Content is NOT King
A classic thought experiment asks "if a tree falls in the forest, and no one is around to hear it, does it make a sound?" The question begs a further one: Who cares?
There's a lot of talk about content these days. More money is being spent on content than ever before. Consumers don't want their content interrupted and demand it immediately. In 2017, Netflix, Amazon, and Hulu spent a combined $15 billion on content productions and acquisition while the three biggest traditional network spenders (NBC, FOX, and Time Warner) spent over $24 billion.
Many networks, marketing execs, and advertisers are still married to the classic maxim that "Content is king" and spend fabulously to make it, surround it, and acquire it. But the wisest know Content is not king. Distribution is. And the shifting media landscape proves it.
Despite Great Content Viewership can Decline
I would argue that all the major networks put out great content in mostly equal measures. NBC has This is Us, ESPN produces exceptional sports coverage, FOX has the Simpsons, Netflix Stranger Things, HBO Game of Thrones. Networks know there is a range of audience preferences and produce a variety of content to appeal to diverse audiences.
I'm not saying that all content is created equal, but I believe there are 'good' shows in every network's library given the amount of content produced. Yet, despite huge content spends across the board, we've seen broadcast and cable networks' viewership decline YOY while streamings' has grown. No amount of content has been able to staunch viewer hemorrhaging from traditional broadcast and cable.
The image to the left shows YOY viewership declines from all major traditional networks compared to Netflix, a 669% increase in minutes watched. All cable and broadcast saw double digit declines from 2010 to 2016. Discovery is the single outlier.
Could one reasonably argue that Netflix's subscriber growth is due to better content than NBCU, ESPN, Viacom, Time Warner, 21st Century Fox, CBS, and A&E networks? It isn't. Their growth is due to their distribution. Their convenient, accessible, consumer friendly delivery system facilitates higher YOY viewership while awkward package bundles, cable boxes, and satellites discourage it.
In fact, most of the popular streamed content isn't even produced by Netflix. It's syndicated (aka licensed) content from other networks. In other words, content that Netflix pays other networks for performs even better on their platform and outperforms most of the content they produce themselves.
Distribution Drives Content Value, Not the Other Way Round
Ever wondered why a film's opening weekend and box office receipts are so closely followed and reported on in industry news? It's because a film's box office receipts are critical to the lifetime value of a film as an asset. The prices a studio can ask for during the home entertainment phase and subsequent syndication phase are directly correlated with the demand the film received at the theater. If a film bombs at the box office, it is doomed for late night reruns on secondary networks.
The box office essentially operates as a consumer approval barometer, with gross receipts dictated by two important factors: how many theaters a movie can get into and how many people it can bring into those theaters. That means the bigger distribution a movie receives, the more box office receipts it can acquire, and the more valuable the movie becomes in the long run.
Unfortunately for the big screen, theater tickets per capita have seen steady declines for the past 5 years. In response, studios have increasingly relied on a few trusted franchises like Marvel, Star Wars, and Harry Potter to fill seats, and theater owners have jacked up ticket and concession prices.
In millions. Total Gross is the calendar gross for that year, meaning actual revenues during the time period, including holdovers from previous year. Source BOX Office Mojo. Tickets sold per capita has descreased while tickets prices have increased to fill the gap. The average domestic ticket now costs $9.16.
Although major franchise film can still draw crowds, movie theaters on a whole have been unable to attract audiences, and the reliance on just a few franchises leaves studios vulnerable to audience fatigue. See Disney's Han Solo example.
Less butts in movie seats isn't because of worse movies. Amazon produced several Oscar winning films last year. The theatrical release distribution model is failing. Only big franchises that have nationwide releases can sustain it.
People don't want to pay $9-$16 to sit in sticky seats and eat soggy popcorn when they can enjoy the very same movie in their pajamas. The decline of the movies is a byproduct of convenience, not content. The fault lies with the theaters and consumer preference. Distribution makes the movies.
Distribution Allows for Content Monetization
There are two main revenue models in media, paid subscriptions and advertising. Think about the two most successful media companies of the 21st century. No, not Disney or Netflix. They are Google and Facebook.
Google and Facebooks' PR teams will tell you they're tech companies, but in the simplest possible terms they operate as massive media distribution systems. They aggregate and distribute content for the digitally connected populations. Don't believe me? Google it.
In Google's information web, you can visualize how google aggregates information and provides it in a convenient, single location - the search bar. Google has become the preferred distribution model for information.
Google and Facebook ingeniously found a way to develop massive media distribution networks without the burdensome capital investment required to produce content. In fact, you are producing most of their content for them. Read the Facebook terms and conditions closely. They can use any and all content you upload to their platforms and monetize it via inserted ads. Thanks for sharing!
The digital age has proved more than anything that distribution matters most in the media game. Content is relative, subjective, and intangible. You can measure distribution, distribution creates content value, and great content does not guarantee viewership. Determine your distribution channels before you build your content.
Thousands of trees have fallen in the forest, but we only care when we hear them crash to the earth.