Latest / The Media Odyssey / THE STREAMING PLATFORM RATIO
Transcript
- Marion Ranchet: [00:00:00] Welcome to the Mia Odyssey podcast live from Streaming Made Easy Live. This is Evan Shapiro [00:00:15]. Evan Shapiro: That is Marion Ranchet. How great was this event here that she put on today? Congratulations, it was really wonderful. I'm now gonna introduce our guests or actually I'm gonna [00:00:30] have them introduce themselves. To my left. Jonas Engwall: I'm Jonas Engwall, CEO of Bedrock Streaming. Bjarne Myklebust: Hi, I'm Bjarne Andreas Myklebust from the Norwegian Broadcasting Corporation, NRK. [00:00:45] Marion Ranchet: Woo-hoo. Evan Shapiro: Host country. Rowan de Pomerai: And I'm Rowan de Pomerai, the CEO of the DPP. Marion Ranchet: Yeah. [00:01:00] So guys, you, the DPP and Bedrock came together and had an idea. You wanted [00:01:15] to get a feel, get into the streaming economics. We often talk about the money people make. We talk about how much the streamers are spending. We don't talk that often about how much they spend when it comes to product tech and this is [00:01:30] IBC so that's the right time to talk about that. So why did you feel we needed to get under the skin of that? Jonas, I'm gonna hand it to you. Jonas Engwall: Yeah so apologies. I'll give you a slightly lengthy answer. But, Bedrock, at the [00:01:45] get-go, our mission and vision so to speak, has always been to supply our stakeholders with a platform that is what we call on par or we try to be on par or when we can, better than the global streamers, just [00:02:00] because we want those players to be able to shine with their content on an equal footing. So when you make that kind of statement, this goes way back. Obviously, we spent a lot of time benchmarking ourselves against those global streamers to understand [00:02:15] how are we fairing, where are we lacking in terms of what kind of value we bring and what kind of features and capabilities. And as the market and our stakeholders and everyone moved from [00:02:30] features and value and stuff to more finance, it was very natural for us to continue that quest to benchmark and it turns out that it's pretty difficult. I think most people know it's pretty difficult [00:02:45] to understand, are you spending the right amount of money? Are you better, worse than, than you should be? And as a consequence of this, we came up with the platform stream ratio. And [00:03:00] it's very simple Evan Shapiro: That's a new unit of measure that you all are introducing, that's the reason for your study as a brand new way of measuring and the ratio is platform performance ratio? Rowan de Pomerai: [00:03:15] Streaming Platform Ratio. Is what we call it. Evan Shapiro: Yeah. And explain it. Rowan de Pomerai: Yeah, sure. We do a load of work around where sort of business and technology meet but I have to say that, Jonas and the team get full credit for coming up with [00:03:30] the idea of this. They came to us with this and said, "We're really interested in this. Do you wanna work with us on it?" And the metric is pretty simple. It is, as a proportion of your streaming revenue, how much are you spending on building and operating the [00:03:45] platform? So if you make $10 million and you spend $2 million building the platform and running the platform, your ratio is 20%. Nice and easy. Surprisingly difficult, though, to get a hold of that data. Marion Ranchet: And [00:04:00] so the idea for you was to look beyond you guys, even if you do cater to different platforms but to go beyond. So you've went to 16 platforms, mostly in Europe, I believe. Rowan de Pomerai: Yeah, exactly. One of the reasons [00:04:15] I think that Bedrock wanted to work with us on this is because we've got relationships with a load of media companies and we could be an independent body that we could say, "Talk to us about what's going on in your business. Share your numbers with us and we will anonymize them." [00:04:30] Nobody, including Jonas' team, has seen the individual results for, the individual media companies we worked with. But we got, as you say, 16 European skewed. Partly, I think that's [00:04:45] down to how willing people are to share. I think, as soon as you go near any financials, it's harder with US companies. But also I think, it says something about the dynamics of what's going on in those industries- Evan Shapiro: But if I may... Rowan de Pomerai: I think the Europeans [00:05:00] really wanted to learn about this too. Evan Shapiro: Yeah. You benchmarked this off of a existing company that we all know and- Rowan de Pomerai: Oh, absolutely. Evan Shapiro: Some love- Rowan de Pomerai: Yeah. Evan Shapiro: Called Netflix. And, that