The last two weeks have featured key new moves in the multi-dimensional chess match that is the future of TV viewing. (For some of my thoughts in general, check out my NBA-to-entertainment translator where I throw a lot of fun analogies out about old and new media.)
Most Important Story of the Week – AT&T/WarnerMedia Enters the Streaming Fray
Well, AT&T had already entered the fray. They just have a new plan.
Warner Media and AT&T both had their own “OTT” options for the consumers of the world. AT&T owns DirecTV Now, a “skinny bundle” of TV channels, and had a stake in Otter Media, which owns SVOD channels such as Crunchy Roll, Full Screen, and Hello Sunshine. These rolled up into VRV, a larger subscription bundle.
WarnerMedia had its own “digital networks” group that offered subscriptions to Boomerang–featuring cartoons owned by Turner such as Looney Tunes and Hanna Barbera cartoons–DramaFever–Korean dramas–and a soon-to-be-launched DC Universe streaming service. And HBO owns HBO Now. So both companies had played in the “SVOD” or “OTT” universe.
Just not very well.
The announcement–like the “DisneyFlix” announcement before it–was pretty sparse on details. Here’s what we know: in Q4 of 2019 AT&T/WarnerMedia will launch something. The assumption from many people is that AT&T/WarnerMedia’s offering will ultimately be more like a much larger OTT: there is a base bundle, but then multiple options to add on top. This would be similar to Amazon Prime/Video/Studios approach with its “Amazon Channels” business.
Let’s do good and bad of this vague announcement:
The good: The content offering could be compelling…
I mean, it’s basically a cable package, if Turner gets brought in. TNT for drama, TBS for comedies, Cartoon Network for kids, HBO for prestige viewing, CNN for news and Warner Bros. for movies. Make that as the base with other channels as OTT add-ons, and you may have something.
The good: with a much more coherent price offering.
When I first heard about Boomerang, I could never quite believe what I read. “So you’re offering me a lot of cartoons for $4.99 a month? But Netflix is just $10 a month. Are those cartoons worth 50% of that price?”
Not really. If anyone can get away with that, well it’s Disney. Given that they have the top, in demand movies, they can charge a premium when they launch their platform (and will hurt Netflix in the process). Everyone else needs to offer a large bundle that mimics Netflix prices (and cash losses). The reason Warner Media didn’t offer that before is simple: they couldn’t afford it. Netflix can’t really “afford” it either, from a cash perspective (they just took on $2 billion more in debt). But they can lose money and watch their stock go up; formerly Time Warner couldn’t.
The bad: Do consumers want one bundle, or do they want four different bundles?
Do you buy the whole AT&T bundle, or buy that and Disney and Netflix and CBS Now? And if the prices go up on all of those, do you end up paying $100 for internet, and now $80 for OTT, meaning you’re paying more than you do now for internet and cable, just with way less viewing options? That’s bad for customers. (And a prediction I want to look into. I’m not bullish on customer benefit in a future of greater industry consolidation.)
The unknown: Will AT&T/Warner Media stop selling bad OTT services?
From what I understand, the DC streaming platform–that I guess will launch with a per month price of 20-40% of a Netflix subscription–will still launch. That just seems like a bad business model. At the same time, since acquisition, AT&T shuttered other digital platforms like DramaFever and Super Deluxe. So we’ll see. Maybe they’ve learned their lesson, but I’m skeptical.
Other Contender for Most Important Story – SnapChat Launches Originals
I don’t think that social platforms are good for video.
Phew, glad to get that off my chest.
Let’s explain. I’m a big believer in understanding the problem your company is trying to solve, and delivering solutions to that problem. I haven’t written about the “Marketing Framework” (3Cs-STP-4Ps) yet, but I love to use it to analyze business problems. The key insight of the framework is to align all parts of the product with the solution to the problem.
With social platforms, producing “original video” fundamentally misunderstands the core problem these social networks set out ot solve. Twitter connects normal people to the thoughts of other famous people and their friends. Facebook connects social networks online. Instagram is flashy fun images of famous people and your friends.
Video can help that. Hypothetically, people want to see Instagram videos from celebrities. They want to see videos of kids (they know) blowing out candles on a birthday cake. Those reinforce the core solution to the initial problem.
Notice, I never said those platforms were about sitting back and watching entertaining TV shows and movies. Yes, video from famous people or friends is a part of those social networks, but the problem being solved isn’t wanting to watch long-form (or even short form) video. Specific other apps are optimized to do that and do it better. (And even with the rise of mobile viewing, mobile viewing, phone or tablet, is inferior to the living room experience.)
So welcome to the originals game SnapChat. I think you are trying to inject original video production to solve a problem your customers don’t want solved.
Other Contender for Most Important Story – Annapurna Films Struggles
I considered the news that Megan Ellison’s Annapurna films is (allegedly) in chaos, then (allegedly) not in chaos as my most important story, but there wasn’t enough there there to write it out. But still…
A few months back, I wrote about the fall of Global Road, comparing its performance to STX Entertainment, which felt really similar to me. Well, I could have thrown in Annapurna Films, which I didn’t. In a lot of ways, they’re suffering from the same fate as their predecessor: launching a standalone studio in the age of monopolistic super-conglomerates is tough. In my defense for ignoring Annapurna, until recently they weren’t in the distribution business, sticking to producing films.
I’d add one other point I haven’t really emphasized enough: streaming is my theory for why so many new studios popped up since the financial crisis. (My count? Relativity, Global Road, STX Entertainment, Annapurna Films, and A24, at least.) What fueled this mini-boom was the rise of licensing of movies. Basically, if Amazon or Netflix will pay your production costs in a film output deal–which they may do on a global basis in some cases–then you can make money if you have just one hit at the box office.
I’ll also add that Annapurna plays (mainly) in an even trickier world: prestige films. If you don’t deliver your Best Picture Oscar film each year, then you can lose a lot of money. Initially, Annapurna didn’t have a problem there. Recently, though, they have. That’s also basically the life story of Miramax and The Weinstein Company, that always struggled financially year to year.
Long Read – Streaming Arms Race May Make Cable Look Like a Deal
This is a good summary of the streaming landscape now that AT&T has entered the fray, but I’d really point out they make the same point I do: at some point having a cable bundle may offer more content then all the OTT services put together. I’d add this is doubly so if: 1. SVODs raise their prices or 2. SVOD’s restrict sharing of passwords.
