
30%	
25%	
25%	
20%	
20%	
20%	
15%	
15%	
10%	
10%	
10%...
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 haven’t entirely flopped,
but no one will be reading, watching,
or listening to media on them
anytime soon.
Cars won’t become media
and communications platforms —
other platforms will be used inside them.
VR is promising,
but it’s still too early.
VR INSTALLED BASE STILL SMALL
Estimated Global Virtual Reality Headset Shipments
Source: BI Intelligence estimates, 2015
	...
•  Complicated to use
•  Screen resolution low
•  Display often nausea-inducing
•  Prices steep
AND EXPERIENCE
STILL LEAVE...
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 D...
SOCIAL NETWORKS ARE BIG…
Source: Companies, BI Intelligence estimates
Monthly Active Users 

Global
0	
500	
1,000	
1,500	
...
BUT MESSAGING APPS ARE ALREADY BIGGER
Source: Companies, BI Intelligence estimates
0	
500	
1,000	
1,500	
2,000	
2,500	
3,0...
0	
100	
200	
300	
400	
500	
600	
700	
800	
900	
1000	
WhatsApp	 Messenger	 WeChat	 Viber	 LINE	 Snapchat	 Tango	 Kik	 Kaka...
FACEBOOK OWNS TWO — PLUS INSTAGRAM
Facebook Messenger Monthly Active Users
Global
Source: Company, BI Intelligence estimat...
SNAPCHAT HAS 200 MILLION AND COUNTING
0	
50	
100	
150	
200	
250	
4Q11	1Q12	2Q12	3Q12	4Q12	1Q13	2Q13	3Q13	4Q13	1Q14	2Q14	3Q...
YOU CAN DO EVERYTHING IN THESE APPS
Calls	 Chat	 GIFs	
Games	 SZckers	 VoIP	
Taxi	 E-commerce	 Music	
Video	 Payments	 URL...
GENERATION DIGITAL IS NUTS ABOUT THEM
% Of Smartphone Owners Who Use Messaging Apps
US
Source: Pew Research Center, March ...
6. TV NETWORKS WILL SOON FEEL
NEWSPAPERS’ PAIN
TRADITIONAL TV HAS PASSED ITS PEAK
Households With Pay TV Vs. Subscription OTT, U.S., 2010-2015E, Millions
Leichman Resear...
PAY TV SUBSCRIBERS ARE SHRINKING
Cable TV Subscribers (US)
Source: Leichtman Research Group
48.0	
48.5	
49.0	
49.5	
50.0	
...
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	 2...
Meanwhile…
NETFLIX ~70 MILLION AND GROWING
Netflix Subscribers
Estimates in millions, Global
Source: Netflix
DomesZc	
InternaZonal	
0	...
0	
1	
2	
3	
4	
5	
6	
7	
8	
9	
10	
2011	 2012	 2013	 2014	 2015E	
Millions	
HULU ~10 MILLION AND GROWING
Hulu Subscribers
E...
AMAZON PRIME ~45 MILLION AND GROWING
Amazon Prime Members
Estimates in millions, Global
Source: Deutsche Bank, Company rep...
-				
	5		
	10		
	15		
	20		
	25		
	30		
	35		
	40		
2007	 2008	 2009	 2010	 2011	 2012	 2013	 2014	 2015	 2016	 2017	 201...
58%	
73%	
83%	
89%	
63%	
68%	
63%	
42%	
Age	18-24	 Age	25-34	 Age	35-54	 Age	55+	
Percent	Reach	
Four	TV	Networks	 Faceboo...
NETFLIX IS WATCHED MORE HOURS PER MONTH
THAN ALMOST EVERY OTHER NETWORK
Total Hours Of Viewing, Per Month Per Network
Liam...
NETFLIX HOUSEHOLDS WATCH 60 HOURS OF
NETFLIX PER MONTH, 2X ANY NETWORK GROUP
Source: Liam Boluk, MEDIA REDEF
YES, TV STILL DOMINATES VIEWING TIME
US Consumer Time Spent On Video Per Month, 2015E, Hours
Source: Digitalsmiths, eMarke...
BUT DIGITAL VIEWING UP ~100% IN 3 YEARS
Source: Digitalsmiths, eMarketer, GfK, Sandvine, Nielsen, TDG, Activate analysis
3...
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 what’s going to happen?
First, ignore people
who say “TV will die.”
Old media don’t 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	...
