Why Every Brand Needs a Livestream Media and Selling Strategy in 2021

October 2, 2020 by  Andrew Cohen

Executive Summary

More than $9 billion of capital has flowed into companies built on the power of live in just the past year alone. We break down how “live” is built upon 4 value pillars, how Legacy Live and Nextgen Live are Converging, 9 new growth sectors, and where the power of “live” is headed next.

 

  • WHAT’s Happening? Investment capital is flowing towards companies built on the power of live media

  • WHY Is This Happening? Live entertainment evokes a deeper level of audience engagement, which is the ultimate source of sustainable and diversified revenue

  • HOW Is Live Engagement Monetized? “Legacy Live” models like live sports / news broadcasts and festivals / events) receive premium ad spends, and “Nextgen Live” models like Twitch and Fortnite employ direct-to-consumer transactions in a freemium environment. However, the two models are beginning to converge.

  • HOW Is “Nextgen Live” Evolving? Accelerated by COVID, this model has reached mass-market adoption. It’s now transcending its gamer roots. Adjacent consumer verticals—including sports, music, e-commerce, gambling, travel, and more—are all being “Twitch-ified” or “Fortnite-ified”.

  • WHERE Will “Nextgen Live” Go From Here? Every major consumer sector will be “Twitch-ified” or “Fortnite-ified”. Both through the expansion of these companies into new genres and through the emergence of dedicated native solutions in each new category.  

 

Alright, let’s get into it.

 

WHAT’s Happening? Investment Capital is Flowing Towards Companies Built on the Power of Live Media

In recent months, we’ve observed outsized capital flowing towards businesses built on a foundation of live engagement. Both through the strategic initiatives pursued by incumbents like Amazon, Facebook, Fox, the NFL, NBA, and others, and through the many capital raises by venture-backed companies outlined in the table below.

 

WHY? Live Entertainment Generates Deeper Levels of Audience Engagement and Monetization

It’s long been said that we’re living in an “attention economy”. But not all attention is created equal.

A clickbait listicle that generates millions of passive eyeballs is not as valuable as a captivating piece of content that wins the hearts, minds, and attention of thousands. On this hierarchy of engagement, live viewership reigns supreme.

The live medium has the power to elevate entertainment into cultural phenomena. For example, in 2020, the TV show Cops had 450,000 viewers per episode. And Live PD, which was essentially just a live version of Cops, averaged 1.9 million viewers per episode, making it the number one cable show on Friday and Saturday nights. Similarly, if you removed the live element from HQ Trivia, instead of earning a $100 million dollar valuation after one year, it would’ve been just another iPhone game. If you remove the live element from Fortnite, it’s just another video game. Without live, Twitch never would’ve been able to compete with YouTube. And if sports weren’t live, a 30-second time slot during the Super Bowl wouldn’t cost advertisers $5.6 million.

But why does it matter if entertainment is unfolding in real-time? If a piece of content is aggregating tens of millions of people, why does it matter if they’re all watching at the same time or not?

Due to the four pillars outlined below, “on-demand-proof” live media deepens audience engagement and provides the foundation for sustainable and diversified revenue growth.

 

Live media is defined by 4 pillars, all of which evoke a deeper level of audience engagement:

  1. Moment-Driven (Tune in). The fleeting nature of live content, and live moments, creates a sense of urgency for viewers. ‘The concert is at The Hollywood Bowl tonight’, ‘the game is on ESPN tomorrow’, ‘the news is breaking on CNN now’. Content formats that are inherently linked to a time and place are, by nature, more unmissable than evergreen programming. I love Succession, but I’m not planning my night around it. I’ll watch each episode at my convenience. NFL football on the other hand, owns an entire day of the week. Each live event holds the potential for a completely unique moment. A unique experience. So you tune in.

  2. The Fomo Factor (Lean In). The fear of missing out (aka “FOMO”) on a memorable moment keeps users glued to the action. The next moment may always be the can’t-miss moment that everyone will be talking about. This is, in part, why consumers watch live video 10-20 times longer than on-demand content.

