Market Insights

The Competitive Landscape

Market Insight 12. Digital players have spurred disruption, but traditional players are still in the game.
Audio market Video market

While online services have turned the media ecosystem on its head with increased accessibility, flexibility and low pricing, they must also grapple with ingrained consumer habits. This means trying new tactics, like offering curated radio stations in addition to on-demand music, auto-playing the next video to keep viewers binge-watching and now even offering linear TV channels online that mirror those of traditional TV providers. At the same time, traditional players maintain a relatively stable position from which they can make investments to develop competitive responses to the benefits offered by digital disruptors, such as through low-cost subscription options and online delivery of traditional services. While we expect the continued launch of online services to keep the competitive pressure on, driving innovation across the board, traditional TV and radio services still have a dominant share of revenues in the market, at least for now.

Market Insight 13. Pure-play online competitors harness global reach.
Audio market Video market

Unconstrained by legacy media businesses, pure-play online media companies—those with no stake in traditional radio or television businesses—are harnessing the global reach of the Internet to spur growth. This global scope is driving unprecedented investments in content budgets, user-interfaces and discoverability algorithms, which is raising consumer expectations. This gives online providers an advantage because this scale may not be possible for legacy services to replicate domestically or even through international partnerships. Although it may be difficult for domestic services to replicate the content budgets and global reach of pure-play digital services, these online services have taught domestic players important lessons about the need for more effective approaches to user-interfaces, discoverability algorithms and data collection.

Figure 35

Netflix has 110+ million subscribers and is available in over 190 countries around the world.

Source: Netflix (Subscribers; countries available)

Figure 36

Spotify has 170+ million active users and 70+ million paying subscribers, and is available in over 65 countries around the world.

Source: Spotify

Market Insight 14. Existing TV program rights markets will be difficult to untangle.
Video market

U.S. studios still dominate investment in TV content. These investments rely on the segmentation of content rights across a global network of distributors and services. While it is possible that U.S. rights holders will go directly to consumers online in the same way that their pure-play competitors do, untangling longstanding business relationships and long-term content supply agreements between these U.S. rights holders and their global partners—all of whom need to protect their own interests—will prove challenging in practice and may take years. This challenge will be compounded as online services start to bolster their on-demand content offerings with existing linear TV channels that are geographically restricted. Some examples are the U.S.-only launch of online TV subscription services such as YouTube TV, Hulu, DirecTV Now and SlingTV.

Market Insight 15. Virtual TV service providers are stemming cord cutting in the U.S.
Video market

The online TV market in the U.S. is expanding beyond on-demand services to include linear TV channels. Hulu, YouTube TV, DirecTV Now, Sling TV and others are offering online TV services that resemble and compete with traditional cable TV. The broadcast and cable network channels, which are overwhelmingly owned by U.S. studios, are supportive of the online distribution of their channels since it helps them retain subscribers. This shift isn’t happening in Canada. Canadian distributors, which are largely vertically integrated with broadcast channels, may not have the same motivations to offer these channels to competing online distributors.