was the benchmark that you started with as you, before you did this study. So explain how you did that [00:05:15] as the start, as the knowable case study to prove the point. Rowan de Pomerai: Yeah. That, as you say, it was knowable because there is publicly available information. So the reason it works- Evan Shapiro: Same way I make my map. You can prove a point by [00:05:30] using publicly available information. Rowan de Pomerai: Exactly. And the great thing with Netflix is you can essentially assume it's not quite true but it's near enough true to say Netflix is a streaming company full stop. Evan Shapiro: Right Rowan de Pomerai: So Netflix's revenue is their streaming revenue. I don't think that's [00:05:45] true for any company that we worked with. They all have linear broadcast or other, other online outlets or they do audio or various other things, right? But for Netflix, you can say your revenue is your video streaming revenue and then you can look at their [00:06:00] publicly listed technology and development expenses. You can take a few estimations around things like CDN cost and you can come up with a number and it just so happens that number comes out at a nice round 10%. Marion Ranchet: Fascinating. Evan Shapiro: Fascinating. And, [00:06:15] it's the biggest streaming platform on Earth, right? Yep. The most consumption in the most territories with the most variables, right? You start your study from there and then you spoke to a bunch of people here and your public [00:06:30] broadcasters and commercial. Yep. Public, it turns out, I'm gonna turn to you, performed better than commercial. Is that correct? Bjarne Myklebust: Rowan says, we- Rowan de Pomerai: Slightly... Bjarne Myklebust: We did slightly. I think we're [00:06:45] basically on the same percentage but- Evan Shapiro: Demonstrably though, right? Bjarne Myklebust: Yeah. But still, for NRK been, we have been working on streaming for 25 years now and when the BBC started their iPlayer, we also started our player. So I think [00:07:00] the public broadcasters and the broadcasters that came into this in, this industry or this part of the industry early has managed to work on these- this cost side, basically. We have, for instance, three CDNs and we have price competitions every year so I get basically [00:07:15] 20% more traffic every year, for instance. So we have things in place to try to keep that cost in check. The cost of producing content is basically the same for traditional television as for OTT. So it's basically [00:07:30] on the distribution side, the playout side and the distribution side and the player application where the cost is. And for us as a public broadcaster trying to migrate from the traditional TV where it's a lot of cost when it comes to distribution, almost 90% of [00:07:45] my budget is on traditional networks like DTT networks and so on. And, we are transitioning to OTT, where we now see 20, 25% of consume now is on our OTT platform. And [00:08:00] having these numbers to try to navigate that transition is very useful. We need to do it actively. Some broadcasters say that, "Okay, we just have to keep that network. We have to pay our dues to [00:08:15] the old one while we are trying to do the new things." But we have to have some active operations around and try to build down, try to migrate our users more over to the new platforms. I didn't think [00:08:30] that the streaming platform will be cheaper than the broadcast platform. Everyone said, we, I also said that, broadcast one to many, it's a great, calculation. It is great economy. But when you're down to 5, 6% households using a [00:08:45] DT, national DTT network, it's not. It's the other way around, basically. So that is why these calculations are useful to look into. Rowan de Pomerai: Yeah, I think the one thing I would say on the sort of public versus commercial [00:09:00] is when we look at the cohort, there's not that many very large commercial media organizations in it. A lot of the very large media organizations that are commercial come out of the US and weren't included for the reasons we've discussed. [00:09:15] And so when you look at particularly the European market, those public broadcasters, they did well but actually what was really noticeable in the data is that the larger organizations did well. And within their markets, the public broadcasters tend to be [00:09:30] the largest or one of the largest streaming platforms there is. So when we looked at high-scale platforms versus low-scale platforms, that was a cutoff that I chose, revenue about 100 [00:09:45] million. And there's virtually a doubling in proportional cost. You're really seeing borne out here