SWITCHING CULTURE IN CABLE AND STREAMING (March, 2018)

Added on by Arturo Gutierrez.

We’ve been entertaining this hypothesis; that video viewers can and will follow preferred content wherever it goes. Regardless of platform, cable service provider, or mobile device, consumers can now comfortably navigate different service providers. 

In a not so distant past, consumers were locked into single service providers by geographical boundaries. Entire counties could only be serviced with content from one cable company, for a determined amount of time, and if lucky, that might include a packaged bundle consisting of an email address (that you never used) and some Wi-Fi enabling equipment. Don’t get us wrong, a bundle is still a wonderful tool for selling services that bring great value to consumers; however, the market has changed so much over the years that the cost savings associated with bundles have become increasingly challenged. 



Context 

Some insights shared from 451 Research last October made it clear that Pay TV Customers are actively looking for special deals and promotions to switch from their current providers. From skinny tv packages to no equipment or rental fees, a desire to not only tailor but meet a growing demand of needs is persistent in the market for media and entertainment companies. Now, consider these needs alongside the growth of streaming behavior (HBO announced last week it grew from 2 to 5 million subscribers in the past year), its penetration across all age groups, pervasiveness in all devices, and it may lead one to wonder if content providers (OTT, TV, Satellite) can not only address consumers’ swiftly changing behavior but also retain them long-term and mitigate churn. 

chart_original_context_netflix_vs_amazon.png

This got us thinking beyond “why are people switching?” to the following questions: 
 

  1. What has happened in the marketplace that has allowed for switching to occur so easily?
  2. Can customers in a multi-device world with multiple needs be retained long term?

Today we’ll share our understanding as to changes in the marketplace that have resulted in the shift to switch providers and to do so regularly and readily. We’ll cover long-term retention at a later time as it will require a more complex analysis. 

Moving Pieces 

Simply put, the pieces are in place. Cancellation fees and long-term contracts are no longer a barrier for TV viewers to leave one provider for another. Quality content has become ubiquitous, even available as a free add-on through new means (T-Mobile One and Netflix), and its shortened seasonal nature has become a perfect moment for viewers to jump around from one service to another within short periods of time. In March, a viewer may sign up for an OTT product delivering free Showtime so they can catch the latest season of Billionaires. Only to cancel their subscription to join HBO NOW for the newest season of Ballers. Additionally: 
 

  • Devices like Chromecast and Amazon Firestick have become increasingly affordable. In most cases, the cost is less than a month’s cable bill.
  • Internet speed is becoming a bit of a commodity… “it’s fast enough.” Finding an ISP with the fastest internet is no longer a priority, it’s all fast.
  • It’s questionable where loyalty lies… with the content, or the pipes that provide it?

Net-Net 

As traditional barriers to switch, like price and contracts, continue to disappear, more high-quality content and preferred content becomes accessible across multiple channels, content providers should continue to feel increasingly pressured to not only expand acquisition and engagement programs but place even more emphasis on win-back strategies. 

Customers will leave, but it looks like the market has created an environment where it’s even easier to come back.

Cultural Colonization

Added on by Arturo Gutierrez.

The term cultural colonialism refers to two related practices: the extension of colonial power through cultural activities and institutions (particularly education and media) or the asymmetrical influence of one culture over another. -  Blackwell Encyclopedia of Sociology

 

+ This:

When a perceived superior culture (financial and/or military advantage) forces their beliefs, interpersonal behaviors, and social practices on another as a standard for acceptance. Where the adoption of that culture may secure socio-economic acceptance, and when deviating from that culture can lead to not being accepted, seen as, and treated as other.

 

This Week In Conscious Capitalism

Added on by Arturo Gutierrez.

Just a quick list of conscious capitalism activity over the past few weeks and some thoughts...

1. Nordstrom deciding to no longer carry Ivanka Trump products

This one in particular is interesting because the ongoing discussion on 45's influence over his business interests while in office. Also see Kelly Anne Conway's remarks, because seriously wtf?    

