Manatt Digital Media: Top 10 Predictions for 2016

by Manatt, Phelps & Phillips, LLP

It's a new year, and that, of course, means it's pundit time. Last year's headline story in digital media was the rapid ascension and burgeoning number of over-the-top (OTT), cord-free streaming video services, led by Netflix. 2015's secondary headline was the coming storm of virtual reality (VR). Now let's look ahead. Here are Manatt Digital Media's top 10 predictions for digital media in 2016.

(1) VR will be the headline story, as what was just recently written off as fad for most in media will cross into mass-market status. Several million premium headsets (not just Google Cardboards) will be sold by major consumer electronics companies that have together invested billions of dollars to create market demand. It will feel like the early mainstreaming days of the game console market. While gamer experiences will dominate VR in 2016, live-action VR will also show promise as the language of VR storytelling develops. Jaunt, fresh off its new, massive round of $65 million from Disney and other media giants, will be one of the companies to lead the way.

(2) Not far behind, consolidation will rule the day, as traditional media companies—both domestic and international—will accelerate their appetite for digital-first M&A. These strategic bets will be driven by the now full realization that new DNA is needed to play effectively in our transformed mobile-first, social and Millennial-driven media environment. Those few remaining multichannel networks (MCNs) with scale and HBO-like "originals" strategies are in the line of sight, as are leading digital-first production companies that sell to the growing list of OTT providers that pay for exclusive programming. For creators, this heralds a new "Golden Age" of content. And for consumers, this means choice like never before. Too much? Companies that can help navigate it all will be in demand.

(3) The multiplatform-ization of media will show no signs of abating, as the "Great Unbundling" of pay-TV packages will continue and the list of YouTube challengers (such as Facebook and Snapchat) and challenging stand-alone OTT services grows. New OTTs increasingly include subscription service from both traditional media companies (such as NBCUniversal's "Seeso") and a growing list of vertically focused media companies (such as leading dance/music-focused MPN DanceOn, in which Manatt Venture Fund is invested).

(4) Live streaming (both event and individual/social) will join video on demand (VOD) as a key area of focus for media companies both young and old. Live social network YouNow has raised $15 million this year and is one to watch, while Twitter acquired Periscope for about $100 million. Will Meerkat be next in 2016?

(5) On the music side, major services' (Spotify, Pandora, Rhapsody) subscription-focused business models will continue to look to diversify. That's why they smartly made significant strides in that regard in 2015. Case in point: Pandora, which acquired Ticketfly for $450 million.

(6) eSports—already quietly massive—will be quiet no longer, as an increasing number of stadiums will overflow with teens cheering for their favorite e-Athletes (and major brands will fight to reach them). 2016 may be the year that leading e-Athletes organize to bargain collectively. And traditional sports and live-event megaplayers (AEG) may consider M&A to enter this digital sports world that is here to stay.

(7) The video game industry will continue to outpace and dwarf traditional media titles in terms of revenues due to 2016's VR and eSports rapid adoption.

(8) Wearables and digital health will expand significantly. The Apple Watch is just an early prototype for things to come. Just imagine the resulting data and diagnostic possibilities for mobile, democratized healthcare. Those will come alive in 2016.

(9) Borderless global partnerships among previously territory-constrained media and tech companies will accelerate amid these new digital realities. Expect an increasing array of major strategic moves like those seeking to challenge Netflix (much like 2015's HOOQ with Warner Bros. and SingTel in Asia).

(10) Finally, expect the unexpected. Things move too fast as content and tech continue to collide. As close as we are to the action, new entrants and innovators will undoubtedly surprise.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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