Spotify’s newest board member shows how important video is to its future (NFLX)
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BIISpotify has added Netflix's chief content officer Ted Sarandos to its board of directors, Recode reports. Sarandos’ appointment will boost Spotify’s video content ambitions, to differentiate itself from rival music streaming services like Apple Music and Tidal, and from more pure-play audio platforms like SoundCloud and Pandora. More broadly, the appointment is a sign of strengthening ties between Spotify and Netflix as they look to combat digital titans – especially Apple – in their respective content arenas.
Sarandos is a powerful figure in the entertainment industry. He oversees Netflix's content negotiations and spearheads its original programming efforts. His addition to Netflix's board accomplishes several goals:
- Diversifying Spotify beyond a music-only content platform. Spotify is committed to building out its video content, to provide a broader experience for users. It started showing clips from Comedy Central, ESPN, the BBC, and Vice and rolled out video streaming on its mobile app in 2016, with 12 original shows coming later this year. Video plays into Spotify users’ video consumption patterns too. They dedicate an average of 1.17 hours to online TV per day, almost 30 minutes above the average internet user, according to GlobalWebIndex.
- Helping Spotify capitalize on video ads in the lead up to IPO. In 2015, paid subscriptions made up 30% of Spotify’s total user base yet accounted for almost 90% of revenue. Spotify is therefore looking to squeeze more revenue from non-paying users, to establish two robust revenue streams. Video can help with this by unlocking valuable ad dollars. Ad spending on original programming has more than doubled since 2014 according to the IAB, and PwC estimates video ad spend will grow at a 19% CAGR to over $10 billion by 2020.
- Leveraging video to ward off rival music streaming services. Apple is ramping up its original programming, which is centered around its Apple Music streaming service. The company has a number of exclusive shows in the works, including six-part mini-series produced by Dr. Dre, a documentary about the Cash Money Records label, the Planet of the Apps reality show, and standalone Carpool Karaoke episodes. Providing its a catalog of compelling programming keep Spotify competitive amidst challenges from Apple.
- Asserting Netflix’s solidity and that it’s not looking to sell. Rumors surfaced earlier this month that Netflix was an acquisition target. Some even speculated that Apple would move for an acquisition, which would go towards making a compelling Apple TV product. This was probably unlikely to happen anyway, but the Netflix-Spotify boardroom tie-up will help extinguish such speculation for the imminent future.
- Building Netflix and Spotify’s bond to create a powerful force. Ted Sarandos is the second Netflix executive to join Spotify's board after Barry McCarthy, Netflix's former chief financial officer. In 2015, a year after joining Netflix's board, McCarthy transitioned to become the company's CFO. Stronger ties, collaboration and teamwork between Spotify and Netflix will help both companies compete more forcefully in the music and video content spaces in digital media.
Margaret Boland, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on subscription video on-demand services that examines how the growth of SVOD is coming at the expense of the pay-TV industry. The report analyzes the state of the pay-TV industry and maps out which demographics are more likely to stop buying traditional TV packages.
The report also discusses the user base, original content offerings, and subscription models of the major subscription streaming services available today, including Netflix, Hulu, and Amazon Video. Finally, it looks at how traditional pay-TV companies and premium channels like HBO and Showtime are addressing the shift to digital viewing, as well as the implications of their response for advertisers.
- Those abandoning pay-TV packages fall into three main groups: cord-nevers, cord-cutters, and cord-shavers. Whereas video streaming services have found favor with younger viewers in particular, an increasing portion of older subscribers also are leaving behind their pay-TV packages. Still, younger viewers watch four times as much video content online than older viewers.
- Netflix is the largest SVOD service and will continue to dominate the industry with an impressive original content lineup and aggressive expansion plans.
- Amazon is trying to compete with Netflix by investing significant resources in original content.
- Hulu is the third-largest SVOD service, but the only one to offer ad-supported membership tiers. Hulu has been the slowest to roll out original and exclusive content, but it has inked numerous deals in the past year to boost its content library.
- Pay-TV companies are responding to the rise of SVOD services by offering subscribers "skinny bundles" and their own streaming services.
In full, the report:
- Illustrates the fall of the traditional TV package and the rise of broadband only cable subscriptions.
- Lays out the different types of viewers that are leaving behind pay-TV: cord-cutters, cord-shavers, and cord-nevers.
- Examines the leading SVOD services including Netflix, Amazon Prime Video, Hulu, and premium channel offerings from HBO and Showtime.
- Explains the various ways that pay-TV companies are responding to the rise of SVOD services, notably skinny bundles and standalone streaming services.
- Considers what the migration to SVOD services means to marketers.
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