The Future of Content (One Year Later): The Everything Bundle and How It’s Taking Shape



By Ayal Shmilovich
10/04/2019


Last year, I wrote about the big tech companies trying to compete with Netflix and each other to create the "Everything Bundle". Now, I’d like to explore what has happened in the last year and how it will look going forward.

The first and most striking observation to me is the increased number of services there are today versus last year. Here is a look at some of the bigger ones that exist:



With so many options and costs going up, added services will be more important to get users to stick. So, let’s now revisit the three major tech companies that are likely to continue to change the game.

Google/Youtube

YouTube may be the most valuable of the content assets of the tech giants not named Netflix. YouTube now has over 2 billion monthly active users that watch over 250 million hours of video per day.* Google also has a plethora of choices for content, mostly free with YouTube, but they also have their pay service of YouTube Red, YouTube TV, and YouTube Music.

Google is likely to continue its amazing run because its Android platform is free, and most Google services are free for users. Their use of ads and content driven by individuals will continue to drive YouTube and Google’s dominance. If people don’t have to pay, then they will be much more loyal to the platform.

Amazon

Amazon has been on a buying spree for content and is trying to compete with all the big names to acquire content. Recently, the company purchased the rights to J.R.R. Tolkein’s Lord of the Rings, spending $250 million just to acquire it.* Who knows how much the company will spend on the actual production of the multi-season deal. According to CNBC, Amazon is on pace to spend $7 billion in content for 2019, including music and video* and they don’t seem to be slowing down. Recently, they have also had some major successes at the Emmy’s with shows like The Marvelous Mrs. Maisel and Fleabag, which is helping them gain traction as a true content player and which will continue to add to their content spend.

Apple

Apple seems to be creating quite the content bubble for its users. While some may argue that they have tremendously overspent to get top talent for just a few shows, their strategy is interweaved with several others. Apple has added subscriptions to video games, magazines/newspapers, credit cards, music, iCloud, and phones, each as its own bolt-on service. This shift to become a dominant services superpower has saved Apple from declining hardware sales due to the saturated smartphone and tablet market. The downside to Apple’s listing, is they have spent a tremendous amount of money for only a small amount of content, which may be hit or miss.

In an ever-competitive world, that may not be enough of a value to get people in. However, if they get even a small fraction of their users to buy some of these services, it could mean billions of dollars. Ultimately, Apple’s strategy is to simply keep you locked into the ecosystem, and with all these new features, they may be posted to do well. Finally, it will probably drive some growth in hardware sales, as some things like Apple TV+ content will be free for a year if you buy an iPhone, Mac or iPad. Therefore, people will see this as a “value” if they were already planning to buy a new product.

And the Winner (and Loser) is…?

I believe Apple is moving most effectively towards everything bundle as they offer the most diverse range of services at the moment. For now, it’s all theoretical as to whether it will succeed, but they have many different offerings from which users can choose. In the future, I hope Apple will continue to harness iTunes and the App Store within its platform to offer a true everything bundle where I can have an “all-you-can-eat buffet” for content without having to go anywhere else.

I believe that Netflix has the most to lose now. I know that sounds strange given they are the pioneers who started this game and their first-mover advantage has led to a meteoric rise, but they actually lost US subscribers last quarter, according to their last earnings call. They have so much competition coming from all sides with offerings at lower costs than theirs. I believe Netflix will continue to have an amazing global footprint; however, I think the Golden Age is now over for them. People simply have too many options to choose from and the tech behemoths have enormous revenue drivers from their other businesses that will allow them to continuously pressure Netflix, who only has its one revenue source.

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* https://variety.com/2019/digital/news/youtube-2-billion-users-tv-screen-watch-time-hours-1203204267/
* https://deadline.com/2017/11/amazon-the-lord-of-the-rings-tv-series-multi-season-commitment-1202207065/
* https://www.cnbc.com/2019/04/26/amazon-on-pace-to-spend-7-billion-on-video-and-music-content.html