$-				
	$2,000		
	$4,000		
	$6,000		
	$8,000		
	$10,000		
	$12,000		
2007	 2008	 2009	 2010	 2011	 2012	 2013	 2014	
(Mill...
2. Access providers will continue
to thrive — unless (until?)
real price competition
CABLE’S FUTURE IS BROADBAND
Cable Subscribers Millions By Service (US)
Note: Select major cable providers
Source: Leichtma...
6.9	 12.3	
25.5	 32.3	
45.5	
55.6	
79.6	
89.8	
108.4	
125.0	
144.2	
2005	 2006	 2007	 2008	 2009	 2010	 2011	 2012	 2013	 ...
3. Traditional TV networks will go through
~decades of pain
Why?
Money follows eyeballs.
$-				
	$10,000		
	$20,000		
	$30,000		
	$40,000		
	$50,000		
	$60,000		
2003	 2004	 2005	 2006	 2007	 2008	 2009	 2010	 2...
THERE ARE TOO MANY NETWORKS
Channels Receivable And Watched Per TV Household
US
Source: Nielsen
129.3	 136.4	
151.4	
168.5...
THERE ARE TOO MANY (MEDIOCRE) SHOWS
Average original TV series each year vs. survival rate
Source: Liam Boluk, MEDIA REDEF
So get ready for years of
consolidation and pain.
Pay	TV	SubscripZons	
$103.1	
TV	AdverZsing	
$67.0	
Ad	Supported	
$7.7	
SubscripZon	
$5.5	
Paid	Downloads	
$2.0	
$185.3	B	
...
So they’ll 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	 Time	
Warner	...
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	
Billions	
27.9%	
YoY	
2.9%	
YoY	
5.4...
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7 predictions about the future of media

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7 predictions about the future of media

  1. 1. Providing in-depth insight, data, and analysis of everything digital. BI Intelligence 7 PREDICTIONS ABOUT THE FUTURE OF MEDIA
  2. 2. 1. DIGITAL WILL INHERIT THE EARTH
  3. 3. 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
  4. 4. And averages do not tell the whole story…
  5. 5. THE SHIFT IS GENERATIONAL Top 5 Media Mentions Among All Adults, 2013 Source: Ofcom 0 20 40 60 80 100 Total Aged 16-24 Aged 25-34 Aged 35-44 Aged 45-54 Aged 55-64 Aged 65-74 Aged 75+ Watch TV Read newspapers/ magazines Listen to the radio Go online on a computer/ laptop/netbook/tablet Use a smartphone
  6. 6. GENERATIONS HAVE A PREDICTABLE LIFE CYCLE… Source: Goldman Sachs
  7. 7. •  First digital native generation(s) •  Already 45% of population and largest share of earners •  Profoundly different media habits MILLENNIALS AND GEN Z
  8. 8. 26 16 0 5 10 15 20 25 30 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Hours spent 18-24 TV VIEWING DOWN ~30% IN 4 YEARS Traditional TV* Viewing Trends Among 18-24 Year-Olds Weekly 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
  9. 9. Meanwhile…
  10. 10. DIGITAL MEDIA CONSUMPTION GROWING EVERY YEAR, ESPECIALLY MOBILE Source: comScore Media Metrix Multi-Platform & Mobile Metrix; US, Total Audience 476,553 480,967 550,522 409,847 621,410 778,954 77,081 97,440 118,299 Jan-13 Jan-14 Jan-15 Total minutes (MM) Desktop Mobile App Mobile Browser MOBILE TIME SPENT Growth In US Digital Media Time Spent
  11. 11. MILLENNIALS CHECK THEIR PHONES EVERY 10 MINUTES Source: Kana Software
  12. 12. 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 Not sure
  13. 13. 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 Not sure
  14. 14. So here’s a glimpse at the past, present, and future of media…
  15. 15. 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
  16. 16. THE PRESENT (~2015): 40% DIGITAL Source: Ofcom 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Smartphone Computer/laptop/tablet Radio Print TV
  17. 17. THE FUTURE (~2030): 80%+ DIGITAL Source: Ofcom 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Smartphone Computer/laptop/tablet Radio Print TV
  18. 18. 2. SUBSCRIPTIONS FOR THE WIN!
  19. 19. Remember when pundits said digital content had to be free because no one would ever pay?
  20. 20. Oops.
  21. 21. 4.0 4.8 5.8 7.3 9.2 11.5 2014 2015E 2016E 2017E 2018E 2019E Billions USD STREAMING VIDEO SUBS CLIMBING FAST Streaming Video Subscription Revenue US 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).
