2015: The Year of Multiple Tipping Points

In the media and entertainment industries, 2015 was not marked by the birth of an entirely new invention, but can instead be summed up as the year of multiple tipping points, when several key breakthroughs that had been building up started along their mainstream paths.

Frédéric Guarino could not have picked a better title for his blog post. Anyone interested in analyzing the trends shaping our industry should pay close attention to identifying and understanding “tipping points.”

Since Gartner’s hype cycle reminds us that every innovation goes through a cycle and that new standards come to be accepted only at the end of a long process, it is important to be able to recognize defining moments that enable a transformative phenomenon to evolve into a mass movement understood and adopted by the industry and the public.

It is at such critical moments that new applications, new technologies, and new creative and business practices come to be adopted. Guarino identifies four such pivotal moments that, in his opinion, marked 2015. We couldn’t agree more: some of these themes can be found in our 2016 trends report Entering the age of experience, to be published in January 2016, and—with our customary six keytrends as a framework—address the following topics:

  1. Always On: The “all-smart-things” world is on our doorstep

  2. Screen Convergence: Mobile, mobile, mobile…

  3. Transmedia: Virtual Reality (VR) and Augmented Reality (AR) take off

  4. The Power of Many: Is the generational gap materializing?
  5. Monetization: Fragmentation and challenges to the advertising model

  6. The Big and the Agile: Big TV and big tech dominate, yet niches could be the next frontier

The blog that follows sets the table perfectly. Enjoy reading it!

Catalina Briceño, Director, Trends, Canada Media Fund

It was the year when VR laid the course for actually becoming a mainstream medium, when online video became its own ecosystem, with North American tours such as Vidcon, and when Netflix pushed its advantage and started disrupting the film business after disrupting TV earlier and when Amazon became a real competitor in the OTT realm.

Let’s take a look at these multiple tipping points one by one.

1 – The year VR laid the foundation for being a mainstream medium

In 2014, the world took notice of VR via Facebook’s momentous acquisition of Oculus, but 2015 will remain the year VR grew into its own. The confirmed launches of Head Mounted Display (HMD) competitors HTC Vive, Sony Playstation VR and Samsung Gear VR clearly had an impact on making VR more than a niche endeavour.

The conventional wisdom on VR had been that high quality headsets designed for gaming would drive adoption, yet there are indications that other forms of headsets and non-gaming content effectively drive adoption. Mobile VR, primarily via Samsung’s Gear VR, is quietly eclipsing HMD VR as the medium of choice for both creators and consumers.

IonVR and the Zeiss One are other examples of mobile-based VR headsets that will help ensure the mass adoption of VR. The fact that early adopters of VR pretty much all have access to a smartphone helps bridge the gap and does away with most of the financial argument, namely that HMD VR costs too much because of the souped-up PCs needed in addition to the headset.

On the mobile front, at the beginning of the year few foresaw the growing popularity of Google Cardboard, which was initially dismissed as a novelty gimmick. Google Cardboard is playing the role for VR that AOL did for the internet in the late 1990s, providing an easy gateway to a first experience of a new online world.

The NY Times just shipped 1 million Google Cardboards to their subscribers with their November 4 Sunday edition and used it to formally launch their VR app.

2015 will certainly be remembered as the tipping point when VR leapt into the mainstream, a bit like 1995 when the Netscape IPO signalled to the world that the information superhighway was this “thing” called the Internet.

2- Online video became its own ecosystem

A decade after the launch of YouTube, online video has grown into its own and is increasingly becoming a self-sufficient ecosystem. This was confirmed in 2015  with the ever popular North American tours of YouTube stars such as Vidcon with tens of thousands of attendees. The total revenues of a top YouTuber such as PewDiePie topped $12 million in 2015, solely within the online video ecosystem.

Hollywood studios were paying attention when they offered several prominent YouTubers their own “TV” shows, most prominently Grace Helbig on E!.

Yet there are more “purist” YouTubers who do not view branching out into so-called traditional media as a stated career goal, Freddie Wong is a good example. In 2011, the creator ofVideo Game High School, which online broadcaster Hulu picked up, stated:

“Making a feature film or making a TV show [as] a definition of success, that’s out of date, (…) We’re looking at where online content is going, where technology is going — that’s an exciting new frontier. We have this chance to carve out what the online world and digital-distribution world could look like, and that’s infinitely more interesting.”

– Freddie Wong

The power of online video audiences helped propel “films” starring Grace Helbig, Shane Dawson, Kian Lawley and Smosh into the #1 spot on iTunes and VOD.

