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What’s Next For Content Streaming Services–Futurum Tech Podcast Interview Series
by Daniel Newman | February 18, 2020

In this episode of the Futurum Tech Podcast, The Interview Series, Daniel Newman welcomes Richard Whittington, Senior Vice President of Media and Entertainment at SAP, and Amos Biegun, Global Head of Rights & Royalties at Vistex. During this episode, Richard and Amos talked to Daniel about the latest trends in media—specifically in content streaming—and what to expect from SAP and Vistex joining forces.

To begin, Richard discussed four big trends he’s noticed:

  • The sheer volume of content out there makes it hard for consumers to find anything that resonates, so they’ve moved toward seeking more personalized, targeted content to consume.
  • The yin and yang of media and entertainment is to license content to make money, so we’re seeing big players like AT&T and Verizon get more into content to engage audiences and sell to advertisers.
  • There’s now a deeper library of content out there, as well as the ability to reach niche audiences in a profitable way—leading media companies to monetize those libraries.
  • There’s a shift from mergers and acquisitions in the last year; as we see CBS and Viacom, Disney and Fox Studios, etc. come together, we’re seeing legacy media companies scaling to offset the threat from newer services like Netflix, Facebook, Amazon, and Google.

Amos added that 12 to 18 months ago, AT&T bought Time Warner, and then there was the CBS and Viacom merger. He explained that there’s a trend of cord cutting among consumers who prefer streaming services to subscription TV, so traditional companies had to change to compete.

Disney Plus is an example of a traditional broadcaster changing its content delivery model. Amos described how it’s a gamble to take Disney’s content off Netflix. But in return, Disney will increase brand loyalty, since viewers will see and connect with the original creator on its own platform. And now Disney gets to see consumer data, which will give clues on consumer behavior, making content personalization and localization easier.

Richard went on to explain how it’s an arms race when you look at money spent on content production. In 2019 alone, companies spent $108 billion producing content! Daniel noted that it seems like much of the content we see on Netflix is the brand’s original productions now. No longer is it just a content hub. And Richard agreed, stating that the average cord cutter has 2.3 subscription services.

So who will the winner of this race be? Well, Richard said Netflix is still a force to be reckoned with, but Disney Plus creates a formidable battle. In the end, the winner will be the one that can not only understand the consumer’s needs, but also find revenue beyond advertising, such as allowing viewers to use a companion app to buy the products they see on a show.

Amos added that he sees a trend of streaming services buying licenses to evergreen content—like Seinfeld, Friends, etc. But they’re overpaying for these series licenses to attract viewers, so eventually, they’ll have to increase fees…and consumers will start narrowing down which services they want to pay for. He said the winner will be the service that can offer more than music and media content. That’s Disney, Amazon, and Apple, since each can bundle other goods and services—while the companies with just content will struggle.

Richard and Amos wrapped up by stating what Vistex and SAP are doing together to help the industry. Basically, while royalties were once a simple process, the huge amount of data out there now—due to tons of content being streamed—results in lots of micro payments to be aggregated. SAP’s partnership with Vistex helps manage the financial complexity in consumer content consumption. There’s more data and less time for marketing decisions to be made, which is why SAP and Vistex are working together to develop a platform so companies that deliver content can focus on experience at the front end and know they’re covered on the back end.

You can find out more about this partnership by checking out the SAP and Vistex websites, as well as this press release describing in detail how the two companies are working together!

For a complete dive into the future of content streaming services, including the challenges media and entertainment companies face, and our predictions about the road ahead, download your copy of What’s Next for Content Streaming Services? today.

Transcript:

Daniel Newman: Welcome to the Futurum Tech Podcast, the Interview Series. I’m Daniel Newman, Principal Analyst and Founder at Futurum Research, and your host today and I’m excited about this interview series. It’s a special edition where we have a sponsor with SAP and Vistex and we’re talking about media entertainment. For everybody out there that wants to think about this even at a simpler level, we’re going to talk about what’s going on with content and streaming and what you’re listening to in those little earbuds in your ear every day.

I’ve got two guests on this Futurum Tech Podcast Interview Series today and as we jump into the topic first, let’s make some introductions.

