Silicon Beach – The media revolution of the tech giants
What’s the story behind the huge content investments being made by Apple, Amazon, Google & Co.? Tim Stickelbrucks decodes the tech giants’ strategies.
Whether House of Cards, Stranger Things, The Man in the High Castle, Planet of the Apps or Mozart in the Jungle, all these hours we spend in front of screens of varying sizes are thanks to a new kind of media power. It’s difficult to get our heads around the huge sums being invested, which surpass anything previously seen of the Hollywood studios’ already generous budgets. Following in the footsteps of video streaming pioneer Netflix, the big digital platforms of Amazon, Apple and Google with YouTube are investing in the business with their own premium content. Now that the majority of them have already gained experience in the lucrative distribution of content on their platforms with the “gateway drug” of music, the production of exclusive video content is the supreme discipline of the future. With different strategies but full-to-bursting wallets, technology corporations from Silicon Valley are infiltrating the time-honoured film and TV production sector. According to reliable estimates, in the mid-single-digit billion range, their annual budgets for own content are exceeding the investments of traditional TV channels, such as HBO, many times over. With their newly opened offices in Los Angeles, not far from the Pacific coast, the world’s new media centre is emerging: and it goes by the name Silicon Beach.
But if you thought these companies are only capable of programming and putting together end devices, you’re way off the mark. Amazon and Netflix are already winning Oscars and Emmys for their own productions and proving that they have perfectly mastered the art not only of licencing, but also of generating relevant and enthralling content themselves. A constantly growing audience is confirmation of their strategy. But even more important is the fact that they have changed the way we consume video content in the long term. Binge watching, independent of broadcasting schedules, the ability to pause a show at any time, mostly ad-free – these are just some of the changes that spring to mind. And that’s just the beginning. In the development centres, technologies are currently being created that will change the way we watch moving images, just as much as the invention of the remote control or the video recorder did back in the day.
The strategies of the tech giants
As lucrative as the business of this new content may be, it’s hardly surprising that there’s a deeper hidden agenda behind it. If we look at this quote from Tim Cook, CEO of Apple Inc.: “Creating our own exclusive content is a fantastic opportunity for us,” it’s obvious he means that it will strengthen the Apple eco-system, i.e. the content that’s exclusively available to the users of Apple products. So customers should be taken or kept there, which will inevitably result in them purchasing Apple’s highly profitable end devices. US magazine Vanity Fair has dramatically called Apple’s foray into the world of own content a “declaration of war”. After all, this is of course also the approach of Amazon, Facebook and Google, whereby the latter, at least as far as the content strategy approach is concerned, is clearly setting itself apart. On the one hand, with the simple product name YouTube TV, the pioneer and global market leader for on-demand video is spearheading a service in more and more markets that allows people to watch linear TV channels on its platform, a move that is surprising to many people. An offer that is primarily aimed at the young generation of so-called “cord cutters”, an audience that refuses to just watch linear TV channels via cable or satellite, but consumes them in a “screen agnostic” way, i.e. regardless of long-term contracts and on changing end devices ranging from smartphones to their living-room TV. On the other hand, for its subscription service YouTube Red, Google is also investing budgets worth millions in its own productions, on a par with its competitors. But much more fascinating is YouTube’s approach of opening their own production studios worldwide. These so-called YouTube Spaces offer qualified video producers free access to professional production resources, training and workshops. Of course, one of them is located in Silicon Beach in Los Angeles, but they’re thinking internationally too: YouTube Spaces can also be found in London, Tokyo, New York, Berlin, São Paulo, Mumbai, Toronto, Paris, soon also in Dubai, and no doubt many more locations in the future. It’s not only exclusive videos being created here, but also a whole new culture. The new generation of DIY video producers is therefore in a position to create highly professional content. And it is also an essential defence strategy against another newcomer to Silicon Beach: Facebook. With its still young office in the global entertainment centre, the social media giant is positioning itself as the new player in the original content business. Nick Grudin, VP of Media Partnerships, describes the strategy as follows: “We’re supporting a small group of partners and creators as they experiment with the kinds of shows you can build a community around – from sports to comedy to reality to gaming.” But similar to YouTube, the focus is already on the end consumer as a potential producer. After all, Facebook’s live video function is one of the platform’s biggest growth drivers.
