2023: The Year in Review

A report released early last year by Insider Intelligence referred to 2023 as an “inflection point” in U.S. viewing trends, with adult consumers spending more time on digital video than traditional TV for the first time. It ended up being an inflection point for a lot more: the streaming wars, carriage deals, the studios’ big bet on direct-to-consumer, the need to own everything everywhere, the subscription and advertising economies and the willingness of consumers to subscribe to multiple services (while still struggling to find anything to watch).

As the world properly returned to post-Covid life and inflation started to hit, consumers quickly reassessed their teeming SVOD options, and that trend is expected to continue. In its Technology, Media & Telecommunications (TMT) 2024 Predictions report, Deloitte predicts that the number of SVOD tiers offered by leading U.S. platforms will surge from 2022’s average of four options to eight. “Whether consumers want no ads, the best sports leagues and latest blockbusters or prefer to pay less for ads, last week’s highlights and last year’s TV episodes, streaming services are working to have more options to suit everyone’s budget,” Deloitte said.

Per Deloitte, the changes underway reflect the realities that major streamers are now facing: the “tactical assumptions” they made about the SVOD landscape were largely wrong, namely the single-minded focus on subs growth, relying on SVOD-only tiers and excessive content spend. “Subscriber growth was critical, but it likely incentivized lower prices and higher content spending to acquire and retain customers who could cancel at any time,” Deloitte noted. “Escalating content costs, high churn rates, low subscription prices and the lack of ad revenue combined to create losses in the 25 to 30 percent range—the mirror image of pay TV profits of +25-35 percent. Investors gave M&E streaming services less time and money to turn things around. The result of the initial disruption, the pressures of Covid-19 and the strategic decisions made many streaming video services unprofitable.”

The market’s pressure points led all the major streamers to introduce advertising tiers and embrace new models. Sign of the times? Seeing Disney and Warner Bros. Discovery shows back on Netflix. The Hollywood studios that had gone all in on direct-to-consumer, wanting to keep all of their IP for their own services, opened their doors to third-party clients again. Some of the major streamers also took a different path to global expansion in 2023, opting to tie up with leading local players (such as NBCUniversal and Sky’s pact with MultiChoice on Showmax in Africa) rather than go it alone in challenging international markets.

But the disruption of 2023 wasn’t limited to the disrupters; “traditional” media, too, faced its own challenges last year amid a weakened ad market, viewing shifts and reductions in public financing. The BBC is expected to face a $113 million shortfall due to a lower license fee increase. CBC/Radio-Canada announced a wave of program and job cuts. Commercial broadcasters, too, had to spend 2023 in restructuring mode, with investing in their on-demand services a key priority amid forecasts that BVOD is expected to be the bright spot in the traditional television advertising sector.

Regulators attempted to address the market’s pressure points with new legislation. Australia revealed plans to introduce local content quotas for international streamers. The U.K. reformed its film and television tax incentives, unveiled a new Media Bill that would bring steamers under Ofcom regulation and nixed the privatization of Channel 4. Canada introduced the Online Streaming Act.

The year was also marked by continued consolidation—and ended with speculation of a 2024 tie-up between Paramount and Warner Bros. Discovery. Lionsgate bought Entertainment One. The Walt Disney Company reached a deal for NBCUniversal’s 33 percent stake in Hulu. Canal+ Group acquired Orange’s pay-TV and film arm, took full control of SPI International and picked up an interest in pan-Asian streamer Viu. With its Talpa Network deal scuppered by regulators, RTL Group found a new buyer for RTL Nederland. Fremantle picked up a minority stake in Artists, Writers & Artisans (AWA) and a majority stake in the Belgian company A Team Productions (ATP). Endeavor Group and World Wrestling Entertainment (WWE) agreed to form a new, publicly listed company consisting of UFC and WWE. Mediawan landed majority stakes in the Emmy Award-winning company Submarine and African distributor Côte Ouest. Banijay secured majority ownership in Balich Wonder Studio, a live entertainment business. STV Studios acquired Greenbird Media. Blue Ant Media and marblemedia fused their production and distribution operations into one unified studio and rights business. BBC Studios expanded its production capabilities across Scandinavia with the acquisition of STV. AsiaSat purchased Lightning International. Nippon TV took a controlling stake in Studio Ghibli, with Hayao Miyazaki’s acclaimed animation outfit becoming a subsidiary of the Japanese media group. The North Road Company, which received a $150 million investment from Qatar Investment Authority, acquired a significant stake in Two One Five Entertainment, co-founded by Academy Award winner Questlove and Black Thought of The Roots. OSN+ is merging with the MENA music platform Anghami to create a service that will deliver movies, TV shows, music and podcasts. Fifth Season secured a $225 million strategic investment from Toho International, the U.S. subsidiary of the Japanese entertainment group Toho Co.

