Interbrand Thinking

Accelerating the Fame, Fortune and Fun

View from the inside

With more and more brands in the Play Arena competing for consumer attention and time, brands in the entertainment space are looking to stay relevant by driving higher engagement with their existing audiences (and attracting new ones). What was once seen as a predominantly passive space has become increasingly more aggressive in providing active participation to drive higher customer retention rates. Driven by a deeper sense of customer centric policies and a need to stay connected to consumers on a deeper more humanistic level, brands are pushing the envelope in what is a historically conservative industry in regard to evolving business models. What some may call bullish and radical brand moves we call progressive and forward-looking innovations. Ultimately, the brands that move faster than customer expectation will be the ones that succeed, leaving their competitors and newer players in the dust.

To that end, the decade of possibility will create a massive shake up in the paradigms of offerings from cultural and entertainment brands. While companies like Netflix built and stake their equity on being a one-stop shop by the virtue of investing so heavily back into disparate kinds of content, increasing their global presence, and creating emotionally connective “water cooler” moments that their competitors’ envy (and HBO once had), others will carve out their market shares on what is left. In a push to catch up with Netflix’s gargantuan subscription numbers, WarnerMedia has introduced an innovative to-market strategy wherein all of their theatrical films will be released simultaneously on HBO Max this year. And while this may mean exhibitors refuse to showcase their films for not adhering to the standard 90-day exclusivity window and Warner Bros. Pictures creative stalwarts like Christopher Nolan and others like him move away from the studio because of the lost backend points they would have earned on theatrical sales, WarnerMedia is betting that the customer will make up the economic difference. The head honchos at AT&T have as a result increased their target number of subscribers for HBO Max from 75-90 million by 2025 to 120-150 million by 2025. Looking beyond the subscription base, the economic outlook looks rosy too. “Based on publicly available data and analyst estimates, we believe that we are already the No. 2 revenue generating stand-alone subscription video-on-demand service in the U.S.,” said Jason Kilar, WarnerMedia’s CEO. But as a means of satisfying begrudged industry players, WarnerMedia could conceivably begin opening up about the numbers they are seeing on their streaming platform and allow content creators like Nolan to make that money back on streaming statistics—something Netflix has brazenly always refused to do but might need to in order to retain market leadership.

Others are also entering the fray to shift customer expectations and vie for a holistic solution for consumer attention by creating a communal sense of interconnectedness around Play. Similar to WarnerMedia, CBSViacom is the most recent massive industry shifting merger between two content giants. We will likely see more and more M&A activity of this magnitude between other players in this space as consolidations become necessity, evolve the competitive landscape along with it. And what mergers of this size afford these companies is the ability to reframe value propositions. CBSViacom is looking to differentiate itself from competitors by leaning more heavily into the sports broadcasting market through Paramount+, the newest entrant into the increasingly crowded streaming territory. While others like Amazon Prime are challenging CBS’ and other traditional networks’ market share by broadcasting select NFL games, Paramount+ is looking to the growing soccer segment in the US to grow its customer base in order to retain its market leadership as the most watched television network in the United States.

And even though NBC has gotten a leg up by offering the Premier League, it is split out amongst NBC’s sub-brand offerings like streaming service Peacock and legacies NBCSN and NBC Sports, making it a confusing and financially frustrating customer experience. By bringing the most prestigious competitions to the Paramount+ slate via Champions League, Europa League, and other sports beyond soccer like NCAA’s March Madness and PGA tournaments, CBSViacom is betting big that sports will be a large part of the reason people sign onto the service long-term and not fall prey to their competitor’s high churn rates. But more importantly, CBSViacom is looking beyond the tournament-based spikes in viewership with its most recent US broadcasting rights acquisition of Serie A, promising consistent soccer viewership to fans. “Showcasing this historic league and some of the world’s biggest clubs is a tremendous opportunity to further grow the sport in the U.S. by delivering first-class coverage to a dedicated and passionate audience,” said Jeffrey Gerttula, EVP and General Manager of CBS Sports Digital. Time will tell if that significant bet will pay off as a means of retaining market leadership, growing revenue, and its subscription base.

But it isn’t just film, television, and streaming services that are experiencing new ways of innovating their customer experiences. Even before the COVID-19 crisis, cultural institutions have had significant revenue losses through the years, leading organizations like the Metropolitan Museum of Art to introduce admission fees in 2018 and others like the Museum of Natural History struggling to rebrand itself to appeal to younger audiences. The pandemic only exacerbated that issue further this past year, with US museums losing 35% of their operating income in 2020 and expecting to lose an additional 27% this year.

But in an attempt to keep engagement up and attendees chomping at the bit to return to the storied halls of prestigious museums, institutions like the Met have begun looking at partnerships as a new way of innovating the attendee experience by launching a series of virtual art and gaming experiences based on their collections. Partnering with Verizon to launch the limited release app, the 5G enabled “The Met Unframed” allowed users to utilize AR technology to “unlock” their favorite pieces of the museum by playing along with the app’s gamification of the experience. The Washington Post called it “one of a few digital ‘experiences’ that actually adds more to the art than it takes away from it”, suggesting that innovation does help drive connectedness. But what’s more important is staying relevant in this wildly competitive arena of Play. But with no revenue driven by user engagement, institutions will likely look to shore up lost revenue by selling advertising on their newly developed app platforms or looking to partnerships like the Met had done with Verizon.

While economic performance is key, it’s become increasingly more apparent that it is not the sole KPI for many of the brands that exist in this space, particularly ones that are philanthropically supported or are able to mitigate the losses in one vertical via the extreme success in another. These class of brands often rely on loftier and more ambitious sociocultural goals that build long term brand equity at short term revenue loss. Big behemoth entertainment brands like Netflix are buying marquee theaters to not only flex their newest fares in the most ostentatious way possible but also to push their way further into the discussion of awards and prestige. Brands like these are aspiring to be something bigger than who they are seen as at the moment. And that is rapidly changing to be the case.

When Netflix leased the Paris Theatre, an exhibition hall of yesteryear that was to be shuttered—one screen, orchestral spacing, and located outside the gaudy Bergdorf Goodman department store and even gaudier Plaza Hotel—it did so with no economic incentive. They did a similar move in Los Angeles, America’s largest film market, leasing the former Academy Awards broadcasting bastion, Grauman’s Egyptian Theatre. Netflix’s moves are “a marketing tactic, not a revenue strategy; box office will only help defray costs,” says Indiewire. More likely than not, the deal will turn into a long-term, albeit small, headache for brands like Netflix and others who are eyeing similar deals such as Amazon Studios and Disney. With a brand being pulled in different content directions, “designing a year-round program that effectively evokes a brand that’s designed to mean everything to everyone,” will be difficult according to Indiewire.

Regardless, this frees Netflix to not need to negotiate with traditional theatrical exhibitors, who already abhor them. They now have equitable awards marketing platforms while at the same time giving them internationally recognized strongholds of film that carry significant cultural and social equity. Netflix’s messaging leans into this, proclaiming in a press release title that they are “proud to preserve New York’s Iconic Paris Theatre,” while outlets like the New York Times state that Netflix is “coming to [the Paris Theatre’s] rescue”, evoking thoughts of nostalgia and artistic stature. It’s a bold brand move but one that will ultimately create longevity in consumer associations between Netflix and quality content. In the same vein, we will likely begin to see others like Amazon and Disney eye up purchasing other prestigious theatres in order to expand Netflix’s prestige market share and limit their access to potential audiences.