  22. 22. 8.7 11.4 14.0 16.5 18.7 20.6 2014E 2015E 2016E 2017E 2018E 2019E Billions MUSIC SUBS ARE CLIMBING FAST Streaming Music Paid Subscribers US Source: BI Intelligence estimates based on historical data from the RIAA
  23. 23. AdverZsing SubscripZons $- $20 $40 $60 $80 $100 $120 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Millions EVEN “PRINT” SUBS ARE CLIMBING FAST New York Times Digital Revenue Global Source: The New York Times
  24. 24. The new pundit story is that there’s one right model — subs or ads
  25. 25. The truth is that both work, as do a la carte sales.
  26. 26. Most media companies have dual revenue streams.
  27. 27. “FREEMIUM” IS OFTEN THE BEST APPROACH Paid 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 Match Group NYT LinkedIn
  28. 28. 3. (NATIVE) DIGITAL ADVERTISING WILL CONTINUE TO THRIVE
  29. 29. The best definition of “native ads”…
  30. 30. Ads that fit the way content and stories in the medium are consumed. “NATIVE ADS”
  31. 31. In digital, “search” and “scroll” are the dominant ways content is consumed.
  32. 32. BEHOLD THE POWER OF NATIVE DIGITAL ADS Note: Based on GAAP revenue. Source: Company Filings, BI Intelligence estimates Google Facebook Yahoo AOL Twiber $0 $5 $10 $15 $20 $25 Billions Digital Advertising Revenues Global
  33. 33. “Read, watch, and listen” are also digital formats.
  34. 34. But the experience is different than in legacy media.
  35. 35. Native digital brand ads will increasingly take advantage of the digital difference.
  36. 36. 4. THE EXISTENTIAL CRISIS OF AD BLOCKING WILL RESOLVE ITSELF — BUT CAREFUL WHAT YOU WISH FOR
  37. 37. AD BLOCK USAGE IS RISING Source: Adobe, PageFair 21 30 39 54 121 144 181 198 Jan 10 Jun 10 Jan 11 Jun 11 Jan 12 Jun 12 Jan 13 Jun 13 Jan 14 Jun 14 Jan 15 Jun 15 Adblock Monthly Active Users In Millions
  38. 38. ESPECIALLY AMONG MILLENNIALS… Share 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 urce: GlobalWebIndex
  39. 39. AND TECHIES Note: Estimated to nearest 5% increment Source: PageFair 30% 25% 25% 20% 20% 20% 15% 15% 10% 10% 10% 5% Games Technology Comics Adult Entertainment Sports News Business Lifestyle Local Finance Travel Ad-Block Usage Rates, By Vertical Global
  40. 40. There is a lot of self-interested finger-pointing, moralizing, and rationalizing going on — from all parties.
  41. 41. If all ads are blocked, most free content will cease to exist. ONE THING IS CLEAR…
  42. 42. So what will happen?
  43. 43. Quality will improve!
  44. 44. Publishers, platforms, and advertisers will focus more on user experience and choice.
  45. 45. People will choose to view ads from, and/or subscribe to, publishers and platforms they like.
  46. 46. These decisions will not all be voluntary.
  47. 47. 5. THE NEXT BIG PLATFORM IS…
  48. 48. As smartphones get boring, everyone is hunting for the next big platform.
  49. 49. Many candidates have been suggested — glasses, watches, cars, virtual reality…
  50. 50. None of these will be the next big platform.
  51. 51. Smart glasses flopped.
  52. 52. Smartwatches haven’t entirely flopped, but no one will be reading, watching, or listening to media on them anytime soon.
  53. 53. Cars won’t become media and communications platforms — other platforms will be used inside them.
  54. 54. VR is promising, but it’s still too early.