  3. Authenticity (Connect). Live content is, by nature, authentic. As opposed to the scripted dramas on HBO, the meticulously rehearsed and edited videos on TikTok, or even highly dramatized reality shows, the memorable moments that make live entertainment special tend to be organic and unscripted. This authenticity evokes a deeper and more intimate level of audience connection. The ultimate currency. A study from Vimeo concluded that “live video engages viewers in immediate and authentic ways that other media formats cannot”. We’ve seen this thesis validated in the audio space. The unfiltered nature of the podcast medium results in powerful conversion rates for advertisers.

  4. Social (Share).  Viewers feel like participants in live content, rather than just passive observers. The communal experience of live consumption—a group of friends and strangers with a common passion engaged in a shared moment—is inherently social. From watch parties to watercooler recaps, live events have always inspired communal engagement. Now, social media has become the world’s biggest watch party and watercooler. Viewers share clips and discuss the content in real time across social media, promoting the event by evoking a sense of FOMO in those who aren’t watching it, and inspiring those who are watching to engage more deeply and contribute to the conversation. Last Sunday afternoon, the top 30 trending topics on Twitter were all related to the NFL games that were underway. The unique interactivity of the live medium amplifies this already heightened form of audience connectivity, resulting in a collective level of sustained engagement and real-time peer-to-peer promotion that’s nearly impossible to replicate in static mediums.

HOW Is Live Engagement Monetized?

The heightened state of live engagement enables diversified pathways to monetization. There are currently two distinct yet converging revenue models for monetizing this deep audience connection: “Legacy Live” and “Nextgen Live”.

However, these two models are beginning to converge. As “Nextgen Live” platforms are achieving massive scale, they’re looking to grow ad revenues. While “Legacy Live” outlets are adding “Nextgen” engagement and monetization features to their broadcasts in order to more deeply monetize live audiences.

 

Legacy Live

Even in the modern consumer landscape, as most ad-supported businesses are struggling, traditional revenue models for live entertainment are thriving. With one catch: the content needs to be inherently, irreplaceably, “on-demand-proof”.

If it doesn’t need to be live, viewers won’t watch it live.

Although new consumer behaviors have significantly eroded the revenues and market share of many incumbents (see our report on “The AVOD Wars”), programming that necessitates live consumption—sports, news, tentpole events—drives deeper audience engagement than ever before. Ad-supported legacy models built on “on-demand-proof” live entertainment have not only been impervious to the mass erosion of the advertising economy, but they’ve actually grown stronger.

We call these “Legacy Live” models. Their fundamental revenue-drivers are largely unchanged, but within the context of a changing landscape, their value has increased dramatically.

The two most prominent examples of “Legacy Live” models are “on-demand-proof” television broadcasts (e.g. live sports, news, and award shows), and “the experience economy” (concerts, festivals, conventions, etc). Not only is outsized revenue continuing to flow toward these models, but so is investment capital (e.g. Serie A, XFL, fuboTV, Cheddar, Live Nation).

Traditional Ad-Based Broadcasts (e.g. live sports, news, and tentpole events). Sports leagues monetize their most valuable asset—scaled live engagement—by licensing their live media rights to networks that pay billions for the rights to sell advertising against this live engagement. And the networks that broadcast live news and award shows monetize the “on-demand-proof” nature of their programming by selling ads for premium price points.

  • Engagement

    • 82% of pay-TV subscribers say they would reduce or cut their subscription if they didn’t need it to watch live sports.

    • 27 out of the top 30 rated TV broadcasts in 2019 were all sporting events or award shows (The rest were episodes of The Big Bang Theory…)

    • In 2005, 14 out of the top 100 rated broadcasts were live sports events. In 2018, live sports accounted for 88 out of the top 100 broadcasts.

  • Monetization

    • Live sports rights revenues for traditional leagues (currently a combined $76 billion for the top three US leagues) are projected to have a 4.5% five-year CAGR, despite declining viewership.

    • eSports leagues, which are expected to adopt a similar legacy model to the traditional leagues (see our 2020 Predictions), are projected to have a 67% five-year CAGR for their live media rights revenues.

    • Although national TV ad revenues have declined 23% during the pandemic, ad revenues for cable news networks increased by 10%, accounting for 15% of total TV ad revenues in the US.