It was also the year that FAST was on everyone’s minds as viewers flocked to free viewing options, and CTV adoption ticked up globally. Early last year, Omdia revealed that FAST channel revenue grew almost 20 times between 2019 and 2022 and is expected to triple between 2022 and 2027 to reach $12 billion. World Screen hosted its inaugural FAST Festival last year, and we’ll be bringing it back this summer to tackle the opportunities and pitfalls in this rapidly growing segment.

FAST marks a return to old-school, lean-back viewing, and per Deloitte, that’s not the only flashback the media business will have to adjust to, noting that 2024 will likely see a “return of some of the mechanisms and business models that helped media and entertainment companies become highly profitable before the streaming revolution. In this way, the industry is expected to try to rewrite the game’s new rules to be more favorable to their businesses.”

Bundling is one of those words that has come back into favor. Deloitte’s 2024 predictions report notes that studios and streamers “will likely consolidate or rebundle into offerings that make it easier for consumers to find and pay for all the content they’re looking for. Others will likely license more of their content to other channels–or fall back from DTC and become content dealers, solely producing content to sell into any channel willing to pay. Some content may include premium pricing, and more are expected to syndicate into other providers, retreating from the cost burdens of exclusive content.”

Jana Arbanas, vice chair of Deloitte LLP and U.S. telecom, media and entertainment sector leader, noted: “In 2024, media and entertainment companies will focus on bringing consumers more of what they want. As streaming services work toward profitability, they’re getting resourceful with how they offer content to viewers. Gaming platforms are giving users the tools to create their own games, which could lead to a boom in quality content but could be a threat to their own business longer term. And fans of top franchises will see their favorite characters and stories in both games and movies. It’s a crucial time as the industry finds new and profitable ways to keep audiences engaged.”

As the industry convened in Cannes for MIPTV in April, thought leader and media cartographer Evan Shapiro had some wise words for how IP owners should face this brave new-meets-old world. “We have to change our mindset completely,” Shapiro said. “We can’t just shift and tweak.”

Evolving is crucial in the next three years, Shapiro stressed. “Those who don’t will fail. I’m here to beg for a complete rethink on how we approach the distribution of and the economics of our television industry.”

He added: “Your intellectual property has to traverse all of these platforms and different ways of consumption if you’re going to scratch all the itches that the consumers you are trying to satisfy are looking to scratch. So when you think about how you make intellectual property, don’t only think about television. Think about where else it can go because you are leaving tremendous value for yourself and your consumers if you don’t think about how to reach them on several different platforms with each piece of intellectual property. When you think about the financial underpinnings of this ecosystem, don’t only think about streaming or linear, audio or video, social or TV. They are all colliding in the mind of a consumer, on the device of the consumer. We have to begin to think about things not as an ‘either-or’ but much more as a ‘yes, and.’ Don’t reject something in the ecosystem simply because you’ve never done it before because it’s not part of the tradition of making television. We have to adapt.

“We have to stop thinking of free and paid as two different experiences. We have to stop thinking of AVOD, FAST and SVOD as three different experiences. We have to stop thinking about walled gardens as an answer to a business model. The paradox of choice is creating choice paralysis, and the economic underpinnings of our business are falling apart as a result of that. We need to blend these things into an easy-to-use television ecosystem that the consumer can embrace and not have to navigate.”

Catch up on our recaps of the year in drama and factual, and stay tuned for our spotlights on what happened in the kids’ sector and formats.