The Year Streaming Made Cable Very Nervous
It’s hard to believe that it’s been less than 20 years since Reed Hastings went about exacting revenge for a $40 Blockbuster late fee on “Apollo 13" by bankrupting that multibillion-dollar corporation. And while some would argue that $40 is a small price to pay to enjoy Kevin Bacon’s greatest non-killer-mutant-worm related role, Hastings was only worth about $700 million at the time, so every penny counted back then. All kidding aside, 2014 has been a monster year for streaming video services, due in no small part to visionaries like Netflix’s Hastings and Marc Randolph proving the business model.
Streaming video services are nothing new, but perhaps at no time in history have they been such a hot topic. Netflix, despite a slight slowdown in subscriber growth, continued its record-setting performance in award ceremonies typically considered the domain of cable companies (45 Emmy nominations and 10 wins in just its first two years of contention).
This is not to suggest that Netflix is bulletproof just because it’s the “elder statesman” of streaming video. The competition has arrived and is ready to battle for market share. Amazon Prime, Crackle (thanks to Jerry Seinfeld), and Hulu are all getting better original content and expanding their user bases. In fact, eMarketer predicts that nearly half of all Americans will be watching TV online within the next few years. Contributing to this explosive growth are streaming devices like Roku Stick, Amazon Fire Stik, Chromecast, and others that have effectively made the barrier to entry lower than $50 (all of this has likely contributed to Netflix’s aforementioned slowdown in growth).
Net Neutrality Pressure Building
As you can imagine, the incredible growth of streaming video and the rise of cord-cutters have put cable companies on the defensive. Unfortunately, when entities with that much wealth and power go to war, everyone feels the hurt. The vitally important issue of net neutrality finally got the attention it deserves last year when cable giant Comcast was successful in squeezing Netflix for an estimated $12-$50 million a year (exact figures are not available). This deal may have led to the success of Internet Slowdown Day, when 10,000 websites and over two million individuals let Congress know that net neutrality is a right, not a privilege. Net neutrality is guaranteed to remain a topic of heated debate until lawmakers reach a consensus on the matter.
Ultra-High-Speed Broadband Rising
This is becoming critically important for good reason. Google Fiber has already laid the groundwork for ultra high-speed gigabit Internet in markets across the U.S., with more expansion expected in 2015. This will open up the reality of ultra high quality video streaming. Even now, with the best broadband connections, streaming still isn't on par with Blu-ray DVD quality. That’s about to change.
Meteoric Growth of Programmatic
This was also a pivotal year for advertising technology, as the industry has begun embracing programmatic marketing in a big way.
Modern programmatic marketing began just five years ago, with the advent of real-time bidding. With the power to target specific consumers rather than just general demographics, it’s not hard to understand why agencies and brands have been adopting this new technology in droves. In addition, the supply-and-demand pricing offered by RTB virtually eliminates the guesswork involved in making an ad spend. According to an IDC report, RTB-based spending ($0 in 2009) will hit $10 billion in 2015.
Programmatic media has clearly exceeded all expectations in terms of new technology adoption. Moving beyond programmatic buying, we will see creative content that adjusts to its environment. Brand managers will gain the power to adjust product pricing based on the market and the context. Price elasticity will at last be controllable in real time, allowing brands to have never-before-experienced influence over distribution and pricing.
2014 was a big year for marketing technology, creating seismic shifts in both online video and the ways in which that video is aimed at specific consumers. As the lines between traditional TV and digital streaming continue to blur, marketers will benefit from the highly targeted opportunities to reach audiences on a myriad of devices that programmatic advertising provides.
I hope that this column has provided you with interesting and actionable information throughout the year. Wishing you and yours a happy and prosperous 2015!