a hypothesis that we had in our heads, which was like the bigger [00:10:00] scale you've got, the easier this becomes, 'cause certain costs are fixed. And this is why we assume Netflix to be the best. Yes, they've got very smart people but they've also got very big scale. Evan Shapiro: The biggest. Yeah. And a long and for the longest period of time, too. Marion Ranchet: Jonas, you [00:10:15] initiated this and then you saw the results. What did that tell you? Anything surprise you? And what should we as an industry, on a larger scale than those 16, what should we, what should companies do about it [00:10:30] once they have that number? Jonas Engwall: First of all, I think it was, it is very helpful for us and it's very helpful for our stakeholders because everyone wants to know where you are, everyone wants to see if you're progressing in the right way, et cetera. [00:10:45] And it was obviously very interesting to hear that I think most people felt that this was a very interesting benchmark, a helpful benchmark. So for sure. And the findings are, makes total sense for us. [00:11:00] We've always said we need scale, right? We need scale, otherwise you're just not gonna get to the right numbers. And also coming back to the fact that there was a starting point, like you said, there was a official number out there, although not that [00:11:15] many people were looking at it but it was there a long, long time. So we, think it's very interesting and so I'm not surprised about the numbers. Back in the day, I heard more about 30%. And that was actually before we looked [00:11:30] at Netflix. I think Netflix, we, now we look backwards. Netflix has been hovering around 10 for the last six years or five or six years, which is not a surprise at all. I can also say for us [00:11:45] it's really important we use this as a benchmark for our success so to speak. We don't have all our customers at 10. We have some on 10 and we are looking at moving those even down towards [00:12:00] nine, et cetera. So again, for us it's, Evan Shapiro: But this is, in a world where we know the programming costs are the same across all, right? And there is a competitive edge in platform costs, this is where the [00:12:15] savings is gonna... Even when you think of all the applications of AI- and generative AI, still this is where most of the value will be gotten. Do you, you understand that there's [00:12:30] these variables, it goes back to scale at the end of the day. You did all this study and I do love to see that you had a, didn't have confirmation bias. You said, "Let's do the study. Let's figure it out," and it proved the most obvious thing in the world, which is with this stuff, [00:12:45] scale is gonna be where you make the savings. That's always been your thesis. So what you're saying is even if you run a VOYO in Central or Eastern Europe or you're running Viaplay or you're [00:13:00] running whatever it is, centrally located bedrock of a tech stack is gonna get you the lowest possible fixed cost you can have. And you can chase zero and you can chase this with technology coming in but the [00:13:15] greatest use of it is gonna be the greatest value, right? Jonas Engwall: Yeah, I agree. Marion Ranchet: Can I ask, is, it's funny how you, you are based in Europe and we've looked at Europe but is it a question that matters to us here in the region but maybe not in the [00:13:30] US? 'Cause if it all comes down to scale The reason this number is very important here is that chase for scale is very hard. A lot of the players in the region are in just one market. Jonas Engwall: Yeah, exactly. I- Marion Ranchet: So that number from Netflix, [00:13:45] there's no point in chasing that. It's a global player. Evan Shapiro: No but that's what you do, right? That you offer that potential scale on the tech end. That was the larger point I tried to make earlier but explain why BetMGM's theory fits in with [00:14:00] this information. Jonas Engwall: Yeah. As in we've always had the foundational belief that without a certain amount of scale, you will never be able to produce, at least not substantially, viably, a [00:14:15] platform that is gonna be on par with global giants. And I think that's where you need to be. Even if the local users, they all use Netflix, they all use Spotify, whatever it is, Disney Plus, et cetera. They [00:14:30] don't care if you're a local player. You don't get a free ride, right? They're expecting, they expect your platform to be on the same level. So hence that's the benchmark. And then you get bound back to the numbers. If you wanna [00:14:45] be on that level quality-wise during World Cup, during live games, et cetera, it is quite