    • In Q2 2020, ad revenues for primetime cable news increased by 31%, while the TV ad market as a whole declined by 19%

The Experience Economy. Over the past decade or so, in reaction to the all-consuming rise of social media and the omnipresence of digital communications, millennials began to crave the authentic sense of connection provided by “IRL” events. Festivals and conventions began to proliferate, becoming a dominant cultural force (last year, 800+ music festivals attracted 32+ million attendees). And audiences in these settings demonstrated a heightened level of engagement. Connecting deeply with each other, as well as the brands and performers associated with the event. Marketers were quick to monetize this unique form of engagement through sponsored activations and branded events.

  • Engagement

    • 78% of millennials would choose to spend money on an experience or event over a physical item

    • 69% of millennials believe that attending events makes them feel more connected to other people, the community, and the world.

    • After attending a branded event or sponsored activation, 98% of attendees report feeling more inclined to purchase from that brand, 81% shared photos from a branded event on social media, and 62% researched the brand online.

  • Monetization

    • Experiential marketing revenues have experienced consistent YOY growth from 2010-2019, peaking at $84B, significantly outpacing the growth of overall advertising and marketing industry.

    • Live events accounted for 15% of the Complex Networks’s total 2019 revenue.

    • The inaugural ComplexCon in Chicago generated $40 million in revenues, and in 2018, ComplexCon attendees spent $25 million across 160 sponsored vendor booths.

 

Nextgen Live

The intrinsic immediacy of live media can’t be replaced. It can only be reinvented. Not only have certain “Legacy Live” models thrived in the modern media ecosystem, but new models are emerging to provide an outlet for consumers to experience the four pillars of live engagement in environments that are more accessible and engaging for younger audiences.

“Nextgen” live models, which were incubated in the gaming space, monetize the unique power of live engagement using direct-to-consumer microtransactions in a “freemium” environment.

These platforms—including Twitch, YouTube, Facebook, Fortnite, Roblox, and more—have harnessed the unique power of live media and supercharged it with elements of gamification, social interactivity, personalization, and mobile UX enhancements. And they’ve turned these engagement features into meaningful revenue-generators.

“Nextgen Live” platforms are free to access from any Internet-connected device, which brings consumers into these ecosystems, enablingbroad audience reach. The engaging features keep them on the platform, and bring users “down the funnel”, converting them to paid users. Once audiences build habits in these ecosystems, many opt to purchase upgrades to enhance their experiences through an array of options, including various tiers of subscriptions, and micro-transaction opportunities that allow users to customize their content experience.

“Nextgen Live” models are also beginning to converge with “Legacy Live” models. Now that these services have achieved massive scale, they’re beginning to focus on growing ad revenues.

eSports and Livestream Gaming. Livestream gaming platforms like Twitch, YouTube Gaming, and Facebook Gaming provide real-time social interactivity—both between creators and fans and amongst the audience itself—as well as graphic overlays, gamification, and personalization. These engagement features function as revenue-generators, as viewers can purchase emotes, bits, cheers, and channel subscriptions for their favorite streamers. Additionally, advertising is becoming a more significant component of the revenue mix for these platforms, typically through pre-roll ads, sponsored integrations, and influencer marketing.

  • Engagement

    • Twitch reaches 50% of the millennial males in America

    • Twitch has 15 million daily active users, who engage with the platform for 106 minutes per day on average

    • eSports has 84 million annual viewers in the US, making it the second most-watched sport behind the NFL.

    • In Q1 2020, 5.6 billion total hours were watched across the top four livestream gaming platforms

  • Monetization

    • 22% of Twitch users have opted to pay for a subscription

    • In 2019, Twitch generated $1.2 billion through direct user transactions.

    • The popular streamer Ninja makes $2.1 million per year from fan subscriptions on Twitch alone.

    • Twitch generated $300 million in advertising revenue in 2019

The Metaverse. Free-to-play “metaverse” platforms like Fortnite, Roblox, and Animal Crossing combine the accessibility and social interactivity of livestream gaming with the sense of “IRL” connectivity of “The Experience Economy”. They’ve built on Twitch’s micro-transaction model and took it a step further by applying immersive tech to the live medium, making these platforms into Nextgen social hubs. Thus tying the in-game purchasing of virtual merchandise and cosmetic upgrades to a sense of personal identity. As a result, in-app purchases are even more lucrative on these platforms. The vast majority of players choose to pay for these upgrades.

