Manatt Digital and Technology

2015 Digital Media Year in Review

Yes, it's that time of year again. Nostalgia and reflection time—taking a look at this past year in digital media. Nearly one year ago, Manatt Digital Media CEO Peter Csathy made several predictions for TechCrunch in an article titled The Future Of Digital Media 2015. This month's MDM newsletter uses those predictions as guideposts to discuss the continuing string of transformative strategic developments and moves in 2015's world of digital media (and to make some early predictions for 2016).

I. Prediction: The mobile-driven, premium, short-form video economy grows up, and traditional media companies finally take notice on a mass scale . . . International also becomes a major new battleground for these borderless video opportunities.

Reality Check: 2015 was the year when the media world's new digital realities hit home on a mass scale. Too many data points to mention but, on the domestic front, here's one significant one: Comcast/NBCUniversal. This media giant placed major strategic bets this year. First, it invested $200 million into Vox Media. Then, in less than one week, another cool $200 million in BuzzFeed. Then, it launched its mobile-first short-form video platform "Watchable." Soon later, it announced its longer-form stand-alone subscription OTT companion to Watchable, i.e., "SeeSo." Now quite a digital statement. Bravo! (a network NBCUniversal owns, by the way).

On the international front, global media giants—particularly in Europe—placed their own massive bets. Cases in point include Scandinavian media company MTG buying leading UK MCN/MPN Zoomin.TV for a deal valued at nearly $100 million, and German media giant ProSieben.Sat1's acquisition of leading U.S. MCN/MPN Collective Digital Studio, which it combined with its existing Euro-based Studio71 MCN to create a global digital, mobile-first and Millennial-driven media company (valued at approximately $240 million, including ProSieben.Sat1's cash infusion).

II. Prediction: Major consumer brands follow suit and act in earnest. Massive marketing dollars shift from traditional media to more measurable digital platforms in the form of branded content (not just ads), cannibalizing the former for the first time.

Reality Check:Ad dollars shifted from "traditional" to digital/mobile in real, eye-opening ways, the magnitude of which is still not fully appreciated. The digital New Fronts were proof positive of that. One major U.S. data point in that regard—Viacom widely reported that it is placing major bets amidst these new realities. Specifically, it is developing its own Nielsen-like audience measurement service. Amidst these transformative forces where speed to market is at a premium, an overarching question is whether to build, rent or buy? Several are choosing the latter path.

III. Prediction: YouTube is challenged by new competing video platforms like Facebook and Vessel.

Reality Check: YouTube no longer stands alone at mass scale in the digital-first video world. Facebook attacked the video market in a very big way in 2015. It is a behemoth alternative platform that increasingly matters to video creators and consumers. Same with Snapchat, which is now a bona fide media company (and not just your kids' communication platform). YouTube's competition is very real for the first time and that's precisely why it recently reacted to these competing forces by launching its YouTube Red ad-free paid subscription service. Even the original video star concluded that it can't stand still. Experimentation is the order of the day. Most feel, you simply must be in the game and can't be afraid to fail.

IV. Prediction: Traditional pay-TV packages likewise come under fire in the "Great Unbundling" that began in 2014.

Reality Check: In 2015, virtually every media company has now either launched or announced its own stand-alone paid subscription OTT service (cases in point include NBCUniversal's SeeSo, CBS's All Access, ABC's WatchABC, Univision's just-announced Univision Now, HBO NOW, Showtime, Nickelodeon, Comcast Watchable, Dish's Sling TV)—not to mention all the others out there focused on particular vertical/niche programming. But, one big looming question remains—in this era of the "Great Unbundling," how many of these paid subscription services can the market take? 2016 will shed important light on that question.

V. Prediction: Media and tech companies will converge.

Reality Check: Significant strategic joint ventures and partnerships abounded this past year. Case in point, Warner Bros' and Sony's OTT Netflix-like joint venture with SingTel in Asia named HOOQ. Expect this trend—as well as significant M&A—in 2016.

VI. Prediction: On the music side, businesses move away from stand-alone services.

Reality Check: Why? Because as massive as both Spotify and Pandora are, they still recognize that they must move beyond subscription-based revenues alone. That's why Pandora just recently announced two major strategic moves to diversify its business model. First, acquiring now-shuttered competing service Rdio for $75 million in order to add on-demand functionality and compete head-on with Spotify and others. Spotify also hears the music and just partnered with Songkick to add its new Concerts feature that gives it a hoped-for major new revenue stream. With all the consolidation the past two years on the digital music side, don't rule out significant M&A here in 2016.

VII. Prediction: Gamers see real action too.

Reality Check: This prediction focused on game developers increasingly transforming themselves into multiplatform media storytellers à la Rovio. Certainly we are seeing accelerating moves and investments to that end. MDM colleague and games expert Patrick Sweeney confirms this. He underscores that for game developers, it's not just about original IP for their stories. Examples based on existing properties include Laura Craft Go (a mobile strategy game based on Tomb Raider), Fallout Shelter (an interesting resource gathering twist on a classic game console title), and Pac-Man 256 (a new mobile spin on one of the most classic game titles).

VIII. Prediction: Gamers take to wearables . . . we see an Oculus under every hardcore gamer's tree.

Reality Check: I undersold this one. This prediction was all about virtual reality (VR) and how it stands to radically transform the gamer experience. But, 2015 represented so much more than "just games" in the fast-transforming immersive world of VR and AR. This is the year that massive bets were made to accelerate mass VR adoption in not only games, but in live experiences and storytelling in general. So, while we won't see an Oculus under every tree this Christmas (I was a bit premature on that one), those premium headsets (as well as the growing list of others including behemoths Samsung, HTC, Sony) are coming en masse and fast early 2016. We believe millions will be sold in 2016 (much like what we saw in the early days of game consoles) and that means mass adoption and the mainstreaming of VR.



pursuant to New York DR 2-101(f)

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