2022: The Year in Review

The streaming wars shifted into overdrive last year as Disney+, Paramount+, Viaplay and others expanded their footprints and new players arrived on the scene, leading to record investments in content across the globe. But with war ongoing in Europe and fears of a global recession, peak TV finally appears to have peaked. Indeed, Ampere Analysis is forecasting that global content expenditure will increase by just 2 percent this year, the lowest growth in more than a decade, other than the Covid-19-induced contraction in 2020.

M&A activity is also slowing, according to PwC, with last year lacking some of the transformative megadeals that shaped 2021. But the talent arms race did drive a slew of investments by IP owners—read our drama and factual recaps for what happened in those spheres, and look out for our kids’ and formats trend pieces in the days to come. Mediawan agreed to acquire a significant stake in Plan B Entertainment, co-founded and led by Brad Pitt. ProSiebenSat.1 took complete control of Joyn, and Nexstar Media picked up a controlling interest in The CW. Maximum Effort Productions, a production company co-founded by Ryan Reynolds and George Dewey, secured an equity stake in FuboTV. Red Arrow Studios’ U.S. production companies, a portfolio that includes Kinetic Content, Left/Right, 44 Blue, Half Yard Productions and Dorsey Pictures, were sold to Peter Chernin’s The North Road Company. Candle Media, founded by Kevin Mayer and Tom Staggs, acquired the Spanish-language production outfit Exile Content Studio. Chicken Soup for the Soul Entertainment agreed to acquire Redbox, bolstering its digital capabilities in AVOD, TVOD, PVOD and FAST. TelevisaUnivision acquired the streaming platform Pantaya. Bodhi Tree Systems, the venture founded by James Murdoch’s Lupa Systems and Star India veteran Uday Shankar, led a Rs 13,500 crore ($1.8 billion) investment in Viacom18 in a bid to form one of the largest TV and digital streaming companies in India. Penélope Cruz and The Mediapro Studio partnered to launch a new production company, Moonlyon. This year, media observers will be watching to see who buys Hasbro’s Entertainment One (eOne) TV and film business not directly related to its branded-entertainment strategy. The toy and play giant enlisted J.P. Morgan and Centerview Partners to assist with the potential sale process, which would include a content library consisting of 6,500-plus titles, the non-Hasbro branded film and scripted TV business, its interest in eOne’s Canadian film and TV business and an unscripted division. Meanwhile, TF1 and M6 canceled their merger transaction last year, with RTL Group so far opting to retain its interest in M6.

Factors that will impact deal activity in 2023 include higher interest rates, inflation, geopolitical tensions and regulatory oversight, PwC notes. As such, dealmakers will need to “refine their portfolio strategies and be more intentional about deal value creation,” PwC says. PwC also expects a greater focus on profitability through “more purposeful and deliberate content spend,” decreased expenditure on subscriber acquisition costs, a focus on limiting churn and the rollout of ad-based tiers.

Disney+ and Netflix both introduced their lower-cost ad-based tiers in 2022. Price-conscious audiences are becoming more willing to watch ads on their streaming services, Deloitte observes in its 2023 Technology, Media & Telecommunications (TMT) Predictions. By the end of 2023, two-thirds of consumers in developed countries will use at least one AVOD platform a month, a 5 percent year-on-year increase. Moreover, Deloitte projects that all major SVOD platforms in developed markets will have added an ad-supported tier by the end of this year. Looking ahead, Deloitte expects half of these platforms will have added a FAST service by the end of 2024. By 2030, most online video service subscriptions will be partially or wholly ad-funded.

Deloitte surveyed consumers in several markets and found a preference for lower-cost or free ad-supported options. In addition, many consumers are already regularly watching ad-supported services: 59 percent in the U.S., 58 percent in the U.K., 45 percent in Japan, 33 percent in Germany and 30 percent in Brazil. Deloitte also notes that the ad load for AVOD services from former SVOD providers is likely to be moderate, at about 4 minutes per hour, whereas broadcast TV ad minutes may double or triple in prime time.

