(Welcome to the “Most Important Story of the Week”, my bi-weekly strategy column analyzing the most important (but often not buzziest) news story of the last two weeks. I’m the Entertainment Strategy Guy, a former streaming executive who now analyzes business strategy in the entertainment industry. Please subscribe.)
Last year, in a bid to fend off a bill that mandates that large search engines like Google (Well, only, Google) pay publishers whose news stories they use, CA governor Gavin Newsom managed to negotiate a “deal” where instead of Google paying, the state of CA would pay into a fund that would go to local journalists managed by UC Berkeley (who since departed the program).
Yet, in less than a year, Newsom has cut that money due to budget cuts.
Google made $200 billion in gross profit last year. Just saying.
Anyways, on to this independent journalist’s bi-weekly news column, which is my second most important story column in two weeks, my ideal publishing plan. I love writing these strategy articles, but having more subscribers means it’s much easier to pull off my demanding writing schedule. So please subscribe!
Let’s not waste any more time on the introduction and just dive in. We’ll look at a wave of mergers and what they portend, two big buys in the kids space, cable companies, theme park expansions, and more.
But let’s start with my hyperbolic headline…
Most Important Story of the Week – The Third Wave of the Streaming Wars Starts…
Apologies for the hyperbolic headline/sub-header in today’s article. The “all-in-one” streamer isn’t actually dead. I mean, Netflix still exists, as does Prime Video (with its multi-channel bundles), and Disney still wants to smash Hulu into Disney+. But consider…
- Disney will launch an ESPN standalone service in the fall…
- Max will become HBO Max and slim down its content, including cutting many Discovery shows…
- WBD will launch CNN+ and maybe a weather app/channel..
- CNBC recently started CNBC+, a live stream of that business channel.
- Fox will debut Fox One, a combined streamer, later this year.
I just have to ask…are “sub-services” back? Or better said, “single-serving” or “niche” streamers? To be clear, niche services never went anywhere, but at the height of the streaming wars, every studio/streamer wanted to serve everything to everyone. These five stories show that the “do everything” streamer isn’t as in vogue as it once was.
Which marks a distinct shift in the streaming wars. Consider the three phases of the streaming wars, which I’ve broken into the “three act structure” Hollywood relies on:
- Act One: The early days as Netflix, Prime Video, Hulu and YouTube kick things off. (Along with, I guess, CBS All Access.)
- Act Two: The streaming wars begin, Disney+ and Apple TV+ enter the fray, then the rest of the traditional studios’ streamers launched or rebranded their streamers (Paramount+, HBO Max and Peacock).
- Act Three: Wall Street sours on streaming, the new streamers struggle to gain traction, and some new or revamped streamers enter the fray.
Phase three seems like it will be markedly different from Phase Two, which was a land rush fueled by Wall Street speculation. Now, driving both revenue and profits matters. Let me offer four takeaways for what’s driving this third act:
- There are winners and losers of the streaming wars, and the traditional streamers couldn’t best the tech streamers.
- The “first mover advantage” really did help Netflix and Prime Video (but not Hulu).
- This is the last transition of the old cable bundle to streaming.
- Bespoke strategy is back! (Or, “Everyone stopped copying Netflix.”)
Of these, I like the last explanation best. Good strategy is a strategy designed to take a company’s strengths and target specific customers in the competitive marketplace At the height of Act Two of the streaming wars, many streamers said, “What is Netflix doing? Let’s do that”, then hoped there’d be enough room for everyone and Wall Street that would stomach the losses. But there wasn’t and they didn’t.
This is also a recognition that a lot of current TV viewing still needs to switch to streaming. How sports and news make that transition is much less clear, hence these new streamers. So yeah, the second-to-last explanation isn’t bad either. Though most other pundits would prefer to only talk about the first point, which I think is often exaggerated by Big Tech boosters.
This phase seems to acknowledge that each studio/streamer needs to have its own strategy. Now I have quibbles in some places (WBD in particular seems to change their mind much too often; I’m skeptical on the standalone news apps) and praise in others (the ESPN standalone efforts wouldn’t work in the Disney bundle; Fox One may have some subtle strengths, which I know some folks don’t want to hear), but overall I think the new shifts make more sense than the “just be everything for everyone” strategy.
Lastly, I still think we see room for one or two more “all-in” streamers, and frankly, Disney seems best positioned for that. Apple TV+ doesn’t have the reach, nor does their channels business. Paramount+, Peacock and Max don’t seem large enough either, but that gets to the next topic…
M&A – A Big Telecom Merger Closes and Another Telecom Merger Starts
We finally got some M&A news. Specifically, Charter is buying Cox Communications in a whopping $34.5 billion deal. (That’s a mega-merger!) Meanwhile, the FCC finally approved Verizon’s Frontier deal. Two telecom deals. What do they mean?
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