By: Fredwill Hernandez
A couple of days have passed since the fifth annual Digital Entertainment World [DEW], conference which took place on Feb 5 – 6, 2018, at the Marina Del Rey Marriott, Los Angeles, [Ca]. Many [like me] are probably still processing, dissecting, and figuring out how to use the wealth of valuable information given about the entire digital landscape.
What made the two day expo interesting, fun, and worth attending [aside from the network opportunities] were the tracks in Video/TV/Movies, Brands/Advertising, Games/Interactive, Rights Tech, Music, Innovation [Stage], and others, in which executives gave insight and opinions during [their] view from the top and keynote/fireside chats.
“Welcome everybody, welcome to the fifth annual Digital Entertainment World. I’m really trilled to be here today, we have a fantastic crowd, I want to thank a few people, and the first person on my list is my dear wife Tinzar, who a lot of you probably have been getting emails from and know quite well. She’s worked tirelessly and her team put this event here today. She doesn’t get enough credit, so let’s all give a big round of applause. We can’t do this event without our sponsor’s support and we just have a fantastic group here. A lot of them are exhibiting downstairs. I really encourage you to take a moment stop by and check out their booths and chat with them. This is a great group and its the foundation of the event, it’s how we’re able to do this event on year after year, so again a round of applause for our sponsors of 2018,” eloquently explained Ned Sherman, Counsel/Director, Manatt Digital; Founder, Digital Media Wire, [and Founder of DEW]. “It’s really an exciting time for all of us in this room, I’d just say strap on your seat belts because 2018 is going to be a rocket ride, 2017 was nothing short of spectacular in terms of growth in entertainment media technology, putting LA on the map as a leader in the digital economy. What I’m going to do right now is walk us through five high level trends that were seeing in the industry…
OTT audiences are growing, no surprise but US adults will consume 1 hr. and 17 minutes of digital video per day an average [in 2017] according to an eMarketers recent report, that’s up 9.3% on the year…
Cord-Cutting, numbers show that 22.2 million US adults have cut the cord, that’s up 33% from the 16 million that cut the cord in 2016 and maybe more interesting [are] Cord Cut never[s] or those consumers who have never paid to subscribe to a paid TV service is expected to rise 5.8% to 34.4 million this year, so what does this mean [?] Well supply and demand for original content is increasing at a rapid pace and we’re seeing what Netflix is doing. Netflix is expected to spend between 7 and 8 billion on original content in 2018, that’s up from 6 billion spent in 2017. Apple, we really haven’t seen much from them in this space, people are projecting they are [kind of] quietly coming into the space. They’ve spent half a billion dollars in 2017, projections are they’ll be spending 4 billion dollars by 2020, something to watch for sure…
Media Consolidation, some are under review from the FCC, they haven’t closed yet. It’s expected that we’re going to see continued consolidation among studio’s and those on the broadcaster content side as they figure out how to compete with the tech giants. When you look at the top ten companies in the United States in terms of gross revenue, four of those companies are tech giants. It’s going to be interesting to see what’s going to happen to the small studio’s [like Sony Pictures, the Lionsgate’s, Paramount Pictures, or the MGM’s ] when we see a tech company acquire a studio or media company [?]…
The opportunity and challenge for digital advertising, there’s no question that ad inventory has been shifting to digital media but it certainly not been without challenges. In fact, a recent report commissioned by WPP estimated that businesses could lose [as much as] 16.4 billion dollars due to advertising fraud in 2018, fraudulent traffic, fake social media accounts, view ability issues, brand safety, accuracy in measurement are [all] causing big concerns for advertisers. It’s important to see how the industry is going to address these concerns…
I want to end with something that’s been dear to me and I’m sure to a lot of us here in the room. [I think] we’re entering an exciting time for Los Angeles and LA is rapidly growing to be a real important leader in the digital economy as tech companies and investors are flocking to the region to set up shop, they’re fueling growth in the region’s innovation economy. For all of us in the room who have been in LA’s media trenches, this is our time. It’s our time to really shine. I think creativity and innovation is what LA is going to be known for, that’s what were known for, and the future is bright, so thanks for letting me share this time with you guys.”
As things got under way, Andrew Wallenstein, Co-Editor-in-Chief, Variety, coincidently validated some of Sherman’s comments during The View From Hollywood: State of Media Business 2018 presentation, “Being from Variety I feel like while Ned [Sherman] is holding up the fort for digital economy here in LA, there’s a certain analog economy that’s existed for almost a century called Hollywood. The worlds of Hollywood and digital economy [I would say] are converging somewhat, competing somewhat, I think there’s no doubt as Ned referred to that 2017 was really [kind of] an inflection point year in terms of that convergence and the competiveness pressures and really not all good for Hollywood and I think the consolidation that you’re starting to see that Ned eluded to is a piece of that.”