I have Richard Whittington and he’s the Senior Vice President of Media and Entertainment for SAP. Richard, welcome to the show.

Richard Whittington: Thank you, Daniel.

Daniel Newman: And I have Amos Biegun. Amos is the Global Head of Rights and Royalties. He’s a 25 year veteran in this space and he works for Vistex. Real quickly, Richard, and Amos because I gave the very high level, I’d love to give you each a chance to just quickly introduce yourselves and talk a little bit about what you guys are up to. So in a jiff can you, Richard, just introduce yourself, talk about what you’re doing in SAP?

Richard Whittington: Yeah. Hi, Richard Whittington. I run The Global Media Industry for SAP, we go to market by 25 different industries. So I spend my time with many of the world’s leading global brands in the media and entertainment space defined by broadcast and cable, print, premium content, newspapers and magazines, books, and music.

I get to spend a lot of time evangelizing and looking at where the industry is going so that I can then help assemble solutions to meet those opportunities.

Daniel Newman: Yeah, and a really interesting part of SAP, Richard, that a lot of people that are coming for CRM and ERP probably aren’t even aware of. So I’m looking forward to digging into this conversation. Amos, do you mind doing a quick intro?

Amos Biegun: Of course. Hi there, Daniel. My name is Amos Biegun. I am the Global Head of Rights and Royalties for Vistex. We are what is called a solution extension partner of SAP, which means we run inside SAP, we strategize how we go to market together. My area of the business is to ensure that Vistex stays ahead of what’s happening in the industry, that our solutions are suitable for the media broadcasting, music, and entertainment industries and that we handle all of the ongoing trends that we’re encountering today.

Daniel Newman: Yeah, thank you. It’s really always interesting to listen in on these types of strategic partnerships, Richard, Amos, what your two organizations are doing is solving a really big challenge in the market today.
I want to start there. I want to talk about mega trends, themes, what’s going on with content across different platforms. You can’t go through an airport, or a train station, or really even through your own office anymore and see people wired in listening to their favorite tunes, watching their favorite shows. Binge watching is now the thing. Netflix is a verb and we’ve really seen this shift in content from the way people buy.

But there’s a lot of backend changes that needed to happen to make this industry continue to hum. Richard, I’ll let you start off. Amos, let’s keep real conversational. So feel free to go back and forth and jump in and even jump on each other if we need to. But talk a little bit about what’s going on in this space.

Richard Whittington: Well, Daniel, thanks. Obviously many of your listeners will consume media in a different way than they did five, seven, eight years ago. This podcast being a great example of that. So what we’re seeing is a mega shift around four big trends.

One is that just the volume and velocity of content out there makes it very interesting and challenging as a consumer of content to find content that resonates with me. We’re seeing our customers start to move towards a world where they try and personalize. 1.0 is if you like this, you might like that. But we’re seeing an evolution towards much more targeted relevance of content targeted at you to consume.

The second piece we’re seeing is obviously the ying and the yang of media and entertainment is licensed the content to make money, monetize the eyeballs that watch that content. So we’re seeing some of the bigger players, like AT&T and Verizon here in the US, getting into media and content as a way of drilling and engaging audiences so they can aggregate and sell to advertisers.

The third thing you seeing is the renaissance of some of the deeper library of content. The ability to reach niche audiences at a cost to serve that is effective and profitable, allows media companies to monetize those libraries in much more deeper ways.

And then lastly, you’re seeing a mega shift around transform and scale. If you just think about some of the mergers and acquisitions that have happened in the last 12 months, for example, 12 to 18 months, with CVS and Viacom coming back together, with Disney and Fox Studios coming together, with Global and Global Sat in Latin America coming together, you’re seeing the legacy media companies try and scale rapidly to basically offset the competitive threat.

If you look at OTT spend, which is the subscription services for movies that we watch, $3 out of every $5 spent goes to these new entrants, the Facebooks, the Amazons, Netflix, and Googles. So you’re seeing a tremendous amount of change in an industry that for a while had been a little dormant. Amos, anything I missed?