Even more interesting are outfits such as SuperGravity Pictures. This company has been using granular data capabilities of online video to stage film “tours” and “four-walled” (rent-out screens, in exhibitor lingo) films in local communities where there was a critical mass of fans willing to buy tickets to see the films in theaters. One sign that this could be significant business: former Fox executive Peter Chernin and AT&T’s Otter Media invested in Supergravity in 2015.

3- Netflix moved its disrupting activities into the film business after TV

Streaming giant Netflix solidified its grip on consumer viewing habits and, in November 2015, a study posited that more than 50% of the US public used its service regularly. The infamous 2010 quip by Time Warner’s CEO, referring to Netflix as the “Albanian army” was dead wrong, and BTIG Research published a report highlighting just how difficult a position content owners have put themselves in.

Netflix’s revenues are a steady stream that compensates for the waning days of DVD, yet Netflix has neutered broadcasters’ and studios’ “brands”, if ever consumers cared about them. Netflix also took the industry by surprise by creating a mountain of debt earmarked for content and reported that in 2016 they would be commissioning/producing more original series than major established cable networks.

Source: New York Magazine

And, if that weren’t enough, Netflix decided in 2015 that it was time to turn its sights on the film business and cause the same disruption it caused TV.Beasts of No Nation, its first “day-and-date” release, which means the film becomes available in theaters, DVD and VOD on the same day, is an ambitious arthouse project that Netflix picked up at completion for a reported double-digit million dollar minimum guarantee.

A second project is a Brad Pitt-produced feature that is the type of highbrow entertainment the major studios have abandoned and that indies have had a hard time monetizing. In supporting these projects, Netflix is endearing itself to the creative community in the same way it did by greenlightingHouse of Cards in 2011.

Ted Sarandos, Netflix’s chief content officer, has been vocal in saying the antiquated indie film business model, that relies on geographical deals and minimum guarantees, would be a thing of the past quite soon. Netflix’s entry into indie film and its potential displacement and replacement of foreign distributors – who historically relied on now dwindling video revenues – is shifting the balance of that market.

Celebrated indie producer Ted Hope joined the competition by launching Amazon Studios in 2015; the stated mission is to support indie film by also going for the day-and-date model and releasing highbrow films on Amazon as well as via indie exhibitors such as Drafthouse. Hope has already released Spike Lee’sChi-raq and acquired Elvis & Nixon, starring Kevin Spacey.

4- Amazon became a real competitor in the over-the-top (OTT) realm

Netflix enjoyed a near monopoly on SVOD from 2010 to 2015, when Amazon decided that it was time to accelerate its efforts through a combination of additional rollouts of Amazon Prime Video in Germany, the UK and Japan, with a reported launch in India soon as well –and redoubled investment in production.

Its first marquee Emmy nominations and wins for the trailblazing show Transparent was followed by a critical success with an ambitious series adapted from a Philip K. Dick book, The Man In the High Castle.

Amazon’s worldwide rollout has been measured to date and is piggybacking on its acquisition of European player LoveFilm which was active in the UK, Germany and Scandinavia. Content owners and creators are understandably quite happy to see Netflix finally experiencing some competition and there is an exclusivity window battle going on for top-level content, which is driving SVOD rights prices.

Hulu has also been actively looking for its breakout hit original series and has been active in furthering series with a following, but the networks have been lax at keeping series such as Mindy Kaling’s The Mindy Project on the air.

A third player of note that is finally graduating to quality original content is Sony’s Crackle, with the Dennis Quaid/Kate Bosworth seriesThe Art of More. Other more niche players such as Rakuten’s Viki, focused on Asian series, will surely commission their own original series.

A related question has been raised repeatedly in 2015: is the “Golden Age of TV” a content bubble? FX’s Jon Landgraf has been challenged by several executives in competing networks, but there does seem to be a ceiling as to how many high quality projects are financially sustainable.

Actors and directors are finding new creative outlets that the traditional studios have essentially jettisoned, all too preoccupied with their multiple branded tent-pole projects.

In 2015, we saw an acceleration of trends that had been building over the last decade: VR, online video, SVOD and OTT. VR is especially interesting from a content perspective since it mandates a fundamental reinvention of visual storytelling grammar and vocabulary. The merging of the traditional visual styles with techniques more rooted in video games will give way to a new medium and that could be the focal point of 2016. High-level directors such as Steven Spielbergand Ridley Scott have started to work on their own VR productions.

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