Category: Weekly News Update

Last week felt like the “winter finales” of the fall TV business season as we resolved two long simmering dramas in the land of TV. CAA settled with the WGA, bringing one of the last two major agencies into alignment with the WGA’s demands for agents. And HBO and Roku finally settled their long running feud over HBO Max. But which is more important?

While the latter story is certainly buzzier, I genuinely didn’t know if CAA would actually settle with the guild. (HBO Max on Roku felt inevitable.) So it wins the crown for my “story of the week”.

(Housekeeping: Expect my writing to be a little lighter with the Christmas and New Year’s Holidays. This will be my last weekly column until January, though I may have a few smaller articles pop up in the interim.)

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Most Important Story of the Week – CAA Settles with the Writer’s Guild

Right up front, let’s review the key deal terms:

– CAA agrees to phase out “packaging fees” by June 2022
– CAA will limit their ownership in production companies to 20%
– CAA will provide additional disclosures on their financial ownership.

Unlike our other contender for the week (HBO Max v Roku) we know a lot more about the actual terms of this deal. Thus we can talk a bit more confidently about who won or lost this deal.

Pyrrhic Victory Winner: The WGA

Look, the WGA got its major deal points. CAA won’t be able to own a production company, and packaging will go away eventually. The only reason why the WGA isn’t ecstatic with this outcome is they had hoped it would have come two years ago. The WGA wanted to settle with the agencies, moreover, so that they could negotiate a better deal with the studios. But since they couldn’t fight two battles simultaneously, their current agreement with the studios didn’t go as far as some WGA members wanted. 

Though, from the outside, the WGA looks well positioned for the next fight. Which will clearly be against the streamers. In the same way that folks say that Wonder Woman 1984 going to HBO Max helped the Roku deal, Warner Bros sending all their films to HBO Max may have sent a signal to the agents at CAA that they needed to settle with the WGA to protect their joint film interests. 

Loser: The Agencies

If anyone didn’t want the hold out of the last 20 months, it was probably the agents, given that it sunk one major agency’s IPO and then Coronavirus walloped the rest of their business models. Many agencies have had to lay off workers and furlough employees. Yes, Covid-19 caused that, but a concurrent work stand off didn’t help.

The most surprising part of it for me is the packaging piece. Ultimately, the agencies made a fortune off those arrangements. Why settle? My guess is the logic of “10% of something is better than 30% of nothing” ultimately won out. Agents made out like bandits in the packaging process, especially when it comes to lower level talent. Meanwhile, this deal also kicks the legs out of the agencies for their new business model of owning a piece of the content their talent makes. (Which was formerly illegal.) 

No change: The Studios

That’s the other funny outcome of the eventual deal: it doesn’t really seem like anything changed, did it? As many films and TV series as ever were greenlit, ordered and produced, but for the Covid-19 shutdown. Like all things, life/business finds a way. 

Which feels like the right end to this drama. (Though yes WME still hasn’t signed.) In the end, the business models will be tweaked, but talent is talent and the agents are agents, with a power struggle that is always ebbing and flowing, as they battle with studios in another power struggle.

Data of the Week – Nielsen Plans a Holistic Viewership Data for 2024

Nielsen is always updating their measurements, and this year rolled out streaming viewership numbers for public consumption. (A topic I’ve obviously loved, and, in full disclosure, Nielsen has provided me some data.) The news of a few weeks back is that Nieslen is planning to unify traditional linear viewership with streaming metrics. I’m intrigued by how they plan to do this (and how users can splice and dice the results) but this should be a win for any data heads out there. The only draw back? It’s still a long way off. (2022 it will start rolling out and by 2024 it will be their de facto measurement.)

Other Contender for Most Important Story – HBO Max and Roku Settle

The news is that Roku and HBO Max agreed on distribution terms, so HBO Max will replace all HBO apps on Roku devices. Like any deal, both sides had wins and losses. Let’s go by company, with who won what deal terms, and what we still don’t know.

Roku Negotiating Wins

– Roku can own the billing relationship. 

Owning the data? Valuable. Owning the user experience? Very valuable. Owning the customer relationship? The most valuable. Going forward, Roku will still be able to sell HBO Max subscriptions, which is key to the Roku platform business. Their key value add to consumers–besides the device itself/operating system–is to be able to sell bundled billing. While this deal can be a win for both sides (HBO could sell more subscriptions if Roku is pushing it), getting potentially 20% of perpetual monthly subscriptions for one sale is a great price.

