Welcome back to my weekly column! Each week I try to suss out the most important story in entertainment. Since I have several weeks worth of news stories to cull through, this week I’ll have to take care of some house cleaning to start. First,I’ll cover my thoughts on the coronavirus. Then, I’ll briefly touch on the biggest story of last week (the one ending May 1st), since it spilled into this week. Then, we’ll get into the other biggest story of the week.
As for dealing with the Coronavirus, I’ll encourage everyone to read my previous takes on the potential impact of the virus. In short, I’m fairly bearish on the long term impact since it seems like everyone else is so negative. The current hypothesis–this will accelerate underlying trends–doesn’t really seem to be supported by the evidence, as I laid out here and here. It could; it could not; but acting certain seems wildly over-confident. If you want more of these aggressively moderate takes, read about the future of theaters on Twitter here. Or the future of Pay-TV here. (I’ll get to streaming, sports, live events and production soon.)
On to this week.
Most Important Story of the Week (May 1st Edition) – AMC Theaters Goes to War with Comcast
This is the biggest story of the last two weeks. And I have a patented “EntStrategyGuy unique take on it”, but it will be going up early next week at Decider. (It’s not really about the theaters, but why Comcast is waging this fight.)
Still, I have a few thoughts that didn’t make it in there.
– First, as Andrew Rosen has been emphasizing, a lot of this is negotiating in public. So the individual declarations and public relations moves are posturing to get a better result when the negotiating is over. Which means we shouldn’t hyperventilate over some of the specific moves.
– Second, Comcast is going to keep pointing out their great digital sales. But that’s not why they’re making this move. They don’t actually think they replace all their former theatrical revenue with TVOD/EST. They’re real motivation, though, will be explained in my guest article.
– Third, the current through-the-roof digital sales are still a red herring. The Covid-19 crisis is an outlier in historical terms. Meaning we won’t know what the new “normal” is for months. Maybe years. So yes, it’s better to have renewed interest in VOD, but it’s unlikely to stay at this level.
– Last, theaters just make a ton of money. As I wrote here, at least 35% of the total revenue for a given film. That’s not changing, which emphasizes how much is at stake here. Not just for Comcast, but all the studios.
Most Important Story of the Week (May 8th Edition – The Top HBO Max News, Ranked
By the end of this month, the long awaited “HBO Max” streaming service will be released. Will it be much different than HBO? Or just HBO with Friends? We’ll have to wait to judge until it launches. (I’ve said before I’m fairly optimistic it will be a permanent part of the entertainment landscape. And that’s a risk for Netflix.)
As you’d expect, the execs at AT&T have been as busy. Which led to a stream of stories over the last week or so. While each story feels minor, on a whole I’d give all the HBO Max news the crown for the most important story of the last week. Here are the major stories I came across, with them ranked in terms of most important to least important.
- HBO Max Gets Apple Distribution
- HBO Max Gets Youtube Distribution
- HBO Max Gets Hulu Distribution
Distribution is the ignored battlefield in the streaming wars. As I’ve written before, though, it’s the “key terrain”. That’s why Apple and Amazon are fiercely battling for it. Why Comcast wants to get in on the game, and likely Disney too.
Why? Because if you don’t own the pipes, you’re fundamentally at a disadvantage. This is why Amazon and Apple went to battle for years about who pays whom as they both tried to create the pipes. For a streamer, though, it’s key to getting your service in front of as many people as possible. Which cannot be underestimated. Many services have tried to launch without broad distribution, and they usually don’t succeed.
HBO knows this, which is why HBO Max is likely going to get broad distribution.
This was probably the most hyperventilated of the HBO Max stories. Particularly for the skeptics, who view any AT&T news negatively. (Is that position wrong? I mean the name is still terrible.) Will HBO Max pricing be confusing for lots of folks? Definitely.
Is there a simple method for HBO’s madness, though? Yep. As I’ve tried to keep emphasizing when it comes to distribution, the “bundlers” take a cut of streamers revenue. This can range from 30-50%. Which means if a new streamer can get you to subscribe directly through their application they make 30% more money. Which means any slight confusion for customers is easily outweighed by the extra revenue. Not to mention, all the data that comes with the direct subscription.
Given that AT&T is well experienced gouging cable channels with distribution fees, it understands how to play this game.
This news is fairly minor, but still notable in that anime is the one sub-genre of content that it feels like every streamer thinks they can get an edge on. Netflix? Got it. Hulu? Got it. Prime Video? Got it. Crunchyroll-into-HBO Max? Got it. Quibi? Not yet. But wait.
By the end of the streaming wars, every service will have a show by Anna Kendricks and a library of anime series.
- Randall Stephenson Is Leaving
One of the biggest forces in consolidation in telecoms is leaving. Stephenson tried to acquire any and everything, from Time Warner cable to T-Mobile to Time Warner entertainment. He successfully got some and was denied other deals.
As a result, is AT&T better off? It’s unclear which is why him leaving is likely a “lot of news with no news” story. We knew it was coming, and if AT&T can get to a post-Stephenson future with an operator focused on customers, the better for them. Whether or not that’s John Stankey, I don’t know.
Data of the Week – Netflix’s Most Consumed Shows (By Hours) Are Still Library
I came across a press release from a TV producer with Nielsen data on streaming. It turns out the top three TV series on Netflix by total viewing in the United States are:
- The Office
- Parks and Recreation
- That 70s Show
Each racked up over 181 million episode views.
What’s the takeaway? Well, library shows will continue to have big value in this marketplace. Certain great shows drive lots of repeat viewing, which is great for retention for a service. Meanwhile, if those are the three biggest series by viewership, clearly the “Top Ten” metric only tells a portion of the picture.
Other Contenders for Most Important Story
Viacom Tweaking Strategy (Again)
I like to imagine frustrated traditional media executives. They put out a strategy. They get criticized for it. They pivot to the strategy everyone wants. They get criticized for it.
That’s SuperCBS in a nutshell. Having a multi-tiered streamer would have been confusing for some customers–though I do like having 3-5 different services if they’re differentiated enough–but SuperCBS has decided to launch a larger, more consolidated streaming service. Of course, details are still light. So wait and see continues.
I’m of two minds about the layoffs at WME. When it comes to “beta risk”, those risks that impact the whole industry, WME is probably representative. Their income streams have dried up during the Coronavirus, especially dealmaking since all productions are paused, and WME has quite a bit of overhead ot pay off.
But the second mind is all about the “alpha risk”, which is the unique factors of WME. And WME, like lots of PE backed companies, is loaded up on debt. Arguably, WME is just crushed by its own bad decisions, not forces bringing down the whole economy.
Subscriber Rebates for Live Sports
I’ve seen the push in my Twitter feed for cable channels to return subscriber fees for not having live sports since the live sports are cancelled. While I’m sympathetic to this argument, most of the money being returned to customers is legally mandated refunds. Not the generosity of spirit of State Farm or USAA. (Though you’d think State Farm was donating this willining.)
Likely, given the multiple complications between sports leagues, force majeur legal interpretations and more, this issue is far from settled. Especially if sports return soon.