However, now that they’ve achieved massive scale and have firmly established these direct-to-consumer revenue lines, many metaverse platforms are beginning to converge with “Legacy Live” models by pursuing advertising and sponsorship revenues. But unlike legacy properties, or even livestream gaming platforms, the metaverse approach to advertising goes beyond selling the standard marketing inventory, and instead creates truly engaging and immersive experiences on behalf of brand partners. For example, through specialty-themed skins, characters, and islands, Fortnite has integrated promotions for the NFL, Marvel, Star Wars, Nike, and many other major brands into its gameplay. An industry critic on Fansided reacts,

“Advertising in Fortnite doesn’t feel like your typical advertising. These massive in-game spectacles feel like can’t miss events. They get players excited while familiarizing them with a brand or product. Epic Games has made advertising cool and exciting.”

  • Engagement

    • Metaverse platforms like Fortnite, Roblox, and Minecraft each generate 1-1.5 billion hours of playtime per month

    • Travis Scott’s virtual Fortnite concert drove 8.1 million hours of live watch time to the platform in a single day

  • Monetization

    • Among users who have spent money in Fortnite, the average lifetime spend is $102.42 per user

    • In 2019, Fortnite generated $1.8 billion in revenue, the majority of which came from subscriptions and cosmetic upgrades in the form of “virtual items” (e.g. costumes or “skins”).

    • When Marshmello performed a “virtual concert” on Fortnite, he sold “virtual merchandise”, which was estimated to generate between $30-100 million in a single night.

    • Roblox averages $4 of user spend per download, translating to $1.5 billion in total user spend on the mobile game alone.

In order for “Nextgen Live” to reach the scale of “Legacy Live”, there needs to be mass-market education and adoption.

 

HOW Is “Nextgen Live” Evolving? It’s Expanding Beyond Its Gamer Roots

COVID has massively accelerated the mass-market adoption of “Nextgen Live”. Since March, when people around the globe began sheltering in place, and classic staples of communal viewership such as sports and concerts were suddenly halted, livestreaming and metaverse platforms have quickly become the go-to source for live, social entertainment.

  • Twitch viewership increased by 63% from Q1 to Q2 2020, with 5 billion hours streamed since the stay-at-home orders were issued.

  • Facebook Gaming achieved 75% growth during this period, with 822 million hours streamed.

  • YouTube’s live viewership has increased by 250% since March.

  • In the first month of the pandemic alone, the Houseparty app (a live social media app owned by Fortnite’s parent company, Epic Games) experienced 50 million signups, 70x its average monthly growth.

  • Ecamm Live, a livestreaming app for Mac, experienced over 200% membership growth since the pandemic began.

COVID has spurred levels of user adoption and awareness that has taken livestreaming mainstream.

As “Nextgen Live” consumption becomes widely accepted, it’s beginning to transcend its gamer origins. These models are now being applied across various consumer sectors.

  • Music: After the success of the immersive “virtual concerts” by Marshmello and Travis Scott on Fortnite’s platform, which reached a combined 23 million live viewers, Fortnite is launching a concert series that it hopes will become a new destination “tour stop” for artists in the future. Similarly, Wave raised a $32 million Series A to build an immersive virtual concert platform. Amazon is now integrating its music platform with Twitch to allow artists to build and monetize audiences via livestreams. And while in-person concerts are halted during COVID, Trey Anastasio, frontman of the band Phish, will be hosting an 8-week “virtual residency” of live performances from The Beacon Theater broadcasted exclusively through Twitch. Caffeine raised a $113 million Series D to scale its interactive live platform through differentiated music-based programming, with a focus on rap battles. On a related note, Verzuz, a livestreaming rap battle series launched by Swizz Beatz and Timbaland on Instagram Live, has embodied the four pillars of live, engaging fans worldwide during COVID. Billboard explains, “Since April, Verzuz itself has become a cultural institution—one with its own characters, lexicon and community…known as “‘the Verzuz effect.’ Fans, music executives and celebrities all participate equally, whether keeping unofficial score in the IG comments or singing along in their tweets…Fans have started group chats and scheduled Zoom viewing sessions with friends around the events, even dressing up in matchup-appropriate attire for the occasion.” As a result of this fanatic engagement, songs that are featured on the show are streamed 200-300% more the following week. Apple Music partnered with Verzuz to simulcast the live broadcast, and have exclusive rights to the on-demand archives.