HBO Negotiating Wins

– No more HBO period, only Max
– HBO owns the UX
– No free content for the Roku Channel

HBO meanwhile puts an end to the confusing branding proposition that has plagued them this year on another streaming platform. So that’s a win, and on Roku applications–from what I understand–HBO will get to own the customer user experience. Meaning you have to launch an HBO Max application to watch HBO Max content. As I said just above, in some ways, this is better than owning the data. (Though data and user experience are usually linked.) Best of all for HBO, they didn’t sacrifice any content to build Roku’s own streaming business. (Which probably would have been a deal-breaker for me too if I were HBO Max/Warner Media.)

Unclear Winners

– Split on ad-inventory (usually 30%)
– Split on subscription fees (usually 20%)

A lot of this is theoretical simply because we don’t know the results of the biggest point of all: who is getting what revenue? 

If HBO Max negotiated Roku to down to 5% of subscription revenue (unlikely!), that’s a huge win. If Roku kept it at 20% (unlikely!), that’s probably a win for them. Meanwhile, splitting ad-revenue is a big unknown since we still don’t have firm details on HBO Max’s plan. They could go big on advertising, or throw it in the trash heap. It remains to be seen. Since Roku has data on all viewing on their platform–including Netflix!–they have more upside with the ad monetization. There are some rumors that HBO caved on this point, which would also go into the Roku win column then.

Ultimate Verdict?

Both sides claim they’re happy with this deal, and that’s probably true. The biggest loser is probably both companies since this feels like a deal that could have been had in June. A lot of pain was had from May to now, without a lot of gain on either side (is my guess). Ultimately, though, that likely hurt HBO Max’s launch more than it hurt Roku’s sales.

Bonus Point: Antitrust Implications

These two quotes in the Wall Street Journal sum up the future antitrust implications if either Roku or Amazon take over a dominant position in device sales. (Or split the world and subtly cooperate on pricing.)

I’m clearly more bullish on a stronger antitrust future than most other business types. (I still read arguments that Amazon isn’t a monopoly and/or dominant player who uses their position to restrict competitors.) But with the deluge of Facebook and Google legal actions, it feels like the antitrust could be the future. And headlines like this won’t help Roku if one day regulators make their way down to video devices. (Dominant market position leading to higher rents being the key phrase.)

Also, this is just another data point that my thesis from last November is coming true.

Other Contenders for Most Important Story

Mind Geek and YouPorn Delete Lots of Their Content

The challenge with user generated content is make sure the users don’t generate bad content. Or frankly immoral, unethical and illegal content. The latest big tech player to deal with this is MindGeek, which owns a plethora of pornography websites. MindGeek had a fairly unscrupulous business model before a story broke that they turned a blind eye to child pornography on their site, including accusations of content piracy, revenge porn, monopolization and illegal content. Thus, Visa, Mastercard and American Express abandoning the website isn’t a huge shock.

Though it does mean something. On the one hand, Mind Geek could end up being a better partner to it’s actual suppliers of pornography, which it has largely ripped off. Interestingly, pornographic talent had been calling for this move for years. It will make it easier for legitimate users to make money. The downside for MindGeek is the value of user-generated content is usually because it is stealing other folks intellectual property. 

This shows the pitfalls of any business relying on user generated content. Even though it was obviously easier to have child pornogrpahy material on a site dedicated to pornogrpahy, many folks pointed out that Facebook, Youtube, Snap Chat, Tik Tok and others potentially have much worse problems with child predators, simply because they are much bigger. Yet, since those companies aren’t ostensibly pornography, they have much more good will. (It’s easy for everyone to pile on YouPorn.) 

All in all, this touches on the much larger political issues involving free speech, Section 230, piracy and countless other political issues. I will repeat a point, though, I’ve hammered Youtube on for years: It baffles me some of the most egregious piracy issues aren’t easier to solve/prosecute. Certain search terms are so clearly designed to lead to illegal content that I don’t know how that’s not actionable.

(For example, in sports. If Reddit users have threads called “Lakers Live Game Stream” it should be clear that’s an illegal stream of the game…right? How is that not actionable? The examples in child pornography are similarly egregious.)