difficult. And, the way we think about scale is we, you're right, European countries are generally small. [00:15:00] We create that scale across countries. We have a central platform, that looks and operates totally different in all the countries, configurable so to speak. But we get the scale behind the scenes [00:15:15] across the countries. And I think if you look at, funnily enough, if you were to ask me 2019 when I was talking about scale, I was saying, "Look, if you're US, if you're India, you're China, you're good to go." But it turns out that even in the US you need scale. So [00:15:30] it's so all, even there you're trying to unify the platforms and be smarter about things. Rowan de Pomerai: And there's loads of interest there, right? I said there's fewer US companies in this. Firstly, there's not none. There, there is some [00:15:45] very, very high scale players in here, just fewer of them. But also we spoke to more. So I did calls and interviews with some very large US players who came back and said, "My legal team says no in terms of [00:16:00] giving you the numbers," But who wanted to talk about it, who wanted to hear how we were doing this. And while I don't know for sure, if I was a betting man, I would say that one or two of them may well have gone and calculated their own figure for themselves, even if [00:16:15] they didn't share it with us. Marion Ranchet: The idea being that if you were part of that pool of 16 platforms, you then had access to the reports and the anonymized data, right? Rowan de Pomerai: Exactly right. Yeah Marion Ranchet: So is there anything you wanna do next? [00:16:30] do you wanna grow the scope? Do you wanna, I don't know, it's a bit of a procurement question. Do you wanna do more with DPP? I know but- Jonas Engwall: Yes, of course. Rowan de Pomerai: Why, thank you. Marion Ranchet: But in the end, what's the end goal? And Barnier [00:16:45] And Bjarne, you as a platform, when you see this, what advice and where are you gonna look for more efficiencies? You've mentioned your legacy stack but is there anything else where you're thinking... Bjarne Myklebust: Yeah, legacy stack is obviously one but, also [00:17:00] being able to benchmark against Netflix. And they will say, "Are you comfortable being benchmarked with Netflix," which is a basically 100% streamer? They don't, they're not a public broadcaster. They don't do the old broadcast stuff. Yes, because [00:17:15] this is what we have to compete with. They are the market leader. We have to be just as good as them, both on the economic side and also on the, taking down the cost of distribution and, play out and so on. So it's [00:17:30] interesting. And, Netflix has also gone through a transformation, basically. They, sent out DVDs per post and they left that just five years ago. It's not comparable but I think the shifts [00:17:45] in our industry, the streamers in, especially in Europe, the OTT platforms there, there are many broadcasters there that are very popular, almost as big as Netflix in their local market. And they are basically all broadcasters and trying then to turn [00:18:00] the cost from the old economy to the more, newer OTT is a difficult, task. And then having some more analysis to look into is good. Evan Shapiro: And, scale does [00:18:15] matter but so does hours of practice, right? Yeah. So you were in this early. All the public broadcasters got into this relatively early because they had the backing of a system that allowed. That doesn't happen in the United States, [00:18:30] unfortunately. But, I think one of the great quandaries across enterprises that last that long and have as many different operations simultaneously and flying the plane that you need and the plane that you will need, [00:18:45] at the same time, do you... The great conundrum is build or buy. And, how do you determine that when you're sitting across from the CFO and the CTO and all the other department chairs? How do you to [00:19:00] weigh the judgment of do we build this in-house or do we go out of house? Bjarne Myklebust: Our industry, especially the more traditional broadcast corporation, are moving from a CapEx to an OpEx world. Basically, we are buying more services, because they are [00:19:15] more software based so we don't need the boxes. We don't buy the software. We license it because we may, might wanna change it. And that's a good thing. So we buy more now than we did before. And one reason is that they're more software based [00:19:30] systems. Basically, you don't need the black boxes, anymore. The other thing's that you are a little bit more agile when you can operate on an OpEx than, than, than the CapEx. But I also think