IDC PERSPECTIVE: Cloud Transition Strategy for Studio Versus Broadcast Streaming Services

Cloud Transition Strategy, Business Cycle, and Ecosystem Architecture for Studio vs. Broadcast Streaming Services

Overview

The media and entertainment (M&E) industry is undergoing a significant shift towards cloud services, driven by consumer demand for immediate content, increased consumption, live latency-free streaming, and enhanced user experiences. Key factors influencing this transition include:

• Consumer Demand: High expectations for content availability and quality.
• Technological Advancements: Adoption of advanced technologies like generative AI, machine learning, and data analytics.
• Business Models: Shift towards total cost of ownership (TCO) and new monetization models.

Key Challenges and Solutions

• Transition Challenges:

  • Prioritization by Business Cycle: Lack of clear guidelines on how to prioritize the transition.
  • Skill Gaps: Insufficient expertise in cloud architecture and native cloud service providers.
  • Different Requirements: Varied needs based on whether the company is a motion picture studio, broadcaster, or streaming provider.

• Strategic Priorities:

  • Total Cost of Ownership (TCO): Aligning with partner objectives for profitability.
  • New Partnerships: Ensuring alignment on engineering principles, roadmap, and risk/reward criteria.
  • Business Models: Evaluating in-house vs. third-party service providers and types of services (SaaS vs. managed services).
  • Monetization Models: Expanding beyond subscription video-on-demand (SVOD) to include advertising video-on-demand (AVOD), free ad-supported television (FAST), and transactional models.
  • Advanced Technologies: Implementing modern cloud services and advanced technologies across all business cycle processes.
  • Workforce Training: Reskilling staff for modern cloud services and advanced technologies.

Motion Picture Industry Specifics

• Content Creation and Delivery:

  • Endless Content Demand: Consumers expect constant content without paying high subscription fees.
  • Rising Costs: Increasing expenses due to inflation, labor agreements, and currency fluctuations.
  • Revenue Growth: Studios aim to show revenue growth and returns for shareholders through improved cost management.

• Key Strategies:

  • Write-offs: Writing off content to production or postproduction for quarterly accounting.
  • Compensation Adjustments: Changing compensation schedules for various roles.
  • Residual Calculations: Paying residuals for actors, directors, and others based on traditional TV programming and theatrical releases.
  • Streaming Models: On-demand, transactional, and FAST models changing payment structures for talent.
  • Accounting Adjustments: Adhering to FASB’s ASC 926 for financial reporting and disclosure requirements.
  • Subscription Revenue Recognition: Following ASC 606 guidelines for recognizing revenue from direct-to-consumer services.

Conclusion

The M&E industry is navigating complex challenges as it transitions to cloud services. Success hinges on aligning with TCO models, forming strategic partnerships, adopting advanced technologies, and retraining staff. Understanding the unique needs of different business models—whether motion picture studios, broadcasters, or streaming providers—is crucial for effective transition and long-term success.