I hope everyone–and this probably just applies to the Americans–enjoyed the long weekend. The only thing missing really was America’s pastime of baseball. Or any sports really.
But all that has changed. Sports are back! Which is really the story of the week. But I’ll tackle that next week in the next installment of “Coronavirus and Entertainment”. In the meantime, let’s look at another sports-adjacent story.
Most Important Story of the Week – Sports Streaming Price Hikes
Everyone is raising prices, from Youtube TV to ESPN+ to Fubo TV.
While all these services are sports based, it’s also important to note the differences between them. Youtube TV is a vMVPD, meaning they’re trying to replicate the cable bundle via streaming. ESPN+ is a streaming service that only offers sports. Fubo TV is a hybrid: it’s a vMVPD, but focused on sports.
The least shocking price raise should be Youtube TV. Of all the services, it was the most clearly trying to offer a $65 product for $45. Despite the bells and whistles, the vMVPD model is essentially the traditional cable model: the vMVPDs pay each channel a given rate per subscriber who receives it. The only difference is that instead of a cable box it goes through a streaming TV, device or iPad. So if you see the rates for various channels–for example this chart in this article by Dan Rayburn–you see how expensive it is to own all those channels. (Especially ESPN.)
Add all them up, and you quickly see that the reason cable is so expensive is because cable channels are expensive. Hence, virtual cable is expensive because virtual channels are expensive. The core economics aren’t different.
How did Youtube TV last this long without a price increase? Because they were losing money on it!
Frankly, that’s why any articles or tweets I saw praising Youtube TV always baffled me. Of course they were beating everyone on price! Google subsidized the losses! But they hadn’t actually created any value, they were simply capturing market share. (They had created some value with a good UX, but that value is easily superseded by selling at a loss.)
Losses in cable can add up really quickly, and even Google couldn’t stomach the Youtube TV losses. If they were losing $15 per customer per month, at 2 million customers, that’s $360 million a year. Adding customers would just make the situation worse. You can’t make up these losses on volume. Hence the price increase.
The challenge is what happens next. Since there are no natural digital monopolies, I wouldn’t be shocked to see either the FASTs or new vMVPDs rise up to offer “skinny bundles” again. Clearly customers want lots and lots of channels–hence why MVPDs and vMVPDs exist–but don’t want to pay as much as the local monopolies charge. Since the barriers to entry are relatively low, a new skinny bundle can easily enter. The actual solution is to have the cable channels finally start lowering their affiliate fees, but that’s a tough pill for a business unit to swallow.
On to ESPN+. If you look at Disney’s earnings report, you know that Disney is losing money on streaming. How much they are losing on ESPN+ in particular is unknown. ESPN+ doesn’t really have a lot of in-demand live sports, so it’s not like they can increase prices too much before folks will unsubscribe. This could portend some additional sports deals, or just Disney shoring up the bottom line in a world without theme parks and movie theaters. Either way, I expect both to keep happening: Disney will try to get better rights for ESPN+ (think NBA or NFL) while raising prices..
Other Contenders for Most Important Story
WGA Puts Their Strike on Hold?
This happened over a week ago and I missed it, so shame on me. (Thanks to KCRW’s The Business podcast for shouting it out.) The caveat is nothing has been officially announced as of yet. So the deal could still fall apart. From reports, the deal is inline with the gains of the most recent DGA deal.
The headline is that the deal prevents a strike because the WGA can’t add a third tsunami to the twin waves of firing all their agents and coronavirus. Really, this is a victory for the pandemic.
The other victor–as Kim Masters noted–is for the studios and streamers, and I tend to agree. The current deal hurts younger and lower level writers that are caught between exclusively writing on one show at a time, but also the reduced episode commitments of the streamers. Not changing that really hurts writers. But they didn’t have a choice.
Disney World on Track to Reopen this weekend
Theme parks are on track to reopen in Florida, with all eyes on Disney World. (As of this writing.) Depending on how cases, hospitalizations and deaths trend over the next few weeks, this will be a story to monitor. On the one hand, people could end up being too scared to go. On the other, theme parks may not end up being a huge source of transmission if they’re at reduced capacity with lots of effective countermeasures.