  55. 55. VR INSTALLED BASE STILL SMALL Estimated Global Virtual Reality Headset Shipments Source: BI Intelligence estimates, 2015 - 5 10 15 20 25 30 2015E 2016E 2017E 2018E 2019E 2020E Shipments (Millions)
  56. 56. •  Complicated to use •  Screen resolution low •  Display often nausea-inducing •  Prices steep AND EXPERIENCE STILL LEAVES MUCH TO BE DESIRED
  57. 57. Messaging apps! SO THE NEXT BIG PLATFORM WILL BE…
  58. 58. 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% Gecng direcZons Watching videos or movies Reading Listening to music Playing games Gecng news alerts Social networking Searching on the internet Text messaging Accessing email
  59. 59. 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 Top 4 Social Networking Apps
  60. 60. BUT MESSAGING APPS ARE ALREADY BIGGER Source: Companies, BI Intelligence estimates 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 Top 4 Social Networking Apps Top 4 Messaging Apps Monthly Active Users Global
  61. 61. 0 100 200 300 400 500 600 700 800 900 1000 WhatsApp Messenger WeChat Viber LINE Snapchat Tango Kik KakaoTalk Monthly Active Users Global, Q3 2015 THE TOP 4 HAVE ALMOST 3 BILLION USERS Source: Companies, BI Intelligence estimates
  62. 62. FACEBOOK OWNS TWO — PLUS INSTAGRAM Facebook Messenger Monthly Active Users Global Source: Company, BI Intelligence estimates 0 100 200 300 400 500 600 700 800 900 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Millions
  63. 63. SNAPCHAT HAS 200 MILLION AND COUNTING 0 50 100 150 200 250 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 Estimated Snapchat Monthly Active Users Global, millions Source: Companies, BI Intelligence estimates
  64. 64. YOU CAN DO EVERYTHING IN THESE APPS Calls Chat GIFs Games SZckers VoIP Taxi E-commerce Music Video Payments URL Bar / Search UZliZes QR Codes
  65. 65. GENERATION DIGITAL IS NUTS ABOUT THEM % Of Smartphone Owners Who Use Messaging Apps US Source: Pew Research Center, March 17-April 12, 2015 49% 37% 24% 18-29 30-49 50+
  66. 66. 6. TV NETWORKS WILL SOON FEEL NEWSPAPERS’ PAIN
  67. 67. TRADITIONAL TV HAS PASSED ITS PEAK Households 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 98 97.1 23 28 33 38 43 50.3 0 20 40 60 80 100 120 2010 2011 2012 2013 2014 2015E Pay TV Households Digital SubscripZon (OTT) Households
  68. 68. PAY TV SUBSCRIBERS ARE SHRINKING Cable TV Subscribers (US) Source: Leichtman Research Group 48.0 48.5 49.0 49.5 50.0 50.5 51.0 Q1 14 Q2 14 Q3 14 Q4 15 Q1 15 Q2 15 Millions
  69. 69. 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 Nielsen Household RaZng (% Of Households With TV Sets Watching) Big 4 US TV Networks Average
  70. 70. Meanwhile…
  71. 71. NETFLIX ~70 MILLION AND GROWING Netflix Subscribers Estimates in millions, Global Source: Netflix DomesZc InternaZonal 0 10 20 30 40 50 60 70 80 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Millions
  72. 72. 0 1 2 3 4 5 6 7 8 9 10 2011 2012 2013 2014 2015E Millions HULU ~10 MILLION AND GROWING Hulu Subscribers Estimates in millions, Global Source: Hulu, BI Intelligence estimates
  73. 73. AMAZON PRIME ~45 MILLION AND GROWING Amazon Prime Members Estimates in millions, Global Source: Deutsche Bank, Company reports 0 10 20 30 40 50 2011 2012 2013 2014 2015E Millions
  74. 74. - 5 10 15 20 25 30 35 40 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Millions Global US APPLE TV 35 MILLION+ AND GROWING Apple TV Installed Base Source: BI Intelligence estimates
  75. 75. 58% 73% 83% 89% 63% 68% 63% 42% Age 18-24 Age 25-34 Age 35-54 Age 55+ Percent Reach Four TV Networks Facebook FACEBOOK REACHES MORE 18-24 THAN FREE TV Source: Nielsen Facebook vs. TV Daily Reach US
  76. 76. NETFLIX IS WATCHED MORE HOURS PER MONTH THAN ALMOST EVERY OTHER NETWORK Total Hours Of Viewing, Per Month Per Network Liam Boluk, MEDIA REDEF
  77. 77. NETFLIX HOUSEHOLDS WATCH 60 HOURS OF NETFLIX PER MONTH, 2X ANY NETWORK GROUP Source: Liam Boluk, MEDIA REDEF
  78. 78. YES, TV STILL DOMINATES VIEWING TIME US Consumer Time Spent On Video Per Month, 2015E, Hours Source: Digitalsmiths, eMarketer, GfK, Sandvine, Nielsen, TDG, Activate analysis TradiZonal TV 72% SubscripZon TV 14% Ad-Supported 9% Paid Downloads 5% Total: 177 hours
  79. 79. BUT DIGITAL VIEWING UP ~100% IN 3 YEARS Source: Digitalsmiths, eMarketer, GfK, Sandvine, Nielsen, TDG, Activate analysis 3.5 7.5 15 Paid Downloads Ad Supported SubscripZon 2012 8 16.5 25 2015E Monthly Consumer Time Spent On Video, U.S., 2012-2015E, Hours
  80. 80. And the TV audience is increasingly a specific demographic…
  81. 81. MSNBC and CNN: 60 Broadcast Networks: 62-64 FOX News: 68 MEDIAN VIEWER AGE
  82. 82. Convenience. WHY IS DIGITAL TV GROWING?