that the DPP also know this because they talked a lot [00:19:45] to their customers, around that change, which is very difficult to do. And we're in the middle of it or we're past it but it's, been difficult to, do that change from the CapEx to the OpEx. But I say buy. Our [00:20:00] core business is to make good content and to reach the audience, basically. Your content doesn't have any value until it reaches the audience. That's my job. So focus on that and let's buy the system, buy the CDNs. We don't [00:20:15] build our own CDNs. We buy that capacity. So I will say buy if that's the question, yeah. Rowan de Pomerai: And not that many broadcasters built their own broadcast networks either, not more recently. You go back a long way, sure. But, a lot of [00:20:30] countries have an organization that operates the sticks on the hills or the satellites in the sky or whatever it is. There's no reason that needs to be different in the streaming world. So I think it's a really relevant conversation. I really can't name [00:20:45] them but there was one organization involved that had two platforms, as a result of some M&A history and one of them was insourced and one of them was outsourced. And I suspect that their leadership [00:21:00] were probably very interested in the results as to which was coming out cheaper. Evan Shapiro: I think that's another, it's hard to demonstrate that, especially when you're reporting on other people's earnings. I have a question for you that pivoted, pivots back to something we first discussed when we first met, which was you [00:21:15] were adding vertical video to services and this was a years ago. And I remember thinking, "Why would you do that?" Marion Ranchet: Yeah, it was with M6, I believe. Evan Shapiro: Yeah. It was, it was with M6. Yeah. That's exactly right, which [00:21:30] something I said earlier to Linette Zaulich on the street, I said, "If you're, wanna see the most interesting thing, things happening at the intersection of technology and television, it's in France right now." You had Netflix- Marion Ranchet: I'll second that... Evan Shapiro: And, TF1 [00:21:45] up on stage, earlier today. That's a great example of Netflix having a, your set of problems now. But you were the first one to talk to me about adding a vertical feed to a premium [00:22:00] streaming product. Are you seeing more requests for that these days? Jonas Engwall: Yes, absolutely. We're definitely leaning into this. It's, you're right, it started, I don't know, it's three-plus years ago [00:22:15] probably. And the conversion rate was very good. And the starting point, if I don't misremember, was, basically shorts related to a long-form content that was traditional on the platform and the [00:22:30] conversion rate was very high. And now they are do- using this for lots of different sources. Evan Shapiro: So just let's walk through that slower for people who don't speak all the lingo, which is they saw it on their phone on a feed to a certain extent. So it's just, [00:22:45] it's, the premium streaming service in a vertical form on your phone and you're out and you see a short there and it converts to subscription or viewership or some other consumer action. Jonas Engwall: Yeah, correct. I think in this particular case it was more a [00:23:00] conversion between, let's call it a teaser content into the proper long-form content. Yes, on the, in this case, MC's on the platform. Yeah. It was, it very successful. And since then I, I might add, we've [00:23:15] launched it at least on three of the four. I'm unsure about the fourth one but for sure, three of the four has vertical videos and we're leaning into it and we're getting more and more interest on it, around it, as we speak. Evan Shapiro: [00:23:30] Bjarne, did, are you seeing that? Are you using that? Bjarne Myklebust: Yeah, yes. We're actually, releasing a new microdrama series called 21 Days, which is vertical and will go in more social media, also on our own platform but vertical. Evan Shapiro: So that's a premium [00:23:45] original piece of series? Bjarne Myklebust: We're a public service so it's absolutely premium, But it's basically free for everyone. Evan Shapiro: But it's vertical. Bjarne Myklebust: Shot vertical. Yes. And it's for a little younger generation. So you see, I'm a TV, basically a radio guy but a broadcast guy, [00:24:00] and I hate the... Did hate the vertical wrap. But you have to, comply, with it because, the generation growing up now and even us are watching vertical video more and more. So if you want to reach those platforms and do it good on [00:24:15] that platforms, you probably have to go vertical. Marion Ranchet: Can I ask you though? 