Last week felt like the “winter finales” of the fall TV business season as we resolved two long simmering dramas in the land of TV. CAA settled with the WGA, bringing one of the last two major agencies into alignment with the WGA’s demands for agents. And HBO and Roku finally settled their long running feud over HBO Max. But which is more important?
While the latter story is certainly buzzier, I genuinely didn’t know if CAA would actually settle with the guild. (HBO Max on Roku felt inevitable.) So it wins the crown for my “story of the week”.
(Housekeeping: Expect my writing to be a little lighter with the Christmas and New Year’s Holidays. This will be my last weekly column until January, though I may have a few smaller articles pop up in the interim.)
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Most Important Story of the Week – CAA Settles with the Writer’s Guild
Right up front, let’s review the key deal terms:
– CAA agrees to phase out “packaging fees” by June 2022
– CAA will limit their ownership in production companies to 20%
– CAA will provide additional disclosures on their financial ownership.
Unlike our other contender for the week (HBO Max v Roku) we know a lot more about the actual terms of this deal. Thus we can talk a bit more confidently about who won or lost this deal.
Pyrrhic Victory Winner: The WGA
Look, the WGA got its major deal points. CAA won’t be able to own a production company, and packaging will go away eventually. The only reason why the WGA isn’t ecstatic with this outcome is they had hoped it would have come two years ago. The WGA wanted to settle with the agencies, moreover, so that they could negotiate a better deal with the studios. But since they couldn’t fight two battles simultaneously, their current agreement with the studios didn’t go as far as some WGA members wanted.
Though, from the outside, the WGA looks well positioned for the next fight. Which will clearly be against the streamers. In the same way that folks say that Wonder Woman 1984 going to HBO Max helped the Roku deal, Warner Bros sending all their films to HBO Max may have sent a signal to the agents at CAA that they needed to settle with the WGA to protect their joint film interests.
Loser: The Agencies
If anyone didn’t want the hold out of the last 20 months, it was probably the agents, given that it sunk one major agency’s IPO and then Coronavirus walloped the rest of their business models. Many agencies have had to lay off workers and furlough employees. Yes, Covid-19 caused that, but a concurrent work stand off didn’t help.
The most surprising part of it for me is the packaging piece. Ultimately, the agencies made a fortune off those arrangements. Why settle? My guess is the logic of “10% of something is better than 30% of nothing” ultimately won out. Agents made out like bandits in the packaging process, especially when it comes to lower level talent. Meanwhile, this deal also kicks the legs out of the agencies for their new business model of owning a piece of the content their talent makes. (Which was formerly illegal.)
No change: The Studios
That’s the other funny outcome of the eventual deal: it doesn’t really seem like anything changed, did it? As many films and TV series as ever were greenlit, ordered and produced, but for the Covid-19 shutdown. Like all things, life/business finds a way.
Which feels like the right end to this drama. (Though yes WME still hasn’t signed.) In the end, the business models will be tweaked, but talent is talent and the agents are agents, with a power struggle that is always ebbing and flowing, as they battle with studios in another power struggle.
Data of the Week – Nielsen Plans a Holistic Viewership Data for 2024
Nielsen is always updating their measurements, and this year rolled out streaming viewership numbers for public consumption. (A topic I’ve obviously loved, and, in full disclosure, Nielsen has provided me some data.) The news of a few weeks back is that Nieslen is planning to unify traditional linear viewership with streaming metrics. I’m intrigued by how they plan to do this (and how users can splice and dice the results) but this should be a win for any data heads out there. The only draw back? It’s still a long way off. (2022 it will start rolling out and by 2024 it will be their de facto measurement.)
Other Contender for Most Important Story – HBO Max and Roku Settle
The news is that Roku and HBO Max agreed on distribution terms, so HBO Max will replace all HBO apps on Roku devices. Like any deal, both sides had wins and losses. Let’s go by company, with who won what deal terms, and what we still don’t know.
Roku Negotiating Wins
– Roku can own the billing relationship.
Owning the data? Valuable. Owning the user experience? Very valuable. Owning the customer relationship? The most valuable. Going forward, Roku will still be able to sell HBO Max subscriptions, which is key to the Roku platform business. Their key value add to consumers–besides the device itself/operating system–is to be able to sell bundled billing. While this deal can be a win for both sides (HBO could sell more subscriptions if Roku is pushing it), getting potentially 20% of perpetual monthly subscriptions for one sale is a great price.