  • Live Sports Betting: With the state-by-state rollout of legal sports gambling, betting operators are partnering with content creators, rights-holders, and mobile technology providers to provide highly engaging live betting platforms. 63% of fans say they’d pay more attention to games if betting were legal in their state. This is because live betting sustains and enhances the narrative tension of sports broadcasts, even during lopsided matches. The game could be a blowout, but if you and your friends are betting on moment-driven outcomes like “which player will score the next goal?”, “will the next point be a touchdown or field goal?”, or “will the combined point total of the next quarter be over/under X?”, you’ll be on the edge of your seats and glued to the action as if the game were tied. For this reason, leagues view betting as the ultimate engagement tool.  The NFL is projected to earn $1.9 billion in incremental “fan engagement revenue” as a direct result of increased consumption and engagement with the league’s content (a 13.4% increase). The NHL’s CRO, Keith Wachtel, explains “We always saw, and we still see legalized gambling, as a fan engagement opportunity. That’s the holy grail of sports betting; it’s not the short-term gambling revenue. But the direct gambling revenue is significant as well. The Barstool Sportsbook, which combines Penn National Gaming’s betting infrastructure with livestreams of Barstool’s top personalities watching and betting on sports in real time, generated $11 million in betting volume during the first three days of its “soft launch”, which was limited to the state of PA. This initiative epitomizes the process of supercharging and monetizing live engagement.

  • e-Commerce (Livestream Shopping). The unique captivity of live audiences can be powerfully harnessed to drive e-commerce sales. As we detailed in a previous report, “livestream shopping” combines the interactivity of Twitch with the “FOMO factor” of time-constricted commerce “drops”. As a result, livestream e-commerce converts viewers to buyers at a significantly higher rate than traditional marketing (30% vs. 3%). China has embraced this model, building a livestream shopping sector that’s projected to generate $129 billion in 2020. In an attempt to replicate the enormous success of the Chinese livestream shopping empires like Alibaba / Taobao Live / JD.com, Amazon launched Amazon Live and the Amazon Live Creator App. Similarly, Facebook and Instagram have been pursuing shoppable livestreams. And Popshop Live, which recently raised a $3 million seed round, is a two-sided livestream marketplace that provides individual sellers with the tools to host shoppable livestreams, including Shopify integrations to help them manage inventory and point-of-sale during the show, as well as access to gamification features, show templates, and real-time metrics reporting.

  • Social Media: During the pandemic, the most popular category on Twitch has been “Just chatting” (a 94% increase in watch time from January to June in 2020). Roblox launched, “Party Place”, a private venue for virtual birthday parties and other meetups. Discord raised $100 million to expand beyond livestream gaming and become “the slack for social lives”.

  • Fashion: Twitch partnered with Burberry to stream its recent show from London Fashion Week. NTWRK, which closed a $10 million series A with high profile investors like Drake, LiveNation, Lebron James, Warner Bros, Jimmy Iovine, Arnold Schwarzenegger, Foot Locker and more, collaborates with A-list personalities via live content to promote exclusive time-sensitive product “drops” on its platform. It recently sold out of its exclusive $175 gold-plated scale in under six seconds.

  • Sports: In addition to broadcasting live NFL and Premier League games, Twitch launched a sports vertical in July. Partners include the NBA, NHL, UFC, Real Madrid, Arsenal, and many other popular sports IP properties. Additionally between its partnerships with Twitter and Microsoft, the NBA is providing younger fans with “eSports-esque” features such as the ability to customize camera angles and color commentary, control replays and visual interfaces, follow specific players throughout the game, and access interactive graphical overlays. This “Twitch-ification” of traditional live sports broadcasts signals a fascinating convergence between “Legacy Live” and “Nextgen Live” models. Just as platforms like Twitch and Fortnite are growing their ad revenues, traditional properties are using innovative tools to enhance live engagement and monetization through features that promote interactivity, personalization, gamification, and microtransactions.