'Cause there's having a feed like that on your mobile app but I think we've seen some announcement these last few days. I think it's the team at Whale TV you guys launched, if I'm not mistaken, a [00:24:30] microdrama app on a CTV platform. Does that make sense for you guys to do that too? Bjarne Myklebust: Like I said, we are launching that on our mobile player. Evan Shapiro: It's not just for microdramas, it's for re- Marion Ranchet: But for anything, yeah. Bjarne Myklebust: It's for everything. [00:24:45] But I think where we will actually reach that audience is on the social media platforms that we all know well. Evan Shapiro: So, you're syndicating the show to the platforms as well. Bjarne Myklebust: We have to do a little bit of that also to get our brand out there and actually be able to reach that audience. [00:25:00] We try not to do very much of it because we want them to use our platform because then we have control over the programming and the algorithms. But you have to do a little bit of it. Evan Shapiro: And I'd, this is for the crowd here at IBC. I'm gonna be talking about this [00:25:15] on stage later but there's gonna be a wave of premium vertical. Massive wave of premium vertical. Original, we just talked about a number of them up here on stage and there are tons of others as well. TF1 is [00:25:30] doing a docuseries, with Gaspard G. And, France Television is doing one with Hugo Decrypt. RTVE is doing one with, an influencer named Nonisimo. This is [00:25:45] happening. That is news. That is hard news. But it's scripted, it's unscripted. And then there's the massive libraries of these companies that can be verticalized. Roseberry is verticalizing Neighbors. I think that's with Fremantle if [00:26:00] I'm not mistaken. Yeah. That, there, there this is a thing that's happening. There is a tremendous amount of new value being made in vertical, in premium, syndicated across social, platforms and native. [00:26:15] Peacock ordered six vertical reality shows this past year. So if you're looking for new opportunity, that is where some of that is happening. Marion Ranchet: And may I say that, we talk a lot about what's going on in the US but all the examples you've [00:26:30] given are from European broadcasters. And I think too often we're talking about the doomsday story about linear declining but they know, right? I think they don't have blindfolds. And these last few years they've proven in [00:26:45] many ways, may that be the Netflix-TF1 partnership, RTL going after Sky or Sky going after ITV, you need to do things differently. Going into, vertical. We are being very innovative in this region. Evan Shapiro: Yeah. It's really impressive. [00:27:00] Rowan de Pomerai: I was just gonna say, absolutely. We really see that. I think it's also all too easy to talk about Europe as if it's one thing, right? Yeah. So we, we did a piece we called the European streaming, TV and streaming [00:27:15] outlook earlier in the year and honestly, the difference between countries that we were seeing, you look at, Bjarne's close neighbors up in Finland, for example, YLE, the national broadcaster, like just hugely popular. Yeah. Right up there beating [00:27:30] the big US services in a way that isn't happening in Southern Europe, for example. So you know, there, there's huge variation. Evan Shapiro: I just wanna say for my fellow Americans who may be listening or watching this, Europe is not one thing. [00:27:45] Just wanted to, you have to, can't make assumptions. This has been, and again, I think you taught me a lot about where streaming was going because of the innovations happening here, [00:28:00] specifically with your partners that helped you found the company but also with broadcasters and other folks around the horn. And a lot of the trends that I talk about now, I learned from you at Bedrock and your team there but also by studying the public broadcasters and [00:28:15] great researchers like yourself. So thanks for having me on the stage. Thank you guys. I'm glad I made the cut this year. Marion Ranchet: Yeah, you, right? I don't know if he's gonna be coming back next year. We'll have to think. Evan Shapiro: We'll see. Marion Ranchet: I'll decide next week. Evan Shapiro: I'll see how this episode does, I think. Marion Ranchet: Yeah, let's see how the episode does and- Evan Shapiro: That's really great. That's how we judge everything. Marion Ranchet: [00:28:30] Exactly, 100%. That was amazing. That was the Media Odyssey Podcast everyone. Evan Shapiro: That is Marion Ranchet. Marion Ranchet: And [00:28:45] that is Evan Shapiro. Thank you everyone. Evan Shapiro: And we'll see you again soon. Thank [00:29:00] you.