  83. 83. We can watch what we want to watch when we want to watch it — on any screen. WHY IS DIGITAL GROWING?
  84. 84. So what’s going to happen?
  85. 85. First, ignore people who say “TV will die.”
  86. 86. Old media don’t die. They just find their niche(s). See radio and print.
  87. 87. There are three key parts of “TV” — and two of them are thriving.
  88. 88. 1. Digital TV networks will continue to thrive
  89. 89. 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
  90. 90. $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 2007 2008 2009 2010 2011 2012 2013 2014 (Millions) CBS Ad YouTube Ad Revenue AMC Networks Revenue CBS Ad Revenue 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
  91. 91. 2. Access providers will continue to thrive — unless (until?) real price competition
  92. 92. CABLE’S FUTURE IS BROADBAND Cable Subscribers Millions By Service (US) Note: Select major cable providers Source: Leichtman Research Group 50 50 50 50 49 49 49 49 49 49 49 50 51 51 52 53 53 54 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 TV Broadband
  93. 93. 6.9 12.3 25.5 32.3 45.5 55.6 79.6 89.8 108.4 125.0 144.2 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 WIRELESS’S FUTURE IS BROADBAND Wireless data service spending in the US (Billions, USD) Source: TIA
  94. 94. 3. Traditional TV networks will go through ~decades of pain
  95. 95. Why?
  96. 96. Money follows eyeballs.
  97. 97. $- $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* In Millions Print Online WHEN EYEBALLS LEFT PRINT THIS HAPPENED Newspaper Ad Revenue (Print vs. Online) Source: Newspaper Association Of America, *Estimate
  98. 98. THERE ARE TOO MANY NETWORKS Channels Receivable And Watched Per TV Household US Source: Nielsen 129.3 136.4 151.4 168.5 179.1 189.1 17.3 17.7 17.8 17.5 17.8 17.5 2008 2009 2010 2011 2012 2013 Average TV Channels Received Average TV Channels Watched
  99. 99. THERE ARE TOO MANY (MEDIOCRE) SHOWS Average original TV series each year vs. survival rate Source: Liam Boluk, MEDIA REDEF
  100. 100. So get ready for years of consolidation and pain.
  101. 101. Pay TV SubscripZons $103.1 TV AdverZsing $67.0 Ad Supported $7.7 SubscripZon $5.5 Paid Downloads $2.0 $185.3 B Total FORTUNATELY, TV IS AWASH IN MONEY Revenues, U.S., 2015E, USD Billions Source: BIA/Kelsey, Digital TV Research, eMarketer, Google, Hulu, Netflix, PwC, SNL Kagan, Statista, Digital Market Outlook, TDG, Activate
  102. 102. So they’ll suffer in style.
  103. 103. 7. POWER AND WEALTH WILL BE MORE CONCENTRATED THAN EVER
  104. 104. $66.0 $48.8 $27.4 $13.8 $13.3 $12.5 $5.5 $4.6 $3.2 $2.5 $1.6 Google Disney Time Warner CBS Viacom Facebook Neilix Yahoo Ganneb AOL New York Times (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 MEDIA” 2014 Revenue Select Media Companies Source: Company Filings, BI Intelligence estimates
  105. 105. And “big media” companies are now distinctly medium-sized.
  106. 106. $233.7 $132.4 $127.1 $68.8 $66.0 Apple AT&T Verizon Comcast Google Billions 27.9% YoY 2.9% YoY 5.4% YoY 6.4% YoY 10.3% YoY THIS IS THE NEW “BIG” 2014 Revenue Select Media Companies Source: Company Filings, BI Intelligence estimates
  107. 107. THANK YOU!
  108. 108. Sign up for BI Intelligence to get more content like this... Subscribe to Business Insider’s research service to get rich analysis and key insights on today’s most relevant topics in the digital landscape: http://read.bi/intelligence

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