We’ve got a lot of interesting/important news stories to get to, but before we get to that, I want to give everyone a head’s up that I have a big, big, big announcement coming from me later this week. So stay tuned.
Before the stories, a celebration.
EntertainmentStrategyGuy Turns Four!
This website (and associated newsletter, social feeds and what not) is officially four years old, having launched on 8-May-2018.
As this little project of mine leaves its toddler years, expect continued growth, new projects, and hopefully, a conquest of all entertainment business media. (Or just my insights delivered weekly, across entertainment strategy and streaming ratings.)
For a fun throwback, check out my very first few articles, which both hold up better than I feared, though they’re a lot rougher in terms of writing than I remembered:
How well have I lived up to the mission I set out to do, to explain the business of entertainment? I think I’ve mostly succeeded. But there’s a lot of work left to do.
Most Important Story of the Week – Big Tech Make Their Forays into Sports
This is one of those “most important” stories that isn’t one story per se, but a series of headlines I’ve been tracking for the last few weeks, especially since it’s a key battlefront in the “streaming wars”.
Check out these stories:
– Apple announced it will host two games per week during the MLB regular season, and a highlights show.
– Alphabet/Google’s YouTube re-upped their contract with the MLB as well.
– Even Peacock is getting in on the MLB games, with Sunday games on the streamer.
Major League Baseball is getting in on the streaming game. Or better said, they’re letting Big Tech throw buckets of money at them for a handful (trivial amount?) of baseball games.
In most streaming wars punditry, it’s taken as gospel that Amazon and Apple will win the war for sports rights. I don’t entirely disagree, but I do think it’s a bit more nuanced than that. If you asked me, “Can Amazon and Apple outspend everyone for sports rights?” Then yes, we agree.
Take Amazon for example. Prime Video started streaming Thursday Night Football games in 2017, and has since secured full, exclusive rights to Thursday Night Football. Did their streams generate the same bang for buck as linear TV? Who knows? In the past, they’ve released some numbers, but not enough to do an apples-to-apples comparison to linear TV. (And notably, Amazon hasn’t provided ratings figures for TNF since 2018. Presumably because it’s doing too well?)
Apple appear to be mimicking Amazon’s strategy. They’ll start by buying a few games, then likely expand to bigger offerings. I doubt anyone subscribes to Apple TV+ just to watch two MLB games—the MLB is not the NFL in terms of interest—but that’s what was probably available for sale. Sports rights don’t come available every month.
What about Alphabet/Google (which means YouTube)? Again, why make your own strategy when you can copy someone else’s? Though, at this point, we can also say, “Hey, it looks like the MLB will sell streaming rights to their games to basically anyone wiling to pay.” And Big Tech is willing to pay. And so is Comcast.
Which brings me to my big disagreement with folks who see these sports moves as “no brainer” strategic decisions by Apple, Amazon and Alphabet. I obviously agree Big Tech can spend money on sports. What I disagree with is when folks then say, “And they’ll make more money on those sports too”. It’s very easy to just spend, spend, spend. It’s much harder to have business models which justify that overspend.
An honest observer would say, “Google, Amazon and Apple plan to deficit finance sports until they can drive their competitors out of business.” Which is technically good for consumers in the short run, but everything after the word “can” could also be called “price gouging” under antitrust law. So it’s good for consumers, but for how long?
Netflix too was a great deal for consumers for years, as long as Wall Street kept its market capitalization sky high. Going forward, between price hikes and a pull back on content, Netflix may no longer be a great deal for consumers. A free lunch tastes great…until you have to start paying for it.
And that’s the lesson: you gotta have a biz model that makes money.
I’m loathe to call any strategy that loses money over a long time (say greater than two years) a good strategy. It was good strategy to accumulate piles and piles of cash (in Apple’s case, $50 billion right now, down from a high of $100 billion of cash on hand in 2019). Is it good strategy to lose money on sports to achieve market size in television? Honestly, I’ve seen—and built—a lot of biz models that actually say no. Sure, Apple can sell phones and Amazon can sell socks, but I’ve done the math, and the extra sales don’t justify losing billions on TV content.
Plus, at some point, Amazon, Apple and Alphabet could decide that losing money on a money-losing business model isn’t worth it.
The biggest positive for the traditional streamers in the face of this money is that the combo of “linear plus digital” still seems influential for the major sports leagues. I’ll have more to say on this, but getting your sports league on ESPN will do more to build fan awareness than any other platform right now. While it might seem like everyone (you know) only uses Netflix, quite a few people still have cable (or virtual cable).
(And those who do cut the cord have aggressively pirated sports rights, which is another issue that Amazon, Apple and Alphabet aren’t solving.)
What To Watch For Next
First, we still don’t have resolution on the NFL’s Sunday Ticket. I’ve seen quite a few articles saying that either Apple or Amazon have already wrapped up this deal and I tend to ignore those articles, because there is a good chance that the NFL is leaking those stories to gain leverage over the ultimate buyer. But we’ll see, and when that news breaks, I guarantee it’ll be the story of the week.
Second, cricket in India!