So if it’s so easy to solve, why isn’t it? Money. All the user-generated content companies make billions. And some of that comes from content that skirts the line of legality. It’s better to pretend it doesn’t exist than to solve the piracy/illegality problems. That’s just the facts.

ESPN and SEC Sign $3 Billion Deal

Another huge sports rights deal, this time for the most valuable league in college football. Even during a pandemic, we’re waiting for the next sports rights deal that shows a flattening in growth.

HBO Max made lots of news last week. First with a deal with Amazon. I thought nothing could top that. Then they announced that Wonder Woman 1984 was going to HBO Max. That’s a big deal, so let’s make that our story of the week.

Programming note: I delayed last week’s column to today due to the shortened work week for the U.S. Thanksgiving celebration on Thursday. I’ll be off until next Monday.

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Most Important Story of the Week – Wonder Woman 1984 to HBO Max and the Messy Estimates of Customer Lifetime Value

One of my favorite media criticisms comes from Ryen Russillo, formerly of ESPN and currently of the Ringer. He brought up the point that whenever a radio or TV personality says the phrase, “And frankly, it isn’t even a DEBATE!” it usually means it is definitely a debate. In the spring, the basketball version of this was folks saying, “Michael Jordan is the greatest basketball player to ever live, and frankly, it isn’t even a DEBATE!” Of course, it is absolutely a debate since LeBron James has a terrific case.

(And crazily enough, both sides are wrong. Kareem Abdul-Jabbar is the greatest to ever play. And frankly, it isn’t even a debate.)

Do we see this in the streaming wars? Of course. My Twitter feed is filled with folks letting me know that Netflix has already won the streaming wars, and frankly it isn’t even a debate. (Reminder from last week’s article, the more a person tells you the more certain they are about the future, the less you should listen to them.)

The news that HBO Max is moving Wonder Woman 1984 to HBO Max for one month in December brought out a lot of hot takes about streaming, theaters and the future of film. Including some, “This isn’t even a debate”-type commentary. This baffles me given how many known unknowns, unknown unknowns and assumptions we have to make about everything related to film right now. Today, let’s debunk some of the worst takes. Or, if not quite debunk, more try to cast some doubt on them.

Starting with the biggest known unknown of HBO Max: the value of a subscriber. Because once you see how little we understand about it, you’ll understand why I’m so hesitant to make a lot of predictions.

Estimating Customer Lifetime Value for HBO Max is Nigh Impossible

One of my rules to live life by is that “Strategy is Numbers”. If you read a media analyst, but they don’t use any numbers, well you should be very hesitant to trust them. (And by numbers, I mean predictions with dollar signs.) They don’t need to have all numbers, but if they don’t use any models to forecast, well they are likely more soothsayer than business strategist.

Thus, when it comes to analyzing Warner Media’s decision to release Wonder Woman 1984 to HBO Max, if I’m taking my own advice, it would seem like the best place to start is with some numbers, right? After all, I”ve done this math for The Irishman and Extraction on Netflix. Surely I could do the same here?

Not at all!

For all the gruff I give Netflix about hiding numbers, they provide a fair deal of information about the performance of their business (because their business is only streaming and they have to comply with SEC regulations, if they didn’t provide the details, they’d be providing nothing). This enables us to estimate, with a good bit of confidence, the customer lifetime value of a given Netflix subscriber.

Customer Lifetime Value (or CLV) is really the name of the game in subscriptions. It’s the financial tool that says, “Hey, if you attract this many folks, this is how much money you’ll make in the long run.” As I’ve written before, it can be used and abused, but it’s why Wall Street loves subscriptions for everything. (Basically, recurring revenue.)

Here’s the thing: if you don’t know any of the inputs, you can’t calculate it. Or even estimate it. Because little swings can have huge changes to the output. Moreover, CLV is an estimate. Meaning a forecast. Meaning a prediction. Predictions are more accurate with lots of data. And they can still be wrong. Frankly even HBO Max has very little data on HBO Max, because it’s only been around since May.