2. Uber's apology here following JFK surge pricing during taxi strike. And the eventual step down of CEO, Travis Kalanick's from Trump's business advisory council. Also related, LYFT's reaction. 

3. AirBNB's super bowl ad or just about every super bowl ad this year.

4. Amazon Dash Button for ACLU

This is probably my favorite of the examples this week. As it incorporated the latest in consumer behavior and product innovation. It also targets a user base with a timely need.

Regarding all the activity...my interest and questions don't align so much with concerns about how genuine these moves are for the mentioned companies as much as these actions further proving that all corporate strategy moves have an economic factor in mind. So while we may praise a retailer for dumping a brand just remember that finance can explain just about everything. 

 

Related to the above is what's happening to Under Armour at the moment. Perhaps no other clothing brand has diversified and experienced growth quite like UA has. They've made their target clear (opening up offices in Portland) and have signed some of the biggest names in sports. Their growth, fueled by a mix of diversifying at the right time and integrating technology as well any brand, was increasing at + 40% YOY since 2014. How unfortunate would it be if a company like UA were to experience the effects of conscious consumerism after comments made from CEO Kevin Plank. The concept of a consumer's moral alignment affecting a brand should be explored a little deeper (maybe the next white paper). It certainly raises questions about how far a company should extend it's influence on social issues if it leads to financial impact. And if that company is sports or entertainment oriented, good luck not being affected by reactions from celebrities and athletes like The Rock, Steph Curry and Misty Copeland.

The Inevitable Intersection of Agencies and Consultancies

Added on by Arturo Gutierrez.

A lot has been written about the changing competitive landscape of advertising and the need for the model to change. Way back in 2010 when I first joined JWT, which turned out to be an opportunity of incredible professional and personal growth for me, I began to see those areas where ad agencies could benefit from investing in, namely, technology consulting, marketing automation, and more specifically analytics. This recent article in Ad Age has led to a number of healthy discussions as of late and I want to briefly share some thoughts on where agencies still have an advantage and provide context on just why consultancies are very well positioned to compete. In many ways, competition here is dependent on who it is that clients will trust as technology and marketing increasingly intersect.

"Growth Practices" has become a common term on both the agency and consultancy side as I've personally experienced building and trying to compete with new offerings in market in both industries. On the agency side, it's more common than not to see an agency try and build an offering around analytics, CX and consulting capabilities. The traditional consulting firms, have done a great job on the acquisition side in bringing in capabilities they otherwise may have had a difficult time building out right from within, like branding, channel strategy, design...the softer side of marketing. And therein lies one factor that is key to the race to the middle; do we build or acquire? 

M&A in this context gets complicated quickly. If one industry leader (hypothetically, Trader Joes) merges with another (Sprouts) that shares similar capabilities and offerings, integration has a better chance of occurring. The profile of employees, processes, capabilities, and functional expertise among it's leaders, etc are disparate at best when you compare a traditional ad agency to a consultancy. Both, if they want to build from within, need to look for completely different profile of employees, make culture decisions, get buy in from existing department heads, and find a way to bring to market a new offering with existing revenue streams. But it does look like consultancies have a done a decent job integrating acquired agencies as both Deloitte (Banyan Branch, Heat ) and Accenture (Fjord, Karmarama) have brought in capabilities they took to market rather quickly with existing digital services.

These agencies don't just have capabilities consultancies can fill gaps with, they have positioned themselves to be trusted advisors to CMOs. They also supplement existing consultancy offerings that enable marketing execution (AB testing, big data, CRM). Agencies on the other hand still have the ear of the CMO, and if they build complimentary value services from within, or acquire and integrate efficiently, can lead CMOs as they take on work that intersects more and more with the office of the CIO/CTO. 

How much work consultancies are winning from agencies is a little unknown, but it's happening. And one reason is that traditional agency work, owned by the CMO, has been slowly converging with that which is managed by the CTO as technology has become instrumental in channel planning and execution. This is where, IMO, the race is. As the CTO and CMO work closer together, which will be the trusted advisor, the agency or the consultancy?