Amos Biegun: No. I was going to do exactly what you did. Go back about 12 or 18 months, look at the deal mania in industry. AT&T buys Time Warner, which includes of course HBO and Turner, Comcast outbid Fox at the time to buy UK Sky TV. Disney closed this deal for Fox. And the CBS/Viacom merger. All of that is not just about scale. It’s about the trend which is called cord cutting, which is younger consumers not subscribing to traditional pay subscription TV and even phone landlines, and consuming their content on mobile devices through streaming services. And these companies realizing, Disney of course leading the pack, that they need to actually change the way that they deliver content to their consumers.

And this new term direct to consumer has sprung up, Disney+ being really the first primary traditional broadcaster to change its entire delivery model, taking content away from third party distributors and platforms and putting it on its own.

A huge gamble for Disney that by a viewing platform, it shows to lose hundreds of millions of dollars of revenue from third party carriers, like Netflix and others, all in return for competing with the Netflix, the Amazons, and so forth.

When you look at direct to consumer, which is where we’re going, the first question one would ask is, is it about revenue? Because the first thing that these companies that are transitioning to direct to consumer models are seeing is that actually revenue is dropping because they’re losing all the third party fees.

So is it more than that? Coming back to what you were saying Richard, there’s an enhanced connection with a brand that these companies now need because people are consuming content on Netflix and not knowing anymore who the original creator is.

If you put it on your own platform, you are going to start creating brand loyalty. There’s more personalization and even localization which can be done much more easily today. And I think the biggest carrot for these companies Disney, NBC Universal, HBO with all their platforms, is then they’re now going to be able to obtain more consumer data. And because they can obtain more consumer data, they’re going to know much more about the behavior of their consumers.

Richard Whittington: But I think, Amos, the other part too, as you were chatting it came to my mind, music and gaming have been direct to consumer for a long time. So I think there’s some lessons to be learned by the folks that are getting into the long form content or the short form content from these other segments.

But Daniel, it’s an arms race right now. If you look at the numbers of dollars that are being spent on content production, I have some stats here, you’re looking at somewhere in the region of $108 billion. $108 billion in 2019 being spent on content production. And if you look at the way that gets broken down, Disney are way out in the front there with about $28 billion, but some of the legacy media customers, like Fox and Discovery Alliance, are being dwarfed by this amount of spend.

If you go with the premise that content is king, then there’s a very clear pattern here. It’s not sustainable for the number of companies in the industry right now, to compete with these mega companies.

Daniel Newman: I was actually just thinking to myself, when you really start to consider the implications of what’s going on. Most people, probably even by accident, are now subscribing to at least one service, maybe two. They’re consuming content different ways. Just in my own life, I get my cable through streaming, I get Netflix through streaming, I have Amazon Prime, which has streaming. I’m a huge football fan, a European football soccer fan, so I have multiple subscriptions to make sure I can watch Champions League, English League, La Liga.

Then all I’m saying is you started going down and you’re thinking about it, and then what you guys said had me thinking about who really is the content creators of the day. Netflix started off about aggregating and sharing everyone’s content and streaming it, making it simpler through others. And now if you go to Netflix, 80% of what you see on your homepage is Netflix productions. Netflix has gone from being this streaming content hub, to really a production company that happens to carry a few other company’s titles. And then over this last year there’s been this huge wave.

We had Apple, Apple TV+, now Apple is making movies. And then you had a Disney, which you mentioned, huge investment there. Like you said Amazon, we have Netflix, and that one, I just want to lob this over because this is probably something everybody’s thinking to themselves. Who’s going to win? And by the way, are consumers really going to do better through cord cutting? Because the way it’s adding up, I can’t possibly… I know cable got expensive, but I’m pretty sure I can’t get what I used to get on cable for less because the streaming is becoming so dis-aggregated.

Richard Whittington: No, I’m laughing because I actually cut the cord despite being slightly out the demographic. But the average cord cutter right now has 2.3 subscription services. And you’re right. When I start to sit down and do the math at home, by the time you add in, three or four subscriptions, like HBO or Hulu or Netflix, and Amazon obviously is a different model. I think the winners are going to be the consumer, to be honest.