Here’s how little we know about HBO Max:

– First, we don’t know the average revenue per user of an HBO Max subscriber. AT&T doesn’t break out HBO Max and HBO subscribers separately. We don’t know their splits with device manufacturers or have any historical data.
– Second, we have no idea what it costs to acquire an HBO Max subscriber in marketing.
– Third, and most important, we have no idea how long a new HBO Max subscriber will hang around. If it’s 12 months, that’s pretty bad. If it’s 36 months, that’s pretty good. I’ve seen one estimate of this, but it came from the summer, right after HBO Max launched. No one knows if that number will be above or below trend. Moreover, even HBO Max doesn’t know this number, because it is happening in the future!
– Fourth, we don’t know how much Wonder Woman 1984 would have grossed at the box office either. And now we never will.
– Finally, none of this matters since the real question isn’t what is the value of a new customer, but what is the value of HBO Max on the CLV of an existing HBO subscriber. Meaning, what is the value of an “activation” which is the AT&T term for someone who downloads and logs into HBO Max. Again, we won’t know this for years.

If you don’t have CLV, you can’t even begin to answer the question, “Will Wonder Woman 1984 make money?” or the related, “Should they have waited to release it in the summer?” All the other methods to do this–taking a month or year of subscribers and attributing them to viewers–end up either double counting customers or making every other piece of content worthless on the site. (In short, if a customer signs up to watch Wonder Woman 1984, but then binges all of Game of Thrones and stays for a year, why does WW84 get 100% of their subscriber revenue? See that doesn’t make sense.)

Now that we know how little we know for this key variable, we can “debunk” the strangest narratives about HBO Max following this announcement. 

The HBO Max/Wonder Woman 1984 Hot Takes

1. Warner Media will Make Much More Money with This Strategy

How would you know? I just showed how uncertain the math is, so how could an analyst with way less data make that claim? This ties back to my introduction. The reason why Warner Media struggled so much with the decision to move Wonder Woman 1984 or release it to HBO Max is because they know as little as we do. They had to make a call, and it was clearly a tough debate, with likely evidence that they could lose or make lots of money with either decision. So how can an analyst outside Warner Media confidently predict the future?

2. This Will Kill Theaters

We don’t know if Warner Media will make any money off this release (and in lots of scenarios they’ll still lose money), so why wouldn’t they keep sending films to theaters? Instead, one thing is killing theaters right now, and that’s Covid 19. Full stop. If the virus were under control, then Warner Media would be happily planning on Wonder Woman 1984 being the big Christmas Day film.

3. Warner Media Will Pivot to “Day-and-Date” for Future Films.

I’m sure there are some folks inside Warner Media debating and even advocating for this future. But then there are likely others pointing to the economics of theatrical releases showing that having a theatrical window has some clear benefits for movie studios, mainly much more additional revenue. Meanwhile, any idea that this “test” can provide future guidance means accounting for the coronavirus, which is a tough variable to pull out of the analysis!

4. Alternatively, Warner Media Definitely Should Have Waited on Wonder Woman 1984

I’m not so sure. HBO Max needs a win, and this looks like a great opportunity to convince a lot of folks who don’t use HBO Max to try it out. If it turns out that a one-time blockbuster can single handedly boost usage, I can see how that’s a big win for Warner Media. A billion dollar box office win? I don’t know, but I won’t dismiss it out of hand.

5. Wonder Woman 1984 isn’t HBO Material

This is maybe the take that shows the least understanding of the HBO subscriber base. Sure, on the coasts, especially in the business, we think of HBO and think Emmys/Succession/Euphoria. Big critically acclaimed shows that drive “the conversation”. But guess what? Every Saturday HBO debuts a big new blockbuster film, including all the DC films and hosts of other big blockbusters. After all, it is the “Home Box Office”. HBO is known for this by customers as much as anything else. Wonder Woman 1984 isn’t a departure from HBO programming, but a reinforcement of it.

6. Amazon/Roku Did/Will Make a Deal Because of Wonder Woman 1984

No, they made a deal because they came to terms. These are 3-5 year partnerships. No big film, no matter how buzzy, will make one of these deals happen. Frankly, it just doesn’t move the needle enough. It may have helped some of the accounting on the HBO side, or provided some pressure, but on the device side it mattered very little. (The Christmas season in general was more of a driver than this specific launch.

End of the Day: We Don’t Know if Wonder Woman 1984 Will “Make Money” on HBO Max

Frankly, even getting the return of just its domestic box office haul, in the hypothetical non-Covid 19 world, will be tough. Yet, given how much HBO Max needs to pull in subscribers, this deficit financed maneuver may be worth it. Will it set trends for all future releases? Doubtful, unless lots of actors are willing to take pay cuts on current projects. At the end of the day, this is a big decision but as for whether or not it was a good call or bad call remains to be seen. (And likely we’ll never know.)