  • Live Events: Just as live music has intersected with the metaverse, so have other staples of the “Experience Economy”, such as fan conventions. Accelerated by COVID, Complex has moved its signature ComplexCon event into the metaverse, rebranding this new virtual festival as “ComplexLand”, which it defines as “ a free, open-world virtual destination that—like the in-person ComplexCon events of years past—brings together the increasingly complementary worlds of music, fashion, food, tech, and more.” Attendees to this “virtual theme park” will be able to watch live performances, shop for limited-edition products from coveted brands, talk with fellow attendees, participate in discussions, and more. The Head of Events at Complex Networks explains, “ComplexLand challenges the passive participation of current digital experiences”.  This active participation is at the heart of what makes “on-demand-proof” live content so uniquely valuable.

  • Streaming Video “Watch Parties”: Despite the popularity of premium on-demand streaming services, they can’t replicate the communal and socially-interactive nature of live content. But that doesn’t mean they can’t try. Accelerated by COVID, Netflix, Hulu, Amazon Prime Video, Disney+, Sling, Facebook, and Twitch have ALL added “watch party” extensions. This feature enables interactive co-viewing of on-demand content, adding a critical dimension of the live experience to these platforms. Additionally, third-party companies like Scener and Whatifi (which raised a $10 million seed round in June) are both seeking to provide native platforms for real-time, interactive co-consumption.

  • Travel / Education: Amazon launched a new service called “Amazon Explore”, which allows customers to book live, virtual experiences led by local experts (e.g. a virtual wine tasting experience in Argentina, learning how to make sushi in Japan or coffee in Costa Rica, virtual tours of cultural landmarks from Japan to Peru). Unlike watching the passive experiences of learning about the world through YouTube videos or Google Earth—the Amazon Explore experience is a one-on-one session between the host and the viewer, meant to provide the feeling of really “being there”. These live experiences are monetized via direct-to-consumer transactions, currently priced from $10-150.

 

WHERE Will “Nextgen Live” Go From Here?

Across the board we’re seeing billions in capital deployed to broaden the application of “Nextgen Live” models beyond gaming. Amazon is pouring billions into “Twitch-ifying” every consumer sector. Epic Games and Discord raised funds at multi-billion dollar valuations to expand their platforms beyond gaming and into general lifestyle hubs.

However, you can’t be everything to everyone.

While Twitch and Epic Games are attempting to expand their universe into adjacent verticals, ambitious venture-backed upstarts are raising capital to own “Nextgen Live” in focused spaces. While Fortnite wants to also be a home for virtual concerts, Wave is building towards that singular mission. While Amazon wants to become the preeminent destination for livestream shopping, NTWRK and Popshop Live are “live content / commerce-native”. While Twitch pivots towards music, Caffeine builds “The Twitch for Rap Battles”.

No pivot necessary.

Yet we believe there’s enough room for both the incumbents and the new upstarts. The mass-market and the niche. In our vision for the future of live, the massive conglomerates will extend their core live product (e.g. Twitch, Unreal engine) to every consumer vertical, owning at least a portion of each market, and the rest will be owned by dedicated “Nextgen Live” solutions that are native to that space. Megastar performers like Travis Scott may continue to perform on Fortnite and even Twitch. But for the rest, maybe Wave or Caffeine is the better option for them and their fans.

In the time it takes for a multi-billion dollar conglomerate to recognize an opportunity and pivot towards it, a new upstart can build with more speed, agility, and intimate consumer understanding. It’s like making a U-turn in a cruise ship vs. a jetski.

So, for investors looking to capitalize on the power of Nextgen live, we’d ask, which consumer sectors still lack a dedicated “Nextgen live” solution. What areas are the behemoths pivoting towards, but still lack a native player?

We believe food is an interesting whitespace that still remains. Like NTWRK reinventing QVC, will we see a shoppable, “Nextgen Live” version of The Food Network? Or maybe audio. Will we see live, interactive, podcast drops that evoke intensified audience engagement? Or perhaps, like it has done for live music, the metaverse will reimagine the moviegoing experience. Will studios and exhibitors partner with existing metaverse platforms to offer immersive co-viewing experiences? Or will a native platform emerge to maximize value to all stakeholders involved? Will shopping malls function more like immersive metaverse words? Will traditional retail sales space will now function as livestream studios?

We have our thoughts and we’d love to hear yours.

One thing is for sure: the power of live will never die. It will only be reinvented. And we believe the era of “Nextgen Live” is only getting started…

Ping us anytime at hello@wearerockwater.com. We love to hear from our readers.

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