HBO Negotiating Wins
– No more HBO period, only Max
– HBO owns the UX
– No free content for the Roku Channel
HBO meanwhile puts an end to the confusing branding proposition that has plagued them this year on another streaming platform. So that’s a win, and on Roku applications–from what I understand–HBO will get to own the customer user experience. Meaning you have to launch an HBO Max application to watch HBO Max content. As I said just above, in some ways, this is better than owning the data. (Though data and user experience are usually linked.) Best of all for HBO, they didn’t sacrifice any content to build Roku’s own streaming business. (Which probably would have been a deal-breaker for me too if I were HBO Max/Warner Media.)
– Split on ad-inventory (usually 30%)
– Split on subscription fees (usually 20%)
A lot of this is theoretical simply because we don’t know the results of the biggest point of all: who is getting what revenue?
If HBO Max negotiated Roku to down to 5% of subscription revenue (unlikely!), that’s a huge win. If Roku kept it at 20% (unlikely!), that’s probably a win for them. Meanwhile, splitting ad-revenue is a big unknown since we still don’t have firm details on HBO Max’s plan. They could go big on advertising, or throw it in the trash heap. It remains to be seen. Since Roku has data on all viewing on their platform–including Netflix!–they have more upside with the ad monetization. There are some rumors that HBO caved on this point, which would also go into the Roku win column then.
Both sides claim they’re happy with this deal, and that’s probably true. The biggest loser is probably both companies since this feels like a deal that could have been had in June. A lot of pain was had from May to now, without a lot of gain on either side (is my guess). Ultimately, though, that likely hurt HBO Max’s launch more than it hurt Roku’s sales.
Bonus Point: Antitrust Implications
These two quotes in the Wall Street Journal sum up the future antitrust implications if either Roku or Amazon take over a dominant position in device sales. (Or split the world and subtly cooperate on pricing.)
I’m clearly more bullish on a stronger antitrust future than most other business types. (I still read arguments that Amazon isn’t a monopoly and/or dominant player who uses their position to restrict competitors.) But with the deluge of Facebook and Google legal actions, it feels like the antitrust could be the future. And headlines like this won’t help Roku if one day regulators make their way down to video devices. (Dominant market position leading to higher rents being the key phrase.)
Also, this is just another data point that my thesis from last November is coming true.
Other Contenders for Most Important Story
Mind Geek and YouPorn Delete Lots of Their Content
The challenge with user generated content is make sure the users don’t generate bad content. Or frankly immoral, unethical and illegal content. The latest big tech player to deal with this is MindGeek, which owns a plethora of pornography websites. MindGeek had a fairly unscrupulous business model before a story broke that they turned a blind eye to child pornography on their site, including accusations of content piracy, revenge porn, monopolization and illegal content. Thus, Visa, Mastercard and American Express abandoning the website isn’t a huge shock.
Though it does mean something. On the one hand, Mind Geek could end up being a better partner to it’s actual suppliers of pornography, which it has largely ripped off. Interestingly, pornographic talent had been calling for this move for years. It will make it easier for legitimate users to make money. The downside for MindGeek is the value of user-generated content is usually because it is stealing other folks intellectual property.
This shows the pitfalls of any business relying on user generated content. Even though it was obviously easier to have child pornogrpahy material on a site dedicated to pornogrpahy, many folks pointed out that Facebook, Youtube, Snap Chat, Tik Tok and others potentially have much worse problems with child predators, simply because they are much bigger. Yet, since those companies aren’t ostensibly pornography, they have much more good will. (It’s easy for everyone to pile on YouPorn.)
All in all, this touches on the much larger political issues involving free speech, Section 230, piracy and countless other political issues. I will repeat a point, though, I’ve hammered Youtube on for years: It baffles me some of the most egregious piracy issues aren’t easier to solve/prosecute. Certain search terms are so clearly designed to lead to illegal content that I don’t know how that’s not actionable.
(For example, in sports. If Reddit users have threads called “Lakers Live Game Stream” it should be clear that’s an illegal stream of the game…right? How is that not actionable? The examples in child pornography are similarly egregious.)
So if it’s so easy to solve, why isn’t it? Money. All the user-generated content companies make billions. And some of that comes from content that skirts the line of legality. It’s better to pretend it doesn’t exist than to solve the piracy/illegality problems. That’s just the facts.
ESPN and SEC Sign $3 Billion Deal