Context Update – A Second and Third Vaccine

By the end of 2021, society will be in a better place than it is right now. If for no other reason than Covid-19 has a good chance to be under control. Of course, variables could still stymy this, from a double dip recession to unwarranted vaccine fears preventing widespread vaccination. Still this is good news. In the summer, many headlines worried that Covid-19 wouldn’t be responsive to a vaccine. Those fears have been almost entirely dismissed (and evidence is increasingly showing a vaccine could be good for multiple years even), which is great news for the economy in the long run.

(We just need a good transition of government in the United States to ensure vaccines are distributed as quickly and effectively as possible. We also definitely need additional stimulus. Both of these scenarios are at risk.)

Other Contenders for Most Important Story

Speaking of the HBO Max/Amazon Deal…

This likely would have been the biggest story of the week but for the Wonder Woman 1984 news. Ultimately, though, like most big deals, we know very little about the terms. From what I can tell, the deal does seem like a bit of give on both sides. HBO shows will stay on Amazon Prime Channels until the end of the year while HBO Channel subscribers get access to HBO Max. As for everything else (pricing, marketing agreements or content sharing), we just don’t know.

The most important variable, for me, is that HBO will ultimately control the user experience. We often talk about “controlling the data” and that is important. Obviously. But for streaming, controlling the UX is much more valuable. Truthfully, Prime Channels does a terrible job featuring third-party series and films, and HBO Max is a much better experience. That’s the win for HBO Max here more than anything else.

The next question is when does Roku do a deal with HBO Max? Some folks say a deal is close, whereas others say it is far apart. Likely they are “negotiating in public” but it will be fascinating to see how it ends up.

Disney Live-Action Films Headed for Disney+

The news is that Disney is considering putting some of its live-action remakes straight to Disney+. Unlike Wonder Woman 1984, this is much more “signal” than noise that Disney could change release plans. Still, there is also some Disney obfuscation of how much of a real change this is, which is what you expect from any streamer.

The key for Disney isn’t how it releases these films, but what budget the films are. My guess is that if these films were destined for theaters, they’d be 9 figure production budgets. When they go to Disney+, my guess is they’ll be around a quarter to half that. Disney could say it’s only about the marketing budget, but I think the production budgets see a hit too. If that’s the case, then it really isn’t that Disney is releasing theatrical films to streaming, but straight-to-video films to streaming. 

Roblox IPOs (and is losing money?)

Roblox released its “S1” to file publicly on the stock market. Like every digital company, it loses money every year. The key question is whether it loses money in as bad a fashion as others, and from what I can tell the cash losses seem to be exactly what Roblox spends on R&D. Assuming the R&D is accurately classified (not actually COGS). The worry here is that while Roblox saw nearly 100% growth in the Covid-19 lockdown, it saw its losses quadruple. 

Roblox is like most digital companies executing the underpants gnomes digital strategy: attract users, something something something, profit.

Rick & Morty Are Very Popular

In a world with no ratings–which we don’t live in, but it feels like it–you could always default to another metric: where the money goes. In that world, Rick & Morty may be one of the most popular shows on television. The latest product the animated show is pushing is the Playstation 5, but that’s just the latest in a long line of product tie-ins. The other candidate for this is Stranger Things, which did a ton of branding last summer, but even there traditional TV has an edge. Rick & Morty is coming out much more frequently (about twice a year) and replayed much more often, which helps advertisers.

Netflix and Cinemark Testing The Christmas Chronicles 2 in Theaters

Lastly, as theaters are “dying”, Netflix is partnering with Cinemark to release Christmas Chronicles sequel to theaters. See, Covid-19 makes strange bedfellows of us all. I love this move for Netflix since theaters will provide straight revenue to the bottom line.

M&A Updates

Lastly, Buzzfeed and HuffPost are merging. This is an interesting merger more than anything, because it is unclear to me that this new scale will save either firm’s underlying traffic problems.

For the second week in a row, we all knew the most important story of the week by Tuesday. And even more than the election, the news of a potentially very effective Covid-19 vaccine has direct benefits to the entertainment industry.

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Most Important Story of the Week – Pfizer’s Vaccine and Ending the Entertainment Recession

When I finally anointed Covid-19 the “most important story” of the week back in March, I speculated that we could call the impending recession the “entertainment recession” since so many parts of the industry could be impacted. That take was generally correct, as the novel coronavirus walloped the industry broadly.

