NBCUniversal writes another line in the cinema’s obituary

The streaming revolution has changed our content consumption habits on multiple fronts, and now NBCUniversal could add further pain to the cinema by offering theatrical releases as in-home rentals.

Coronavirus has started to threaten businesses in the entertainment and retail segments, as more of us are compelled to stay at home for extended periods of time, but this move from NBCUniversal could further threaten the cinema’s place in society. Starting with DreamWorks Animation’s Trolls World Tour, new theatrical releases will be available for a 48-Hour rental period from NBCUniversal sister companies Comcast and Sky, as well as a range of on-demand partners.

For the moment, this is a temporary measure to ensure NBCUniversal can recapture some of the investments made in these titles, but should it prove to be popular, this could be another line added to the cinema’s obituary. Why shouldn’t direct-to-streaming be considered a valid distribution strategy?

“Universal Pictures has a broad and diverse range of movies with 2020 being no exception,” said Jeff Shell, NBCUniversal CEO. “Rather than delaying these films or releasing them into a challenged distribution landscape, we wanted to provide an option for people to view these titles in the home that is both accessible and affordable.

“We hope and believe that people will still go to the movies in theatres where available, but we understand that for people in different areas of the world that is increasingly becoming less possible.”

This is not a cheap alternative for customers, however. The 48-hour rental period will cost $19.99, or the equivalent in international markets. It is slightly more cost effective than going to the cinema, but whether this proves to be an adequate replacement from an experience perspective is unknown. But then again, who says the digital natives of tomorrow demand this cinema experience.

Looking at the statistics, annual admissions over the course of the last decade have remained relatively stagnant.

Year Annual admissions Year Annual admissions
2010 169.2 million
2011 171.6 million 1936 917 million
2012 172.5 million 1946 1.63 billion
2013 165.5 million 1956 1.11 billion
2014 157.5 million 1966 288.8 million
2015 171.5 million 1976 103.9 million
2016 168.3 million 1986 75.5 million
2017 170.6 million 1996 123.8 million
2018 177 million 2006 156.6 million
2019 176.1 million 2016 168.3 million

The numbers are steady, as you can see from the column on the right, the cinema does not command the same status as it has done for previous generations. Digital natives have demonstrated they are open to new experiences, perhaps explaining why the upward trend of cinema admissions from the 80s onwards has flattened; the new generations are perhaps not as interested.

Looking at an EY report on changing consumer behaviour, 54% of households spend more time on the internet than traditional TV, while 64% of 18-24 year olds state that streaming via the internet is the primary way they watch TV programs and films. This number declines to 30% for older demographics.

Like linear TV, the cinema segment could come under threat from new consumption habits and accessibility of content.

Ultimately, companies like NBCUniversal will not care about how the content is distributed, as long as the company grows revenues year-on-year. If there are greater profits, while also keeping the customer happy, in going directly to the living room like it is here, why would it bother including the cinema?

What you have to consider today is how accessible content is becoming. Some streaming services are coming bundled into existing content offerings or pre-installed on smart TVs, while data tariffs are becoming cheaper each year. Accessing streaming services wherever, whenever is becoming almost second nature.

There will be those who suggest the death of the cinema is a preposterous idea, but once upon a time there were those who questioned whether there would be a future for mobile phones and personal computers or believed banks would be a permanent of the high street. Netflix killed Blockbuster and now with its streaming cronies, it could be squaring up to the cinema.

Another interesting chapter to this story is the acceptance of Netflix in the entertainment clique. In 2019, Netflix movie Roma caused quite a stir as it received several nominations for the 91st Academy Awards after an incredibly short run in the cinema. The traditionalists in Hollywood criticised the decision, which almost led to rule changes, though the Department of Justice intervened with the threat of an anti-trust investigation should streaming companies be treated differently to other content creators.

As it stands, to be eligible for an Oscar nomination a film only has to include a seven-day run in a commercial Los Angeles County theatre with at least three screenings a day. This is a minor box to tick and may not have a significant impact on the decision-making process for distribution strategies.

This is a very interesting development as it adds credibility to films which don’t have an extended run in the cinema. In years gone, straight-to-video was a dirty concept, but with Netflix collecting 24 nominations for the 92nd edition of the Oscars, has the idea of skipping cinema been validated?

