(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.)
It’s fair to say everyone (well, almost everyone who writes a newsletter or hosts a podcast I subscribe to) covered “YouTubers conquer Hollywood” as their topic of the week, based on the (extremely good and genuinely exciting) news that Obsession and Backrooms did so well at the box office last weekend. (Honestly, credit the LA Times as the one newsletter that covered AI instead.)
Trust me, I’ll write about this topic soon, since it touches on sooooooo many things I’ve written about before—YouTube films in theaters, A24, the theatrical industry, horror as a genre, Star Wars even—but I’m holding off (for now) for a few reasons:
- If everyone else is writing about something, I like to write about something else. (That’s my writing advice for every Substacker, frankly.)
- I want to collect my thoughts, and some data, first. In particular, none of the articles I read on Obsession and Backrooms mentioned Bus Boys or Shelby Oaks, two other YouTuber-scripted films that did not succeed. Or the lack of success Ryan’s World, Sam and Colby, and Dude Perfect had in previous years. That’s the difference between hype and data analysis. Data analysis looks at the full dataset and usually draws different conclusions than “this new trend will conquer all”.
All that said, to be clear, I think this is unequivocally good news. I want the theatrical box office to succeed, and news that ticket sales were up in May is amazing. BUT when I write about this, I’m going to be way more nuanced, cautious and skeptical than other people. You have to marry your excitement with skepticism, lest you have the same fate as the video game industry hype last week, which I just wrote about last week.
Instead, today, I’m writing about the NFL. A bunch of NFL national football games changed homes, and I want to dig into what that means. I’ll also look at a few huge IPOs on the horizon, the evolving regulatory environment in Europe, the WNBA’s great deals, another exec leaving Paramount-Skydance, and more.
Most Important Story of the Week – The Latest NFL Game Shifts and What They Portend For the Future of Streaming
At first, I thought I had stumbled on something of a mystery. Suddenly, a bunch of folks went from reporting interest in buying extra NFL games (like YouTube and Netflix) to actually buying a bunch of NFL games.
Did the NFL add a bunch of extra national games to the TV inventory?
No, it turns out these were games that previously went to the NFL Network or as part of ESPN’s double-header Monday Night Football games. These games were freed up after ESPN bought the NFL Network, and divested the games as part of the deal. Netflix bought three of the games, and NBC and Fox got the other two. CBS added another Saturday night game as well. Let’s explain why this happened and what it says about the, frankly, grim economics of streaming.
The “Viewership” Hierarchy
Let’s start with an extremely obvious prediction: viewership for these games will increase compared to the NFL Network or Monday Night Football ratings.
Basically, we can look at the various platforms as a “hierarchy of reach”—meaning the total number of customers who can watch games and how easily they can find said games—and smaller cable channels are now at the bottom. In order, I’d rank it thusly:
- Broadcast plus streaming
- Broadcast only
- Netflix streaming
- Big cable plus streaming (meaning ESPN)
- Medium cable plus streaming
- Medium streaming only (Prime Video) and medium cable (TNT, Fox Sports)
- Smaller cable channels
- Smaller streamers
I don’t have an easy visual ready for all those categories, but here are the NFL ratings for holiday games and they show these tiers quite nicely:
This is why some ratings are up this year—cough NBA cough—because they moved up from the fifth biggest reach (TNT plus HBO Max) to the first (NBC plus Peacock). That’s a big jump in reach! Monday Night Football saw similar jumps after they put games on ABC as well as ESPN. And Netflix has shown that its football games can match the top games, though their games lag peak broadcast. So moving from either a small cable channel (The NFL Network) or ESPN only should help drive viewership.
Ramifications and Questions
Based on where these games have gone, we can ask some fun questions about all the players in the sports media landscape.
First, has Netflix changed their strategy?
Nope. They’re still focused on only “events”. (Kinda like their likely “event strategy” for films.) Netflix execs have repeated this point in interviews, and these games only further that strategy. Netflix bought games at the start and end of the season, in addition to a game on the Wednesday before Thanksgiving. In all, this still isn’t great news for the sports leagues, since they need the streamers to eventually replace broadcast and cable revenues, not supplement them only.
Second, Has YouTube Fallen Behind the Rest?
Interestingly, despite initially showing interest in adding more NFL games (and a lot of media coverage on that), YouTube didn’t get any new NFL games. Despite the desire for exposure, I think the NFL understands that YouTube’s economics just aren’t in the same ballpark as either Netflix or broadcast TV. They don’t have that many paid subscribers for YouTube and their ad inventory pales compared to traditional streamers. So they likely just couldn’t offer as much and tried to sell reach instead. That argument may have sold the Academy of Motion Pictures Arts and Sciences on moving the Oscars to YouTube for a lower price, but not the NFL.
Third, How Much More Sports Rights Can Traditional Players Buy?