As companies’ adapt to counter trends, the ever changing landscape of numbers, [and] consumers and the way they consume content, new words like cord-cutting and skinny bundles have come into play.
“Maybe you guys heard of Virtual Multichannel Video Programming Distributors (V-MVPD‘s) or Skinny Bundles, which really came out in force in the market place in 2017, there’s Hulu, Youtube TV, which advertised all over the Super Bowl last night. While we’re starting to see this cord-cutting number very clear accelerate from about 2% to 3%, there’s no reason to believe it’s not going to keep growing. You are seeing these V-MVPD’s starting to recapture some, probably all of those lost subscribers in addition, you’re also starting to see certain individual networks making direct to consumer plays that are [I think] exceeding a lot of expectations,” eloquently explained Wallenstein. “The bread and butter, really the biggest revenue stream in all Hollywood is what’s known as affiliate revenue comes from paid TV distributors, that number is still probably about a mid-single digit number, still on the plus side which is saying something in the climate where cord-cutting is happening.”
There’s a narrative that isn’t all together wrong about the sky is falling and old media being down for the count, explained Wallenstein, who also predicts, “they are some encouraging trends, if media gets its game going in terms of targeted television advertising revenue, those numbers could be meaningful down the line, but not any time soon.”
As to consolidation, as Ned eluded to, Wallenstein also feels there will be bigger deals before the Liongate’s and the MGM’s, and see’s very clear indications of a CBS and Viacom merger, even though he really doesn’t understand the combination, “it will be interesting how those companies can come together.”
Original content which Ned also touched on, Wallenstein described 2017 as clearly transformative and elaborated on the insane level of spending by [both] Netflix and Amazon and urged attendees not to dismiss what Facebook is doing, “Facebook Watch is a product that just a few weeks ago I was less skeptical of, we’re seeing more anecdotal evidence…of growth, but anything Facebook puts its weight behind has to be watched,” and also reminded everyone, “that yes there are some pretty big fancy projections about blocks of billions of dollars coming into a market place that I think is already severely cluttered, facing serious discovery issues, but if you’re an established media company and you see all these premium dollars coming in, is something that is worrisome.”
Obviously, a lot of problems with the Digital Advertising side, as Ned also referred to, with [both] Google and Facabook taking more than the lion’s share of those dollars with 20% growth, quarter after quarter. Wallenstein also pointed out how other advertising companies [aside from Google and Facebook] are scrambling trying to figure things out, and brought up Buzzfeed and Vice as examples of [successful] companies’ learning to diversify, and predicts future consolidation and [or] even acquisitions.
Among Wallenstein’s other predictions are that, “VR, AR, MR, IoT, 5G, and 4K, etc., will all have a transformative effect on the digital landscape business, we’ve seen a massive amount of change and will in 2018, and we’re just getting started.”
Following Wallenstein’s presentation, Josh Yguado, Founder, President and COO, Jam City, who has been making games for seven years touched on where [he feels] media is going and a massive shift of human behavior and their massive adaptation to mobile phones, touching every part of the earth, every age segment. He pointed out how 2/3 of the world right now owns a mobile device, how 39 billion people are connected to the internet, and how the average person spends 5 hours a day consuming content and media, and asked, “how is this going to change the world ?” and argued that mobile phones, “have changed how we communicate, this is with our loved ones, this is around business, how we communicate around the world. How we connect to other human beings, what it means to connect, and what our expectations are ? Anytime there’s a technological change you see the fundamental content forms [also] evolve.”
Yguado, foresees change based on two vectors: “social interaction” or access to the social graph, and this sort of “sense of accomplishment” in tracking where you are with that content will completely change content over the next 20/30 years, “When you look back at content, television and film that we continue to enjoy now and have enjoyed for the last 70 years, is going to feel a bit antiquated if it doesn’t begin to integrate these [two] vectors.”
Some stats Yguado pointed out were that, “Gamers [or Gaming] worldwide has basically 250 X over the last 10 years, over the past 4 years from a mobile gaming revenue perspective has doubled and is one of the fastest growing media sectors…[and that] it’s to our benefit if we can predict and know what customers want.”
In the digital sphere, success many times is attributed to how a person, place or thing is marketed, one such executive plainly put it, short and sweet.
“Most [film] marketing now is basically awareness, is like here’s the thing, this is when it’s available, here’s where it is, please go use it, please go see it, please go consume it and when we kind of realized as more and more content becomes available [and] we ingest all this money in content and set up these different subscriptions, you kind of have a problem with customers were consideration is never being addressed,” explained Scott Lindenbaum, EVP, Director of Digital Strategy, Deutsch during the [View From The Top:] The Future of Digital Content Market panel. “For example, It’s not just The Spider Man movie is out, but why should I go see it [?], because I now have so many options, [so] if advertising and marketing has any role to play in this world of ever spanning content, is to figure out some way to create some sort of consideration among consumers as to why they [should] consume one thing over another.”