The agenda of the visionaries
But technology firms won’t be satisfied with simply producing their own traditional content as an incentive for viewers to remain in or move to their eco-systems. So where will the future take us and what will the innovations of the next few years bring? With this newly gained creative design freedom over content, for the first time the tech companies can now come up with completely new offers, enhance them with new technological possibilities and draw users deeper into their cosmos.
Above all, we’re talking about technologies like Augmented Reality (AR) and Virtual Reality (VR), both increasingly popular media for enabling impressive experiential interaction with content and, of course, also brands. In the case of AR, virtual elements are superimposed onto real experiences, for example via a screen or special glasses, while VR gives the user, equipped with a helmet, wired gloves etc., an experience that is completely detached from reality. Let’s take a look at two of the top dogs to illustrate this: in the future, Apple wants to control the market for AR, as suggested by sensationally successful game applications like Pokémon GO. Facebook, on the other hand, is focusing primarily on this technology with its investments in the VR headset manufacturer Oculus Rift. Regardless of this, we can expect both of them to use their future content production resources to generate optimum experiences for their preferred usage scenario.
Whether Apple’s Siri, Amazon’s Alexa, Microsoft’s Cortana or Google Assistant, all the big gadget manufacturers are assuming that in the future we’ll mainly be interacting with their machines by voice, rather than using a keyboard or touch displays. The technology, which was initially regarded with amusement, and has caused many of us frustration as well as plenty of comedy misunderstandings, nevertheless has an extraordinary developmental trajectory to look back on. It opens up brand new ways of controlling and experimenting with content if content producers and developers create new user experiences together.
Relevance for brands
This shifting balance of power in the media business is undoubtedly having immediate repercussions on the advertising environments available to brands and ad companies. If you already know how media will be consumed in the future, you will be in a position to build intelligent reach strategies early on. The requirements are becoming increasingly complex.
On the one hand there is an opportunity to create highly emotional brand experiences with AR and VR technologies. The studies of user engagement in campaigns that feature augmented reality are more than positive and by far exceed the classic medium of TV when it comes to emotions and authenticity. In keeping with this, big spenders like Coca-Cola and McDonalds, as well as the innovation-driven premium automobile market with brands like BMW, Mercedes-Benz and Volvo, have already carried out their own projects. The challenge is to use the new opportunities that result from the fact that big digital platforms are producing not only these technical innovations, but also a major part of their content.
On the other hand, in the future, users will be increasingly navigating their way through their media offers with voice commands, and without any further support from a screen. Companies that want to be found and experienced in this context will have to find ways to not only make their brand heard, but also to create an integrated brand experience.
One thing is certain: the future has already begun. The classic TV usage of the past has given way to a highly fragmented video consumption on the most diverse of platforms and end devices. The heavyweights of the technology industry see this as their big chance to strengthen their platforms, and will also completely redefine the way we handle and interact with different content offers.
Illustration: Mario Wagner
Managing Partner of Saint Elmo’s Entertainment Los Angeles LLC
At the interface between the music industry and brand communication, Tim Stickelbrucks accompanied the first digital transformation in the media world, advising companies such as Philip Morris, Apple and BMW on their audio strategies. Today he is managing partner of the specialist agency for content marketing and the strategic music competence centre for brand communication. The agency develops solutions for brands that wish to attract and retain customers with the help of entertainment contents like music and video. In the heart of Silicon Valley, he and his team work at the cutting edge of the latest developments in the content industry. Tim, who is based in Los Angeles, is truly passionate about music: whether professionally on the search for the latest trends, or in his private life. For his personal music enjoyment, he has meanwhile rediscovered the joy of analogue and the audio quality of a traditional record player.