Probably not that many more games, but clearly Fox, CBS and NBC each had room to add one more national game to their rosters. These extra games are still the most valuable windows in sports for traditional broadcasters. In this case, I wouldn’t extrapolate from the NFL to other sports. The NFL is king. Also, for now, they can charge more than their rivals. And that’s a thought worth digging into…
Streaming Remains A Worse Business Model than Traditional TV
Looming over all these discussions is the fact that streaming revenues on their own can’t support broadcast and even cable-sized revenues. That fact leapt out when I saw this chart in the State of the Screens newsletter:
And then this calculation:
I mean, most folks would say that Netflix is the most powerful company in media, outside of maybe YouTube. They’re certainly valued like that! Prime Video has Amazon’s backing and is the third biggest streamer on Nielsen’s The Gauge. And yet…the sports leagues actually give them a discount.
Why?
Well, when negotiations start, the economics get laid down up front, and customers streaming an hour of TV don’t make as much for streamers as they do for broadcast and used to for cable. That’s it! That’s it in a nutshell.
So, then, why is Netflix so valuable compared to other entertainment companies? Well, they’re a global streamer, and most traditional US entertainment companies only make TV revenue in America. Folks often compare Netflix’s global revenue to most entertainment companies’ US revenue. But if you compare revenue to same country usage, streaming just isn’t in the ballpark as broadcast and cable were at their peak.
In time, this may change, but we really haven’t seen it yet. And if I’m a sports league, this worries me. Partly this is driven by the lack of reach for most streamers.
Thought 2: The DoJ Threats Didn’t Work
A few weeks back, the Trump administration floated potential antitrust legal action against the NFL since customers are upset that not all games are easily available. (I even wrote about it!) Yet…the NFL went ahead and sold these games to streamers like Netflix. So what gives?
I mean, the one challenge with covering the current administration is their mercurial nature. They change their minds a lot! And can be easily “influenced”. Clearly, the threats of antitrust investigations didn’t worry the participants here.
Addendum: The Cricket in the Coal Mine
I’ll add one related story here, which isn’t in America and isn’t about the NFL, but feels very relevant to this discussion:
At least one group thinks that the price for Indian cricket IPL rights will stay flat next year.
As a reminder, in today’s economy, “flat”—meaning no growth—is functionally death. The market only wants huge growth. Sports media rights—while often exaggerated with totals instead of actual growth metrics—provided that for years. In India, this meant big, big deals for Indian cricket rights, including to Hotstar, the Indian streamer Disney bought in their Fox deal. They later let that deal go.
Thus, India may reverse the trend in sports rights. Now, there are some India-specific reasons here—mainly, the Indian middle class hype cycle ended and Indian customers have never really paid for TV—but this may still provide a preview of what a streaming-only future portends for sports media rights.
Almost Most Important Story of the Week – SpaceX IPO Is Headed Like an Asteroid To the Stock Market
Remember when I jokingly wrote that I was seeking a $100 million valuation for my company?
Well, with valuations out there nowadays, maybe I should start fielding offers?
Because holy yikes, the hype for a SpaceX IPO (and possible merger with Tesla too) is off the charts, with a “valuation” of $2 $1.8 trillion. Now, this isn’t an entertainment story…at all. But it is the financial story of the year when paired with Anthropic’s potential IPO.
Let’s start with SpaceX. As some others have pointed out, it amazes me just how skeptical a lot of normally very bullish analysts are, including the Financial Times (twice!), The Information, and Prof G Media. These business analysts ran the numbers, and honestly they are incredible. Here are my favorite numbers:
- First, SpaceX only makes $18.7 billion in revenue, making this a historic revenue to price multiple.
- For that revenue, SpaceX lost $4.9 billion and lost $14 billion in free cash flow in 2025.
- Even better, SpaceX revealed that Twitter has lost half its revenue since Elon Musk took over.
- Even even better, its AI division grew only 9% last year. While burning tons of money.
- Even even even betterer, the “total addressable market” is 28.5 trillion, or the size of the U.S. economy. This is truly great stuff.
- EBITDA is the wrong metric to use to value Starlink, their lone profitable business, since space satellites are incredibly CAPEX dependent. Meaning depreciation is SUPER relevant, and not a number you should leave out!
- Lastly, Elon Musk may try to merge SpaceX with Tesla. Back in February, there were a host of articles about how Elon Musk had ruined Tesla—its self-driving claims have largely failed—and that merger could be disastrous.
In other words, there’s no way this company is worth $1.8 trillion, and I’m pre-annoyed at the hype, and will be annoyed through the IPO, up until it either busts (when actual investors see the numbers) or when the market is flooded with folks trying to sell their shares at the height. (Or, in success, the company monopolizes space access and fleeces others.)
But before that happens, index funds may buy up a lot of SpaceX stock since the indexes are rushing to add SpaceX before the usual guardrails (time from IPO, amount of shares available to trade, and profitability) are met. This is, frankly, a shame.
And if the worst case scenario comes true, I hope State Attorneys General (hey Rob Bonta!) investigate to ensure all decisions are the up-and-up.
AI Costs May Get Real for Hollywood
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