For John Penney, EVP, Consumer Business & Partnerships, 20th Century Fox, who also served on the [View From The Top:] The Future of Digital Content Market panel, “content is [still and] certainly king, and as you look at every discussion were having the fundamental issues we’re all taking about is how to monetize different types of content, whether is through traditional and business models, subscription models or transactions, like going to the theater and buying things.”
Virtual and Augmented Reality was another hot topic that took center stage at DEW, and some of the panelists during the View From the Top: The Future of VR/AR in the Entertainment Business panel, expressed excitement surrounding the industry and their companies’ latest developments.
“What I think is interesting is the broader application of what this headset and those HMD’s [Head-Mounted Displays] really mean [?] More than a way of consuming entertainment, it really is also a tool. [So], I think as an industry we need to ask, what can this tool do [?], that no other tool before it was capable of doing. This year, risk of sounding [perhaps] redundant to other years, I think 2018 is going to be a great year for VR. Last year was tough, I think everybody felt it, how many VR is dead articles came out last year [?],” eloquently explained Christina Heller, co-Founder/Partner, VR Playhouse. “We in all as an industry just slumped through [but really], what we were experiencing was there was an incubated overly optimistic expectations about user adaption and how fast we as an industry can develop the hardware and software, but as someone who is head of a production studio using the tools, we finally have everything we need to really pull the stuff off. The cameras for 360 production have never been higher quality and more user friendly. You see things like the insta360, all the way up to [like the] YI360 VR self-stitching cameras, the software has gotten really good and they are finally people who know how to use it. The headsets this year are going to be coming out at higher quality low price point. [So], I think anyone who stuck it through last year is going to be rewarded this year. I’m excited to see the broad diverse applications that VR can make.”
Headsets up to recently have been based on what’s known as outside-in tracking technology, and the future, according to what [Facebook’s] Oculus codenamed Santa Cruz’s [2.0] will be based on what’s known as inside-out VR tracking technology which puts active sensors on the headsets itself and requires no other positional objects around the room, making them [theoretically infinite] were the controllers don’t need to be tethered, either.
As to moving past the early [VR/AR] adaptors and headsets, and heading towards mass adoption or consumption, Ben Grossman, co-Founder, Magnopus, who was also part of The View From the Top: The Future of VR/AR in the Entertainment Business panel, feels the industry should, “Incorporate the same technology that we use in Virtual Reality and Augmented Reality into traditional or television production, so that when you want to go from traditional film or television into VR/AR your already there…so we can start to get to what we all have been talking about for decades, which is we’re not making a movie, we’re not making a TV show, we’re not making webisodes, but building a world and from that, extract the film, extract the episode [or what have you] and put the consumers inside that world so they can just explore it freely. [So], I think that’s where were heading now.”
Ted Schilowitz, Futurist, Paramount Pictures, who was also part of [The View From the Top:] The Future of VR/AR in the Entertainment Business panel agreed with Grossman, added, “I had a bit of realization that this medium [VR/AR] is starting to get to the point where it is no different than any other creative and technology medium…and people are actually looking at the work as work, so you’re seeing it track like any other kind of work seen at a film festival where almost all of it has no commercial liability, but it has a very strong artistic sense to it, and things get learned from it, and things get used by it and every blue moon, to your point, something pops up out as having potential commercial aspirations, but it is very much the smallest minority and the vast majority are things that get funded from an artistic perspective and is no different from an independent film or independent television or things that get created for people that have a very strong artistic belief that this is what they want to do and every ones in a blue moon something creates an up commercial lift.”
A perfect example to Schilowitz’s point, [I feel] was pointed out by [VR Playhouse’s] Heller in Spheres: Songs of Spacetime, a VR series, acquired by Oculus for seven figures during The [2018] Sundance Film Festival.
Intel’s Volumetric Video, was brought up as one of a few [new] technologies that will [help] push VR and AR [including 360 video] to mass adoption.
“So your defining one of the core problems with the medium, it’s actually not a mass consumption, let’s go to the place to see it medium, is destined to be a home/mobile, you have your own version of it medium,” also expressed Schilowitz. “Is to your point how critical and valuable is the interactive side…if you are going to make it an active experience and you’re going to be the protagonist and you’re going to be the camera, then it does by its nature start to define itself as a game [more] than a movie…which is why kids and people who play games are so in narrow with games, and when games tell really good stories then they can become gigantic monster hits, billion dollars franchises [which in my opinion, all goes back to what Jam City’s Yguado pointed out].”