[Note: This is the final part of a series on how the entertainment industry is adapting to the same changing preferences in the marketing and delivery of goods as other consumer categories. To read the rest of the series, click here.]
It’s important to look at how the OTT and subscription service industry is reflecting the same trends that are changing the retail landscape. That shouldn’t be surprising as they are all, in some manner, consumer products. Netflix and other existing OTT services are pulling viewers from physical movie theaters just like D2C retailers are pulling shoppers from malls and other stores. If you don’t see the same factors in play, you’re probably not paying attention. And if you forget to include entertainment in your overview of the consumer retail landscape, you’re overlooking a major component that exhibits all the same signs.
These, then, appear to be the important areas to watch:
- Theatrical ticket sales: Don’t get taken in by recent headlines touting how 2018 box-office revenue is up roughly 9% over last year. That increase is being driven by rising ticket prices, which hit a nationwide average of $9.16 in the first quarter of this year. Instead look at the number of tickets sold, which has been dropping steadily for the last 10+ years. At some point, just as with other industries, sales will fall below the point where higher per-unit prices can sustain the business model.
- OTT exclusives: TV networks are already feeling the pinch as they have to compete against “The Handmaids Tale,” “13 Reasons Why” and other streaming originals. While the quality of the original movies produced by Netflix and others has been questionable at times, it’s getting better and, with releases like Set It Up and others, is increasingly addressing audience demand for alternatives to franchise films in theaters.
- Subscription ticketing: MoviePass, much-loathed by exhibitors, encouraged people to see more movies because it removed the incremental cost of doing so and therefore the attendant fear of wasting money on a dud. AMC Theaters’ recently-launched competitor, Stubs A-List, may work do do likewise but could also be too late to overcome changed consumer behavior.
- Vertical media integration: When the same company owns both the content (the show or movie), the media (entertainment news and other outlets) and distribution (streaming or download platforms), there’s little reason to advertise elsewhere. Why spend the money on outside ad buys when you can use the data you own yourself as well as the breadth of media under your own banner to do so at lower cost?
Ad spending by vertically-integrated media companies who have embraced direct-to-consumer delivery will, as the IAB report states, be very different than what has to date been common. That will be driven by the decreased need – and reduced desire – to spend money on outside media buys but because it’s simply not necessary.
Chris Thilk is a freelance writer and content strategist who lives in the Chicago suburbs.