News media erupted with speculation recently over an unsubstantiated rumor from a Financial Times editorial that mentioned Amazon being in talks to spend $1 billion on the adaptation rights to “The Three-Body Problem,” China’s most well known work of science fiction. Since the editorial, no news has leaked out about such talks, suggesting there might not be much to the rumor after all. The fact that people even considered it plausible shows how heated the television market has become.
For comparison, Amazon announced earlier this year that it was buying the smart doorbell startup Ring for about $1 billion. That’s a hardware company with millions of dollars in assets. The idea that Amazon would spend anything close to the same amount of money to adapt a book trilogy seems ludicrous on the face of it. Yet there’s something to be said for making a play for the China market just as the country’s middle class has started spending considerable amounts of money on video and music streaming.
The real reason it doesn’t make sense, though, is that big data has allowed tech companies to data mine the hidden desires of consumers and turn out gold. This strategy has already worked for Amazon to a limited extent and for Netflix to a great extent. A renewed effort by Google for original YouTube content also taps into the nostalgia economy with Karate Kid sequel in the form of a TV comedy called “Cobra Kai.” Companies can generate plenty of buzz and revenue with content acquired for a lot less than $1 billion.
While video stream does tend to skew younger, all age groups have grown accustomed to it. In the U.S., more than half of internet users 60 years old and over use Netflix, according to Raymond James survey. In the 18 to 29 demographic, it’s 82 percent. That’s just Netflix. Hulu, HBO Now, DirecTV Now and Amazon Prime Video are also all growing.
This is just the U.S. Other markets are seeing TV streaming growth, as well, although the incentives for original content aren’t as strong. In China, the streaming market has proven fiercely competitive. Companies like Alibaba subsidiary Youku and Baidu subsidiary iQiyi continue to do well. IQiyi recently had an IPO, although the competition in China will likely stave off profits for a while longer.
Another promising Chinese streaming company has recently floundered. LeEco’s biggest sin is expanding too much, too fast. The company started out as LeTV, an online streaming platform. It then made an aggressive move into smartphones and then smart TVs and eventually even electric vehicles. That’s when it became apparent things were going awry.
It’s not impossible for software and services companies to expand into hardware. Amazon has done it exceptionally well. Apple went the other way, starting with hardware and expanding into software and services, including its own TV streaming.
Third party companies have plenty to gain by this digital TV revolution. Another company with a recent IPO is Roku, a company known for its platform-agnostic TV boxes that went public last September. The company recently moved into streaming itself with its own platform and advertising business. Though its stock has taken a beating along with that of other tech companies in recent months, it still has the best-selling streaming box on the market. It beats out offerings from Amazon, Apple and Google that are designed to keep people locked into specific ecosystems.
Though the market is limited at this point, some companies are still finding new ways to innovate around the streaming TV box. Caavo has done it with a box that combines all other streaming devices into a single interface with optional voice controls courtesy of Amazon’s Alexa assistant.
The real opportunity for startups amid the rapid proliferation of streaming content is in the SaaS sector, though. Many new companies now have their own distribution platforms, data mining services and “second screen” services. AngelList shows 860 internet TV startups with an average valuation of $4.5 million. Most of them are software.
Some of these startups are looking to utilize new technology to keep viewers engaged. Kwarter seeks to “gamify” live TV through mobile devices, keeping people engaged in the content rather than distracted by something else online.
All the new data available on TV viewing habits is also an asset for startups. Bluefin Labs uses publicly available social media data to provide insights on viewer engagement. The company was acquired by Twitter for $100 million in 2013. Samba TV uses data to provide relevant recommendations through smart TVs or streaming boxes.
Content creation isn’t slowing down. Large multinationals are afraid they don’t have enough content as it is to ensure their future. This was the rationale behind Comcast’s acquisition of NBC Universal, Verizon’s acquisitions of AOL and Yahoo and AT&T’s on-going attempt to acquire Time Warner.
The explosion of content and time spent consuming it provides plenty of opportunity for startups to develop new ideas within this market. The cleverest among those companies may grow to be giants themselves if they avoid an earlier exit by way of an acquisition from one of the current tech giants creating all this new content.
Free Email Updates
Get the latest content first.
Congratulations. Welcome to the family.