I think the will be a shrinkage of the number of subscription services people own because again, you layer in the Spotifys or the Pandoras as well for $9.99 A month, and you are, you’re suddenly up at what you are paying for cable.
I think the difference is, you’ve opted in to that and so there’s a big revenue opportunity on the other side of that hill in a combined model where you are paying some degree of subscription, but you also have the option to consume some ads and I think Netflix obviously are still a force to be reckoned with. First-mover, created this market, but 10 million subs on the first day of Disney+ at $4.95 a month just in the US is a formidable battle.

I think the winners will be those that can really understand the consumer and the consumer’s needs, but also look to adjacent revenue beyond advertising. Is there a commerce model inside what you watch? Could you basically order, if you’re watching a cooking show, could you order the kitchen on a companion app?
I think the winners will be those that aggregate the most eyeballs the fastest, can get production costs under control, and think innovatively. It’s not media 2.0 recreating what broadcast was by just pushing out content in a linear mode.

Daniel Newman: I was actually thinking, I just see some interesting inroads that maybe aren’t even being thought about. On Apple obviously using the device to its advantage. It has about 10% of the global markets high end premium smart devices, smart phones, and then you also the carriers. I use T-Mobile and on my T-Mobile device I was getting Netflix free for a while and I’m just thinking about, obviously it’s not really free.

Amos Biegun: Disney+ are getting out there through these bundle deals with carriers as well. Everybody trying to get it. But I agree. But what I’m seeing parallel to this trend is that evergreen content, your Seinfields, your Big Bang Theorys, your Friends, are also involved in some arms race to acquire that content by these new carriers.

Although you like soccer, it’s a little bit like buying the hundred-million-dollar striker and then build a team around them because the hundred-million-dollar will sell the shirts and get the stadiums filled, and then we’ll worry about the rest of the team later.

We’re seeing this overpayment for content with each one of these series selling for $500 million license deals for five years to whoever has bought them, whether it’s HBO Max, or Netflix. So what will happen over time is these companies are going to have to increase fees.

Netflix started, by the way, in January 2008, for $4.99 a month, and it’s now its premium offering is it $15.99 a month. There are already talks about all the services being underpriced for the real costs long term. So in the end, everyone’s right, the consumer has a choice. They can drop Netflix for something else, but then Netflix might be the only place they have the content that they want to watch, so they may have to drop another service.

But who has the ultimate end game is someone who can offer more than music and media content. I believe Disney, Apple, and Amazon are in a prime position because each of them can bundle all their goods and services above and beyond content to make it much more attractive to the consumer and make it much more profitable for them.

In my opinion, if you’re just a platform for content, you’re going to really struggle in the long-term. That is my view.

Richard Whittington: I would love to see, let’s throw out something wild, I would love to see Walmart buy Netflix to compete with Amazon and Amazon Prime. That would be an industry game changer.

Daniel Newman: You don’t even see that. The average suit consumer wouldn’t even get it for a moment. But that there is so much commingling and interdependence on global distribution channels and how this all ties together. Gents, this is super interesting and we could probably have a four hour discussion, but this is a 20 minute interview series and so I’ve only got a few minutes left and I want to talk a little bit about the partnership here.

This is where we turn it from this big broad, all right, we’ve identified the challenges, we’ve gotten to the cool factor. Everybody knows, probably running a tab on how much they’re spending, have they saved money on cutting the cords, blah blah blah. What is Vistex and SAP doing together to help the industry with this challenge?

Richard Whittington: Well I think you hit the nail on the head. One of the side effects of this industry shift is the volume of data that’s going out there. Where royalties used to be a relatively simple process, and I underline relatively, if you take music, for example, with the number of streams that Ed Sheeran has, or Cardi B, you’re looking at micropayments that have to be aggravated.

I think what we saw in the partnership with Vistex was an ability to manage the financial complexity of all these shifts in consumer behavior and consumer content consumption. That, to me, was the value of this. Amos, I think you should add to that.

Amos Biegun: The relationship is that you have a much more complex environment today. The complexity of the contract to acquire or this content, the distribution model and channels are more complicated, and our relationship brings in the capabilities of rights and royalties functionality sitting inside your core finance system.