I remain bullish for theme parks. Unlike sports stadiums, they have more control over keeping folks outdoors and hence controlling transmission. The analogy is the return to restaurants and bars in June. As soon as lock down was lifted, folks returned to their old behaviors relatively rapidly, with just facemasks and spacing as the key differences. Of course, it wasn’t the same volume as previously, but enough to make the business models work.
If theme parks prove safe, I could see the same thing happening: folks come back as before. That said, America’s outbreaks are surging across the southern states whose temperatures have increased in recent weeks. It’s one thing to open a theme park when cases are plummeting; another when they’re surging. That will have to tamp down some demand.
The Landing Spot of Mad Men is…Everywhere?
I would not have guessed that the next big free agent in the streaming wars–critical darling Mad Men—would end up on…IMDb TV?
What happened? Well, streamers with bottom line consciousness likely balked at the actual viewership figures for Mad Men. It was never very popular and I’m not sure time has made it more so. Given that IMDb TV is likely deficit financing, this wasn’t a problem for them. Meanwhile, AMC still gets the linear rights and StarzPlay has a some rights globally.
Mulan moves to August…
Welp, there goes another round at the theatrical reopening roulette. At this point, Warner Bros and Disney seem to be daring the other to go first. Meanwhile, the theaters haven’t gotten creative with reopening to prove they have a plan. Toss in California keeping theaters closed and summer is almost gone. Let’s see where we are in two weeks.
Disney+ Ends Free Trials
For now, if you want to subscribe to Disney+, you’ll have to sign up. Without access to the data, my gut is the streamers are finding that ending free-trials doesn’t really hurt long term revenue, it just weeds out low-quality subscribers likely to churn in and out of services. Now eyes are on Netflix for when it pulls its free trials in America, like it has elsewhere. (Hat tip to the Streaming Wars newsletter for this story.)
Context Update: Techlash Goes Global – India’s TikTok Ban
The big global news of the last week is that India has banned several Chinese applications in their country. It was followed by the crackdown in Hong Kong by Chinese authorities on dissent, and potential exodus of financial, services and technology companies from Hong Kong. Then the United States began talking up action against Huawei (again). Clearly we’re moving towards a trend of the weaponization of technology and the internet.
The long term question for me is whether these individual moves have larger strategic goals, or are they reflexive steps related more to temporary issues? For example, the United States’ moves against Huawei will only stick if the next administration–whoever that may be–will follow the same hardline stance. I’m skeptical. Hong Kong also seems likely to hemorrhage talent and capital with the latest crackdown. I’m not skeptical about that.
The Indian situation could be different and provide a stronger lesson to other countries around the globe with similar economic/population heft. Both the European Union and India don’t like being dominated by either U.S. or Chinese technology; they’d love internal champions of their own. India’s example shows EU antitrust authorities another potential tool in the battle against tech giants.
Data of the Week – Do Good Reviews Lead to Financial Success? By Stephen Follows
The answer, to not bury the lede, is yes. For almost every film category except for one, having good reviews results in a higher likelihood of making a profit. This should be reassuring for the core business principle that making higher quality things really does matter. (It’s another issue for whether Hollywood can figure out a way to do that reliably.) The whole article is at Stephen Follow’s website.
I’d throw one tentative caveat into this discussion which is that “good reviews” is not the same thing as “critical darling”, “award bait” or even “prestige” films. Meaning that this headline shouldn’t be used as an indictment against summer blockbusters. The Marvel and Pixar films, for example, tend to get good reviews and make wild amounts of money. They’re also well-made for the type of films they are.
What’s the one exception? Horror films, where positive reviews just don’t have a huge impact on the bottom line. It turns out horror fans really do like anything. (My past explorations into this topic have backed this up.)
(Bonus Data Story – Parrot Analytics New Portal)
Parrot Analytics has rolled out a data feature for individuals to see their “demand metrics” in real time around the globe. I saw this news story everywhere, including the New York Times dealbook newsletter.
My only caveat with Parrot Analytics is I’ve never seen their data correlated to actual viewership. I believe it is–they use a lot of proxies I like as well, like Google Trends or Wikipedia–but clearly their metrics skew towards “genre” shows. This just doesn’t capture a lot of casual viewing by non-connected folks. But I can’t prove that without a lot more data. That’s just my gut.