(Though, in hindsight, leisure and travel industries like hotels and airlines, were probably even more impacted. Small in-person businesses like bars, gyms and restaurants were also crushed.)

That’s what makes the news so notable that Pfizer has a working vaccine that delivers 90% immunity. This follows rumors going back to August that China has a working vaccine that they’ve given to over 300,000 people. Or similar rumblings that Astrazeneca is also close to a working vaccine. (Honestly, I’m a little surprised we only learned of one vaccine this week.) Given that Pfizer’s vaccine is effective, many expect other vaccines to be similarly impactful.

Like all things, I want to temper my optimism with some doses of reality. Or, better said, uncertainty. Trying to predict how an entire society rebounds from a devastating pandemic is a fool’s errand. But that’s what we get paid the big bucks to do, so we’ll try. But first, the caveats.

The Caveats

1. We still need more caution in our sociological predictions. It amazes me how often we predict confidently in the behavior of large groups of people, and they end up confounding our predictions. Take this virus. While virologists predicted a big surge of cases in the fall, few predicted a big surge of cases in the summer.  If society wide predictions were easy, we wouldn’t need capitalism and could have a state-run economy. But they aren’t, so we don’t.

2. A vaccine doesn’t fix the recession. Covid-19 forced tens of thousands of businesses to permanently close their doors. That’s economic activity that doesn’t just come back. Even if a vaccine is widely distributed, and distributed faster than expected, economic activity may not follow. (Or it will rebound quickly, a point which I’ve seen some opinion makers make.) While the vaccine is unqualified good news, it doesn’t make forecasting the economy any easier. I could see everything from a big muddle (especially without stimulus) to a strong rebound.

3. We don’t know how quickly a vaccine will be distributed. It may end up surprising us on either end. We could look back and find out that the US/European/Chineses governments supercharged distribution faster than expected. Or it may be the end of summer and we’re wondering why we still don’t have vaccine doses at scale. Disney, for example, expects theme park closures to last into March. That’s probably the earliest we could see widespread distribution. On the other hand, vaccine production is tough and it could be until the end of Q3 or further. The median is sometime in the summer.

4. The current outbreak is spreading uncontrolled. What final damage does this leave? Does it force theater chains to close if Wonder Woman 1984 can’t make it’s Christmas Day release? (See below.) This is a big (and tragic) wildcard.

5. What does the government do? We’re potentially in an even more muddled position than before the election. If one party controlled all three levers of power, you could see an effort to spend big to rescue industries and distribute the vaccine. As it is, spending bills could fail to materialize as helping the economy is increasingly seen as a political concession to the party that controls the White House.

The Predictions

In all, a messy picture. My (incredibly uncertain) gut says we should be optimistic for the entertainment industry now that a vaccine with proven effectiveness will be available. In rough order of who stands to benefit the most from an efficacious vaccine:

– Customers in 2021. My biggest prediction is that we see a big rebound emotionally/culturally/socially. Take the Roaring 1920s and pack it into one year. Folks throwing big parties. Or holding double birthday parties. Splurging on outdoor concerts and festivals. Big vacations. In other words, 2021 becomes the year of the party. The pent up demand hypothesis.

– Concerts see the biggest gain. Frankly, live-streamed concerts have come and been found wanting. There is nothing like an in-person experience and I think concerts (and the artists performing in them) have the most to gain from herd immunity. Concerts do take time to put on (as Hedgeye analysts Andrew Freedman put in his recent coverage of Live Nation). That said, these are extraordinary times. When concert promoters see an opening, there will be all effort made to be the first concerts back. And to celebrate that fact.

– Theme parks are next up. They have as much to gain as concerts, except there just aren’t as many. (And some are already open.) At first, I’d guess that local customers are the big arrivals, and we’ll see Disney and Universal studios offer lots of local discounts to get the parks full, especially in California.

– Live sports will rebound, but likely without the same enthusiasm as concerts. Frankly, watching the game on TV is still how most folks consume sports, even if ticket revenues are a huge portion of any league’s revenue. Conversely, each team will celebrate its return to competition and teams could see a surge in interest as folks are ready to get out of the house.