Of the two, I think this sports rights auction actually could influence the streaming wars more. Specifically, the Indian Premiere League auction for their digital and linear rights. (Currently a few companies are interested, including Disney, Amazon, Sony and others.) Every streamer sees India as a tremendous growth opportunity because it has over a billion people, the people are generally getting wealthier (though less so than many over-optimistic models out there), and it’s more open than China.
(For a good read on the Indian Premiere League (for cricket) check out this Economist article.)
Third, after those two sports, all eyes turn to “football” meaning “soccer”, the sport everyone else outside of America watches. Comcast/Peacock seem focused on English Premiere League rights in America, though I doubt that moves the needle much. Same for HBO Max shelling out $200 million for U.S. international competition rights.
The more interesting story might be this little nugget, that FIFA—the parent body for international sports competitions—is launching its own streamer. Running a digital platform is outside the “core competencies” of most sports leagues, but in success, why let others take the value when you can just keep it yourself? At first, the new streamer won’t have live World Cup games—the Holy Grail of sports content—because FIFA has already sold all those rights.
Of course, they added a “+” to the name, a stylistic decision I can’t believe every streamer adopted.
M&A Updates – Univision and Televisa Complete Their Merger
At the time it was announced, I thought the Univision and Televisa merger was big news. Honestly, it may be bigger news than MGM/Amazon simply because this merger brings together two of the biggest independent producers of Latin American content. (The third is probably Brazil’s Globo, which is more Portuguese content than Spanish, but still huge.) The merger has now officially closed.
(Here’s a fun one on the Amazon/MGM comparison. The Univision-Televisa merger is a “$4.8 billion” merger now that’s its completed. Amazon bought MGM for over $9 billion, but in recent SEC filings valued MGM at around $3.4 billion, calling the rest of the price “goodwill” for the brand name of MGM. Especially since two of the leads of MGM will depart this summer. Hmmm….)
Don’t sleep on their streaming products in both the U.S. and other markets. After the merger closed, TelevisaUnivision launched a new ad-supported streamer called Vix. Being in Spanish, it will fly under the radar, but could still rack up subscribers.
Other Contenders for Most Important Story
Comcast wants to be an aggregator in streaming.
I feel bad not making this “the most important” story of the week, because I could look back on this moment and say, “That’s how Comcast became a key player in the ‘bundling’ wars.” (“Bundling” being the people who sell/stream multiple streamers, as opposed to the streamers themselves. Think Roku, Amazon Fire, Google Chromecast and Apple TV.) Comcast currently distributes streamers via its Flex operating system/device, including Netflix, Prime Video, and Disney+. They recently added Apple TV+ too.
Now Comcast wants to take their Flex operating system (and the devices running them) national. So they’re partnering with Charter to expand. Comcast-owned Peacock and Xumo and Charter’s Spectrum app will also be featured. I like this pivot for Comcast, as I think the “bundlers” of streamers could be the true profit centers of the digital video value chain. (A concept I explain here.) As CNBC’s Alex Sherman pointed out, Comcast and Charter will have the advantage in that folks will still need broadband, and they have that customer relationship across large swaths of the country already. (Plus they can license this operating system to other cable providers, as Comcast already does for Cox Communications.)
IMDb TV Turned into Amazon Freevee
This sounds like a small story. Amazon is renaming their FAST (Free Ad Supported Streaming TV) service. But reading the tea leaves, and as I pointed out at the Ankler a few weeks back, I think IMDb TV isn’t hitting its growth targets.
Overall, adding an ad-supported service to Prime Video only added another confusing element to Amazon’s video efforts, since between Prime Video, Amazon Video, Amazon Channels and Amazon Freevee they offer subscription, third-party subscription, transactions videos, and ad-supported video, all in the same user experience. That jumble of different options, far from helping customers (and Amazon’s rule number one is “customer obsession”), drives them crazy.
Still the IMDb name never made sense. This name makes more sense.
Covid-19 Update – Conferences and Concerts are Back
A few weeks back, all the entertainment news was about CinemaCon. Which is funny, because two years ago, I was told conferences were dead? And it happened in Las Vegas at the same time as the NAB—National Association of Broadcasters—conference.
Together, they expected tens of thousands of employees. That’s a lot of people!
Only last year we were told that people would never again attend things in person because “Covid-19” and “disruption”. And yet here we are.
If I could venture a guess why, it’s that slowly, especially after Omicron exploded, most people under 65 realized their risks—especially if vaccinated and boosted, which we all should be—the risk are exceptionally low. Which brings me to my last headline:
People really, really, really want to go to concerts and now that they’re back they’re going in droves. Covid-19 didn’t really “change everything” so much as pause it for two years. If I’m a business leader, I’d make sure all my people know that.
Lots of News with No News – All the Warner Bros Discovery Executive Changes
I covered the death of CNN+ in my last issue, but I avoided the messy executive changes. Specifically, a raft of executives leaving the company, like Jason Kilar, Ann Sarnoff and Andy Forsell. Some commentators quickly pointed to this as an example of Discovery making a huge mistake to get rid of the team at HBO Max.
I don’t put too much stock in individual executive moves when they happen. Maybe Zaslav made a huge mistake letting Kilar go…but maybe the execs replacing him are just as good or better. I’ve seen Kilar do a lot of interviews, so we know a lot about him, but we know much, much less about the new folks replacing him. That information asymmetry leaves us at a big disadvantage to Zaslav.