It’s still unclear how much of an impact the lower-cost tiers will have on the global giants’ slowing subscriber additions. Recent data from Antenna suggested that Netflix’s advertising-supported tier has had a slow start, accounting for just 9 percent of new U.S. sign-ups in its first month. The Basic with Ads tier ($6.99), introduced November 3, was the least popular of the Netflix pricing options, Antenna says, with 41 percent opting for the Basic plan ($9.99), 24 percent for the Standard plan ($15.49) and 25 percent for the Premium plan ($19.99). In addition, just 0.1 percent of Netflix’s existing U.S. subs switched to the lower-priced ad tier in December. When HBO Max introduced its AVOD tier in June 2021, 15 percent of new sign-ups were for that plan, and 0.2 percent of existing customers made the switch, Antenna says.

Churn is a significant concern for SVOD operators, sitting at 38 percent in Brazil, 37 percent in the U.S., 32 percent in Germany, 30 percent in the U.K. and 19 percent in Japan. Bundling and pricing discounts will be key to U.S. SVOD platforms as they look to limit churn amid intensifying competition, according to Ampere Analysis.

“AVOD’s resurgence is healthy for the wider television industry,” Deloitte says. “For SVOD providers, it unlocks an additional revenue stream and could reduce churn; for broadcasters, it raises the profile of a service they’ve been offering for years; for consumers, it enables continued, lower-cost access to their favorite content, albeit with the (minor) wrinkle of having to watch ads. While AVOD is not for every viewer, it’s likely to appeal to the majority, even in the wealthiest of markets. The transition to AVOD won’t, however, be a walk in the park. Consumers should be migrated gracefully. SVOD providers may need to restructure, add sales capabilities, reformat existing content, commission differently, measure ad impact and change culture.”

Variety in the ad range, along with a low volume of ads per hour, will be critical. “Content providers should replicate the ad sales organization and culture that traditional broadcasters have had for decades,” Deloitte says. “For some SVOD players with a traditional broadcaster heritage, this should be easier; for streamers that have never sold advertising, the learning curve will likely be steeper.”
Deloitte also observes that content may need to be edited differently. “Content that was commissioned for an ad-free service may require reediting to identify natural breaks to show ads. By contrast, library content that was originally edited to include ad breaks at regular intervals may not require any changes. Some licensed content may not permit the insertion of ads, so agreements may need to be revised. Content providers may also need to replicate the episodic release of content that broadcasters have perfected over the decades such that their tentpole releases are popular enough to drive the national conversation. For this to happen, new content should be teased and released at regular intervals, rather than a season at a time.”

Deloitte also identifies live sports as the next major battleground in the streaming wars. In 2023, streamers will spend over $6 billion on exclusive major sports rights in the largest global markets. Notable recent deals include Amazon and the NFL in the U.S., Viacom18 and IPL in India, Viaplay for Premier League in several European markets, Apple’s global pact for MLS and DAZN’s investments in Serie A in Italy and LaLiga in Spain, according to Deloitte.

“It is important for both streaming providers and sports organizations to reflect on balancing their short- and long-term needs,” Deloitte advises. “Pure-play streaming providers and tech companies should consider if the high cost of live sports rights is worth it. Will it help attract and retain subscribers? Will it drive a halo effect for their other products and services? Traditional entertainment companies with both linear channels and streaming services should decide which service to prioritize when it comes to investment. And sports organizations should ask if their media deals are both meeting their current fans’ needs and cultivating the next generation of fans. Finding astute answers to critical questions like these will be key to what separates the champions from the runners-up.”

2022 was also marked by the return of physical markets, beginning with the first MIPTV since 2019, and the turmoil surrounding NATPE, which declared bankruptcy after having had to cancel its 2022 edition amid a Covid surge in the U.S.

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