What’s the advantage? You’re dealing with huge volumes of data today and enormous amount of decisions need to be made quickly around that data. You can no longer ingest that data into one system, run a specific process, dump some of it into another system, do another process. There’s no time for that anymore. Marketing decisions need to be made instantly. You are able to get flash data, real time consumption data from services like Spotify and if you’re not able to adjust and manage that efficiently, you’re in second place at best.

We now offer the capability of doing that in a single integrated global system and we’ve proven that with the technology it’s scalable to very, very high limits. We work with multinational record labels that are processing 300 million transactions a day at peak time. Something that the entire industry didn’t do 20 years ago, they’re doing it daily at peak times. One player.

Richard Whittington: Just one point I’d add to Amos’ point, I think the revenue expansion for these services is going to be on a global basis. So that ability to manage media businesses across the globe from an end to end perspective. There are other financial solutions out there, for example, but to be able to manage the customer experience, the what did you like, are you likely to churn conversations that traditional media companies have never really been in the business of.

To be able to manage consumer subscriptions, to be able to take those subscriptions through to consumption ineligibility, to take that through to do I have the rights to actually provide this content to Daniel, to take that through to now I have to pay the content creators for that content, and have the ability to look at that business in real time across the end to end process, is I think the winning strategy.

Digital natives that grew up with data, the Amazons and the Netflix, they get it. The new entrants into the space, the legacy companies, it’s like having a car in the garage and then being asked to be a Formula 1 driver. They need new systems and they need them quick. They don’t have time to spend a lot of time on analysis of what they need. They just need end to end solutions at consumer scale.

Daniel Newman: To sum this up, in short, all this cool experience that we have as consumers to watch movies, download content, see any sports event anywhere in the world at any time because of these licensing royalty deals, is an extremely complex data and analytics challenge that can really make back office almost impossible without the right software and the right solutions.

What SAP and Vistex is doing is essentially developing that platform, so the companies that are creating content, delivering content, managing all this, can actually focus on the experience at the front end and know that their systems are covered on the backend.

I probably oversimplified it a little bit, but because I’m at the tail end of the show here right now, what I would love to do is give Richard, you and Amos, a chance to just tell customers quickly, or the listeners, or the community, all the people that have checked out this episode, where they can learn more about what you guys are doing with the digital rights and content management solutions.

Richard Whittington: Obviously, go to www.sap.com/industries and find the industry story. The one thing I would say two to the last point that you made, every dollar, Euro, Peso, I can save in the back office in complexity is a dollar, Euro, or Peso that I can put into content production and in the short term, content production and the ability to drive audience engagement through compelling content does not go away.

Daniel Newman: Amos, any last words, or guys anywhere you want people to go check this stuff out?

Amos Biegun: A couple of things. The SAP website, the vistex.com website. Both will link to each other. We exhibit at the big industry trade shows, NAB, IBC, Needham, South by Southwest of course, SAP’s Sapphire event in Orlando in May. So we do try to take our story on the road as much as possible and together we engage with some of the largest household names in this industry.

Every day we’re learning something new that we need to do to help this industry because it’s changing at a rate that we never thought would happen.

Daniel Newman: I think that’s tremendous remarks. Gentleman, I want to thank you so much. It’s such an interesting topic. Like I said, it’s almost impossible to boil it down to 20, 30, even an hour, because like I said, this touches on so many things that people are very, very personally connected to. Especially if you’re listening to a podcast, I’m sure you’re streaming content. In fact, you’re streaming it right now as you’re listening to this.

We will make sure that we put links to the SAP site and to Vistex into the show notes so that everybody out there can check it out because what you guys are doing is very interesting and again, if you’re in the media space, you’re listening to this, and you’re looking for solutions and understanding what’s possible, what has been developed between SAP and Vistex is definitely something worth exploring further.

Richard, Amos, thank you so much for SAP and Vistex as sponsors of this episode of the Futurum Tech Podcast. Want to thank you for all of our subscribers. Please keep hitting that subscribe button. Tune in for more great interviews. And of course listening to our regular weekly Futurum Tech Podcast, where we cover all the biggest news in tech.

We appreciate it. We will see you later for Futurum Tech Podcast. We’re out of here.

Disclaimer: The Futurum Tech Podcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

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Daniel Newman