Oh, Fine, Here’s Some Thoughts on GameStop

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For the last two weeks, my weekly column overflowed into two articles. I promise I won’t make this a habit…unless everyone likes it better. Let me know on Twitter. Meanwhile, here were the other stories vying for the top spot last week. But we’ll start with the story that had zero chance of making it.

Lots of News with No News – GameStop Owned the Week in News

How do you know that the Trump administration–and with it, all the media upheaval of the last four years–is truly behind us?

Instead of talking politics, everyone is obsessed with GameStop!

It’s not like the Covid-19 crisis has passed. Far from it, January was the worst month yet for the virus. And that’s vying with potentially the best story of the year, which is the vaccine rollout. While stymied by terrible distribution issues initially, vaccine distribution is growing each week and slowing being solved (though with much less media coverage to this good news story). 

You’d think that all the media would be obsessed by virus coverage. 


Instead, the journalists covering the White House asked more questions about GameStop to the new Press Secretary, Jen Psaki, than about Covid-19! Every newsletter or podcast I follow had to mention GameStop, usually with the tremendous caveat of, “I have no idea what I’m talking about” before opining on it. 

Does the rise in GameStop’s stock price due to a sub-Reddit (WallStreetBets) going publicly long on a stock to hurt short sells change the entertainment business landscape? No. So this is “lots of news with no news”. 

With two caveats.

First Caveat, AMC Theaters Received the WallStreetBets “Long” Position

When the WallStreetsBet collective was searching for other stocks that were big “short” positions, one they stumbled on was AMC Theaters. So they collectively “went long” on it, which is the charitable way to describe it. (Uncharitably? They coordinated buying to pump up the stock.) 

Amazingly, this allowed AMC Theaters–which is famously over-leveraged/in-debt–to convert some debt to equity, and they were able to raise additional equity. All of which would normally dilute shareholders, but the price was acting bubblish because of WallStreetBets’ users enthusiasm. And they were able to to secure additional financing. In short, AMC Theaters has now likely avoided bankruptcy for the year. That’s a crazy, and unpredictable, set of circumstances.

Second Caveat, If Regulators Try to Regulate Media Coverage, That Will Be Tough

The key here is to focus on the word “media”.

Short sellers love to use the media to publicize their short positions. (I’m sure by now everyone has read/listened to ten explanations for how short selling works.) Typically, it works like this. A hedge fund decides to go short on a stock. Usually, they write a report on why they’re going short, and then they publicize that report. This includes but is not limited to: 

– Leaking the report to the Wall Street Journal and NY Times for positive coverage
– Releasing a press release to all journalists.
– Going on CNBC/Bloomberg to explain their short position.

In other words, they try to use “mass” media to publicize their short position. If they enter into their short position before publicizing it, obviously a successful campaign could generate millions of dollars. They’re trying to use a publicity campaign to lower the stock price and make money. The main difference between this behavior and Reddit is that it is 1. Centralized and 2. Mass, not social, media. But the impetus is the same: use media to drive stock prices.

On the opposite side of the coin, there are also folks who want to go long who use media to influence stock buying behavior. For example, this guy with a button and lights shrieking “Buy This Stock!”

Is what Jim Cramer is doing fundamentally different than a bunch of Redditors collectively deciding they love a stock? I’d say at a core level, no, but in the details, yes.

My point is that if regulators want to tamp down on what a sub-Reddit is doing to drive stock prices, good luck. Regulating speech is incredibly tricky and often ends up casting a much wider net than intended. Which is why the First Amendment protects so much speech. If the GameStop saga has revealed flaws in the U.S. financial system, those problems likely won’t be solved by the SEC cracking down on anonymous internet message boards.

Other Contenders for Most Important Story

HBO Max’s Franchise Strategy

It doesn’t seem like an accident that in the last few weeks we’ve heard about a Game of Thrones Dunk and Egg spin-off, a Harry Potter TV series, and an animated Game of Thrones series in the works. Clearly, HBO Max is trying to emulate the Disney+ success. As a fan, I’m here for it. As an observer, I’m curious why they didn’t do this earlier. As a biz strategist, I know that quality will still be the differentiator. So far, Warner Bros. hasn’t proven they can deliver that in their franchises. Still, better late than never.

Oh, and you probably want to know about…

AT&T Announced 41 Million U.S. HBO Subscribers and 17 million activations

This is probably the strongest candidate to be the story of the week besides NBCUniversal/Peacock’s big double story drop. AT&T announced that HBO Max is up to between 17.1 and 41 million subscribers in the U.S. Why between? Because it depends on how you count, as I explained in my most popular series of 2020, “Who Has the Most U.S. Subscribers?” Frankly, if you just count people paying HBO for the privilege of subscribing–a very rational way to do it!–you take the higher number. If you want to focus exclusively on over-the-top delivery–while not my preferred method, this isn’t irrational either!–then you look at “activations” or folks who have used the HBO Max application.

Screen Shot 2021-02-01 at 11.39.08 AM

Either way, Wonder Woman 1984/Roku/Fire TV partnerships/Christmas holidays have worked to grow both numbers in the U.S. If you take the higher number, then they’re roughly 62% of Netflix’s U.S. user base. If you take the lower, they’re at 26%. If they can sustain these numbers, growing the activation total, they’ll join Disney with a seat at the “viable streaming business” table by the end of the year.

Sling TV is Raising Prices

Another virtual MVPD is raising prices to survive, which is as commonplace as it is unsurprising in today’s day and age. The fact is, especially when thinking about the TV habit which I described on Friday, most folks loved the old cable bundle. Sure, there were hundreds of channels, and no one watched them all. But folks actually browsed and watched more of those channels than they realized. The problem was the prices driven by cable’s local monopolies. To replicate a bundle, frankly, is expensive.

M&A Updates – Twitter is Entering the Newsletter Business

Twitter is expanding their business into newsletters by buying Revue, a rival to Substacks’s newsletter platform. I love this acquisition for Twitter, who has really struggled to monetize as effectively as Google or Facebook via ads. Thus, subscriptions seem the way to go and newsletters offer a middle position between paywalls for access to Twitter accounts and the completely ad-supported version. It will be fascinating to watch this integration. (Hat tip to Andrew Freedman’s write up for informing this take.)

Entertainment Strategy Guy Update

Netflix Isn’t a Part of Chromecast’s Browsing

One of the apparent innovations of Google’s new Chromecast/Google TV was that Netflix shows were, for the first time, included in the homepage browsing. This would have indeed been a big deal, since most streamers are very hesitant to allow the devices/operating systems to control the user experience. (Read why here.) Indeed, Netflix has been the most restrictive to date. Which was why I was skeptical they would join this effort, which undercuts their entire competitive advantage.

Sure enough, I saw a headline over the last week that Netflix has been quietly removed from Google TV’s homepage. (Though the author of this headline fails to understand why Netflix would make this move.) Netflix did this because their goal is to be “the TV habit“. That means forcing users out of Google’s operating system and onto their application. Hence this move.

Disneyland is Trying Win Back Annual Passholders

As expected, Disney got a lot of blowback from annual passholders for cancelling the program, so Disney released a new program with some benefits for “legacy passholders”. Former passholders are still upset, as this article describes well, but the article also explains why Disney made this move: demand to go back to Disneyland is higher than the Matterhorn. PR-wise, this move would always have hurt Disney, but they made the right decision.

The Entertainment Strategy Guy

The Entertainment Strategy Guy

Former strategy and business development guy at a major streaming company. But I like writing more than sending email, so I launched this website to share what I know.


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