1 JUL 2022

Is the industry moving towards a vertically integrated business model?

In its latest report, Kantar anticipated significant steps in the trend towards vertical integration as major media companies seek to control the whole chain, from production of content to delivery into the home.

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As larger media companies are moving towards vertical integration and launching direct-to-consumer services, the importance of content franchises is heightened, Kantar assured in its latest “The Future Viewing Experience” report.

“We anticipate significant steps in the trend towards vertical integration as major media companies seek to control the whole chain, from production of content to delivery into the home. Mirroring recent direct-to-consumer initiatives in retail and services that bypass the aggregator/retailer, it points to a future where one company owns the studio, makes the programme and distributes it exclusively on its own VOD platform – a monolithic approach,”  the report notes.

In that context, the viability of media companies vertically integrating and going direct to the consumer is determined by the intellectual property they own. Programming, especially when it comes to SVOD and AVOD services, is increasingly based around the exploitation of content brands and franchises, which can repay their valuations as the cornerstones of streaming services. Disney’s acquisition of 20th Century Fox, for example, and the amount it spent acquiring Pixar ($7.4 billion), Lucasfilm ($4.1 billion) and Marvel ($4 billion) clearly provided the cornerstones of Disney’s global offering, preparing the ground for the launch of Disney+ and the related vertical integration.

Data from Kantar’s TGI Europa demonstrates just how valuable these global franchises are in providing a shortcut to global audiences. Across just four key European markets there are 53 million Marvel fans, with 17 million in Great Britain alone. “Clearly the search will be on for potential new franchises, be they ‘Stranger Things’ or ‘Bridgerton,’ whilst the success of ‘Squid Game’ shows that locally sourced programming can go global and the future default need not only be Hollywood,”  the report says.

Having acquired valuable content brands and franchises, the imperative is to secure a return on investment. In 2022, Paramount has no less than five different “Star Trek” series in production, ensuring the franchise is on their Paramount+ SVOD service most weeks of the year, and keeping fans of the show subscribing all year round. Meanwhile, Netflix and Amazon are making heavy investments in gaming and metaverse companies as they look to develop games based on their intellectual property.

On the long-term future, Kantar believes NFTs (non-fungible tokens) clearly have potential for building engagement with television shows and franchise fanbases, offering opportunities to own stakes in unique content related to shows and unlocking direct participation or access to content.