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Ten predictions for digital media in 2018

Peter Csathy is Chairman of CREATV Media, a media innovation and advisory firm and the author of “Media 2.0 (18): An Insider’s Guide to Today’s Digital Media World & Where It’s Going”.

More posts by this contributor

1. There will be blood in the escalating battle amongst premium OTT video giants, as the market becomes over-saturated, early winners and losers are declared and Netflix finds itself increasingly in everyone’s lines of sight -- including Disney’s and Apple’s.

Originals continue to be the primary weapon used on the OTT video battlefront, extending digital media’s “New Golden Age” for creators. We already know that traditional pay TV providers like Comcast will enter the fray in 2018, as will Disney, when it launches its own pair of “Netflix Killers.”

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But Apple almost certainly will also join the premium SVOD fray in 2018. It’s all-out war in the premium OTT video world, as cord-cutting accelerates and traditional cable and satellite providers shed more paying subs.

2. Most other new premium OTT video market entrants in this beyond-crowded premium OTT video space -- including so-called niche-focused OTT video services -- will be swallowed up or simply languish, squeezed out by market leaders and the sheer scale of Google and Facebook, with which they simply can’t compete for ad dollars.

Google and Facebook already own about two-thirds of that global digital advertising market. That means that most OTT video players simply cannot succeed on ad dollars alone -- and other means of monetization will be beyond their reach because they fail to deliver a sufficiently compelling, differentiated and emotionally connected media experience. Winners will swallow up losers in an environment of accelerating M&A.

3. The Hollywood community will begin to increasingly understand the power of new cost-effective technology-driven ways to test and measure new characters, stories and engagement in order to more smartly and efficiently place their big expensive bets.

Innovative new services like comics-driven motion book company, Madefire; mobile-first horror-focused company Crypt TV; and mobile-focused text storytelling company Yarn point the way. Meanwhile, Netflix, Amazon and Facebook will continue to mine their deep data about all of our hopes and dreams to maximize “hits” and minimize “misses” as compared to traditionalists. And they will increasingly do a good job at it, as they become more confident in their creative pursuits.

4. Spotify will go public at a lofty valuation, but those numbers and overall investor confidence will decline throughout the year, together with Pandora’s, as these two pure-play global streaming music leaders find it increasingly difficult to compete against “big box” behemoths Apple, Amazon and Google/YouTube.

Yes, Spotify and Pandora boast massive scale. Yet scale alone does not financial success make. In fact, pure-play distribution success leads to higher and higher losses due to sobering industry economics these pure-plays can’t stomach, but the behemoths can due to their multi-pronged business models. These harsh realities mean that investors of many pure-play streaming services will take a hard look at themselves in 2018 as they contemplate their strategic next steps. Many will realize that they can’t go it alone. And that leads to M&A, which brings me to…

5. One company’s struggles are another company’s opportunity, and successful “bigger fish” will step up their M&A efforts to acquire those companies that see no long-term path to making it on their own.

M&A is a hallmark of today’s overall digital, multi-platform tech-infused transformation of the media and entertainment business. Just like AT&T made its move to acquire storied traditional Time Warner in 2016 and Verizon closed its acquisition of Yahoo! in 2017, expect some more massive deals in 2018. Right now, Fox is reported to be chased by Disney, Comcast and Verizon for OTT video-driven reasons. And don’t just look within U.S. borders -- there is no virtual wall in our borderless digital media world.

6. Data finally becomes a high-profile, high-priority “missing link” in the strategies of most media and entertainment companies that will try to correct course.

Virtually all traditional media and entertainment companies now openly covet Netflix’s, Amazon’s and Facebook’s user data, as well as how those services leverage that data to their seemingly untouchable advantage. The quest for data -- and the services that provide, analyze and inform -- take on new urgency amongst the traditional media and entertainment ranks.

7. Brave new technologies like AI (via virtual assistants Alexa, Siri and Google) flood the mainstream and increasingly impact the worlds of media, entertainment and advertising, while blockchain technology captures industry mind-share and begins to infiltrate mainstream conversations.

The soothing voices of Alexa and Siri guide us through this AI revolution. “Virtual assistants,” “smart speakers” (or whatever you want to call them) will increasingly populate our homes, improve significantly over time and serve up our favorite content (as well as increasingly targeted and hoped-to-be “welcomed” incentives, promotions and ads).

At the same time, the voice of blockchain technology -- barely acknowledged in media and entertainment circles in 2017 -- will increasingly be heard and respected at the water cooler. Blockchain technology conceptually holds revolutionary and industry-transforming new offensive and defensive power. On the offensive front, blockchain will enable completely new ways to monetize content and direct creator-to-consumer distribution. And, on the defensive front, blockchain promises to eradicate piracy.

8. Behemoths Apple, Google and Facebook will increase their already massive investments in immersive technologies, and 2018 will be AR’s break-out year in terms of mass adoption via ARKit and ARCore, which give our mobile phones real “spatial sense” as true AR systems.

VCs and strategic investors will also continue to throw boatloads of cash into the overall immersive space. AR’s gold rush also means continued growth in the related “wearables” market and early, very early, consumer adoption of AR-driven eyewear. And, when a market together invests so heavily, a market becomes our consumer reality.

9. Basic rudimentary text-based services and audio podcasts will continue to astound in terms of both scale and counter-programming success.

These forms of media face no significant licensing or royalty headwinds, unlike video and music streaming services. That means that all money that flows from them flows directly into the pockets of service providers. And, the most successful of these services can scale massively, meaning that monetization can be significant. Very. That’s why text-centric storytelling apps like Yarn are on fire right now.

10. The too-often-overlooked yet potentially game-changing live event and venue plank of truly 360-degree multi-platform strategies increasingly becomes noticed and offline experiments build.

Call this the “Amazon Effect,” as players across the digital media ecosystem stop scratching their heads about, and rather begin studying, Amazon’s direct-to-theater motion picture releases, brick and mortar retail stores, and Whole Foods super-stores. Amazon understands what most still haven’t even considered -- that direct, non-virtual offline consumer engagement may be the most impactful plank of them all, bringing online engagement into the real world (and then back again to create a virtual cycle of brand engagement and consumer monetization every step of the way).

RELATED BONUS PREDICTION -- In reaction to 2017’s sobering and frequently shocking negative societal forces, many digital media companies will take things even further by infusing their offline efforts with social impact, an inspirational and motivational element that is already proven to be commercially smart.

Such fully realized efforts hold the tantalizing power to transform digital media’s virtual cycle into a fully realized multi-platform virtuous circle. Double bottom-line -- profitable both commercially, and socially. Hey, digital media companies: Don’t underestimate the power of humanizing your efforts with a healthy dose of offline “soul.”