The cinema industry looks to be one which is prime for disruption from those who think further ahead than tomorrow. The experience of the cinema cannot be easily replicated, but it is an industry which has not really changed over the last few decades and is becoming more and more expensive. It is losing its status in society, opening the door for new ideas. Skipping the cinema in launching new content might soon become a more attractive idea the digital era of tomorrow.

Some reading this article might not be convinced by the idea, but a more relevant question is how receptive digital natives, the primary audience of tomorrow, would be?

NBC’s opportunity to cut through the streaming noise with Olympics

With NBCUniversal set to launch its own streaming service in 2020 the risk of content fragmentation is becoming more apparent, but this only underlines the importance of a niche.

Although many of these streaming services might think they are doing something innovative or novel, in reality they are copycatting Netflix. The big issue is that Netflix is already moving onto the bigger and better. Original content is the new frontier, though NBCUniversal might have stumbled across another unique selling point.

“Peacock will be the go-to place for both the timely and timeless – from can’t-miss Olympic moments and the 2020 election, to classic fan favourites like The Office,” said Bonnie Hammer, Chairman of Direct-to-Consumer and Digital Enterprises business unit.

The Olympics, and live streaming sport on the whole, is an area which the streaming giants have largely ignored to date. Amazon has dabbled with tennis, NFL and has a few English Premier League games for the 2019/20 season, while Twitter (admittedly not a streaming service) has got a partnership in place with the PGA Tour. YouTube has toyed with some live events, but never nailed it. It’s a bit sporadic, rather than a coherent assault.

With the Tokyo 2020 Olympics, NBCUniversal has a great opportunity to carve a niche and create a unique position in streaming ecosystem.

Through the NBC Olympic channel, the company has produced every Summer Olympics since Seoul in 1988 and every Winter Olympics since Salt Lake City in 2002. It has all media rights on all platforms to all Olympic Games through to 2032, paying $7.75 billion (US rights) in 2014.

This is a major attraction for consumers around the world and could form the central cog of a new type of streaming service if the team plays its cards right. Olympics coverage averaged 27.5 million viewers across all platforms, with streaming growing particularly. Nearly more than 2.71 billion minutes of coverage was streaming from the Rio Olympics, more than double the previous two events combined.

This is what the new streaming challengers need to understand; they cannot replicate the success of Netflix.

Disruptors to a fast-evolving ecosystem often try to do this and it fails due to the rapidly changing landscape. Netflix found success in being a content aggregator, bringing together titles from a variety of different sources. This model is dead. It cannot be replicated.

The creation of Peacock is another sign of content fragmentation. From next year onwards, Netflix viewers will no-longer be able to view titles such as ‘The Office’, ‘Parks and Recreation’, ‘Brooklyn Nine-nine’ and ‘30 Rock’. This is a consequence of each of the newly emerging platforms. When HBO Max emerged, Netflix lost ‘Friends’, ‘The Fresh Prince of Bel-Air’ and ‘Pretty Little Liars’. With Disney+, all Marvel content will be removed from the Netflix library.

This is a dangerous position for any challengers. The Netflix model is dead because everyone wants to home their content exclusively. The value to the consumer of the aggregator model which drove Netflix in the early years is dwindling away as the content landscape becomes increasingly fragmented.

This is the importance of original content for the streaming services; it allows the creation of a selling-point beyond price. Admittedly, the Netflix original content will not appeal to everyone, but it has big enough budgets to create the breadth and depth, so each show does not have to be a catch-all, mass market product. Anyone who thinks they can compete with Netflix on original content will have to spend a lot of money to do so.

With coverage of the 2020 Election and the Tokyo Olympics on the NBCUniversal streaming platform, there is a notable opportunity to create a proposition which can cut through the noise.

Another very interesting opportunity for NBCUniversal is a fast-emerging trend in the content world; interactivity. This was a notable theme at IBC 2019, and sports presents an opportunity like few other genres.

Viewers could personalise their experience through the selection of different cameras or commentators. Value add content can be generated for months prior to the live-streaming of the event. Technologies such as virtual and augmented reality have a natural home in the sports ecosystem. Partnerships can be developed for additional monetization. There are endless troves of data points to engage every niche of viewer. The opportunity to build a more complete story all the way through the year is very evident.

The question is how aggressive NBCUniversal will be. Will it expand into other sports and live events? Will it look to drive engagement outside of the US market? These are unknowns and will largely be dependent on the delivery of the Tokyo Olympics, though it has a very good opportunity.