Video wars: Apple, Facebook playing catch-up

Top Stories

Video wars: Apple, Facebook playing catch-up
Imagine what would happen if Apple actually acquires Netflix in the future.

Dubai - Google and Amazon are showing the way, but there are simple ways the gap can be narrowed

By Abhinav Purohit
 Industry Insight

  • Follow us on
  • google-news
  • whatsapp
  • telegram

Published: Wed 21 Mar 2018, 4:37 PM

Last updated: Wed 21 Mar 2018, 6:39 PM

The technology world is undergoing a period of transformation, not yet witnessed before. On one hand, the rapid pace of development is bringing sci-fi-esque innovations to life, from gesture-controlled phones to flying cars. Yet on the other hand, there is a growing trend of people undergoing the 'Digital Detox' - a period of time when people, especially the younger generation, or millennials as they are called, refrain from using their electronic devices, most prominently their social media accounts on their mobiles.
Tech companies are struggling with the reducing attention span of their users and keeping them gainfully engaged. Results from a recent study by eMarketer highlighted that in 2017, Facebook lost around 2.8 million users under 25 last year in the US alone, with expectations for 2018 being not that much different. Similarly, Snap, in its last quarterly results (for the third quarter of 2017, announced last November) announced that it had witnessed the slowest growth in quarter-on-quarter subscriber numbers since its inception in 2011-12. The story for the other tech firms is following a similar pattern. In fact, as per an IDC report, global smartphone shipments also declined for the first time ever in the last quarter of 2017, registering a 6.3 per cent decline compared to the numbers in the fourth quarter of 2016. Such a reducing user base translates to lower ad and subscription revenues and thus lesser resources to fund new innovations - and if such trends continue, the signs might look ominous for a vicious downwards spiral.
To address is, tech firms are gearing up for the challenge, devising new services and newer ways to keep their audiences engaged. Here, video-based services are proving to the clear winner - where all firms seem to be gravitating towards.
Almost all major companies have either announced plans or already launched plans to go big on video - especially either towards creating original content or acquiring live sporting rights. Leading the pack is Apple, which has earmarked investments worth around $1 billion to develop its own original content. So serious is the company towards this strategy that in June 2017 the company hired Sony Pictures TV presidents Jamie Erlich and Zack Van Amburg to lead its entry into the premium video business, and in November signed Jennifer Aniston and Reese Witherspoon in leading roles for its first scripted video series.
Furthermore, the rumour mill is running rife with the news of a possible acquisition of Netflix by Apple ever since investment analysts at Citi announced, in January 2018, a 40 per cent probability of such a deal taking place in the near future. On the other hand, Facebook seems to be gunning for streaming of live sports on its platform to keep its users hooked. The company has been aggressively pursuing the rights to live-stream popular sports. Currently the company has a few sports streaming deals, primarily in North America, including games from Major League Soccer, Major League Baseball, Mexican Soccer League and more than a dozen UEFA Champions League football matches. However, its ambitions are clearly global and the company is aiming big.
Late last year, the company bid $610 million, albeit unsuccessfully, for the rights to live-stream matches from the Indian Premier League, widely regarded as the biggest domestic cricket league globally. This was, in fact the single-biggest bet the company had ever placed for acquiring video content. Looking ahead, industry watchers are also speculating Facebook's involvement in the near future for the rights to the Premier League football in England. The bidding for the period 2019-22 finished just last month, from which Facebook was conspicuously absent, but there is a likelihood that Facebook can enter into a partnership with the eventual rights winners, BT and Sky, for streaming a few high-profile matches later on.
This augers well for the Middle East sports fans as well, with football and cricket being by far the two most popularly followed sports in the region.
Google and Amazon, completing the big four quartet of GAFA (Google, Amazon, Facebook and Apple) are both miles ahead of their peers in the video domain. Google-owned YouTube is the top-rated video service globally by most matrices and its subscription-based YouTube Red and YouTube TV services, launched last year, are both gaining solid traction.
Similarly, Amazon-backed Prime Video services has been expanding its content library, as well as global reach, steadily and already has surpassed the global leader of subscription-based streaming services - Netflix - in markets such as Germany, India, and Japan. The Prime Video service is an integral part of the umbrella of offerings clubbed under the Amazon Prime membership service that costs $99 yearly (or $12.99 per month).
The reasons for the video push from tech firms are clear. Good content - both sports and original shows - attracts new users and keeps them coming back. They also have a positive knock-on effect on the core businesses of these companies. For example, the Amazon Prime members spend on an average double on Amazon's e-commerce site, as compared to the non-Prime users. Similarly, YouTube is a major growth driver for Google, and ads on YouTube account for over 10 per cent of Google's total advertising revenues.
However, replicating this success will be hard for the like of Apple and Facebook. Although both companies have lined up their war chests with big money - a good video product is not a direct outcome of money spent - as several high profile, yet underperforming, shows and movies have demonstrated over the years.
The key to delivering engaging content lies in developing innovative story lines that can offer audiences a fresh perspective - delivered by top-rated talent. Apple seems to have taken the first steps here by locking in big starts. Furthermore, the distribution channel employed to deliver the content will be key to obtaining scale - a must-have for a successful video venture. Here, a device agonistic platform-based approach of Facebook can have a better reach, than the walled-garden approach of Apple devices only access.
The jury is still out on which of the GAFA quartet will emerge as the clear winner in the video-wars or if the market will grow enough to allow a lucrative niche for all the big players to profitably co-exist. However, one thing is for sure: consumers will definitely be better off, with more choices available for their viewing.
The writer is a UAE-based strategy consultant specialising in telecommunications, smart city and ICT. Views expressed are his own and do not reflect the newspaper's policy.


More news from