– Theaters could see the next big benefit, but they have a tough road to get there. 2020 will forever be a black mark at the box office, and it may take AMC Theaters with it. If they can get to/through the first quarter, though, I think studios will finally hold the line and let films get released. Meanwhile, the slate of films will essentially be double packed, with the best of 2020 and 2021 in the same year. This could actually hurt individual film grosses, but should lift all boats in general. I wouldn’t forecast we see a record breaking box office year, though, because Q1 will still have head winds from the current outbreak.

– Streaming and linear will…? If folks are spending lots of extra spending on everything, presumably that means they won’t be at home watching TV. But does this benefit the streamers? Or did they pull forward cord cutting? What about the traditional bundle? Will it see more cord cutting as folks go back outside? All that is unclear to me. Likely cord cutting continues at its current pace, but viewership could slide back from lockdown highs. However, competitive dynamics will probably have more of an impact than Covid-19.

Conclusion

I will be wrong on some of the predictions above. For example, some folks may not trust the vaccine. And have permanently turned into homebodies. Or the recession hurts wallets more than the end of lockdowns motivates folks to spend. Or the vaccine really isn’t broadly distributed until the last quarter of the year.

We’ll see! 2021 should start off on a positive trend and it will make for lots of news to unpack. But in all, if you work in entertainment, this is good news.

M&A Updates – Sony is Looking to Buy Crunchyroll

This news has been floating around for a few weeks, but I’ve been waiting to see it confirmed. (Which it hasn’t.) Like all deals, the terms are key. Allegedly AT&T wanted as high as $4 billion for the anime-focused streamer. The current floating price is $1 billion. That makes a huge difference between the two.

Assuming it’s closer to the smaller number, is this a good deal for Sony? I’m still not sure.

I’m fine with niche streaming services and think they will have a role in the streaming wars. You’ll have the general interest streamers like Netflix, HBO Max, and Disney+/Hulu playing the role of broadcast channels and you’ll have niche streamers playing the role of cable channel upstarts. Crunchyroll fits into that latter category well. They allegedly have 3 million subscribers, which isn’t bad.

With two caveats, though. Like folks asked with Disney+, though, at what average revenue per user? 3 million users paying what?

Second, there is a lot of anime content out there in the world. Everyone from Hulu to Netflix to HBO Max to Prime Video has a vertical on anime. I’m not an anime fan, and haven’t studied this industry so I’m not sure exactly how far ahead Crunchyroll’s lead really is. I’ve been told that if you’re an anime fan, due to exclusives, you have to have it. But if Netflix decided to go all-in on anime even further, it could likely outbid Crunchyroll.

Can a company keep and maintain a competitive advantage in a genre of content? Maybe. Shudder has arguably done very well appealing to horror fans with tailored content delivered by key influencers in an authentic way. Has Crunchyroll done the same? I think so, but we’ll see if they can sustain it under new leadership.

Other Contenders for Most Important Story

Disney Earnings

The fiercest traditional competitor to Netflix in the streaming wars had its earnings report on Thursday. In short, Disney was walloped by Covid-19 and a new vaccine is key to rebounding. For the gory details, I’d recommend my thread:

The other big news was that Disney has passed 73 million global subscribers. Pay attention to how Disney+ adds new territories, as we’ve seen big surges in subscribers tied to those launches:

Looming over the coverage, though, was the “Mulan question”. Specifically, did the test workout? On the earnings call, CEO Bob Chapek said it did, though notably Soul, will be premiering on Disney+ directly without the option to pre-buy. So if the test “worked” why not do it again? Well, likely Disney wants Soul to drive end of year subscriber numbers like The Witcher did for Netflix last year. They also just announced that WandaVision, the first big Marvel Cinematic Universe show, won’t be coming until January, so they need Soul to keep subscribers for the next quarter.

Lastly, part of me expects Disney to announce an expanded Premier Access program for 2021. (Their name for the Mulan experiment.) The date to watch is December 10th when Disney hosts its investor day. Reading the tea leaves–executives constantly referring to investor day, the stated success of Mulan, a similar program in India–I think it’s likely that Disney announces a new tier to Disney+ on that day. If they do, we’ll discuss the pros and cons of that new bifurcated strategy.

Comcast’s Freaky Is the First of the New Model with AMC

Specifically, the shortened PVOD window model agreed to last spring. So what do I think? I’ll have my thoughts up at Decider early next week.

The Wonder Woman 1984 Question

Freaky though isn’t the big question for theaters. That’s what happens to Wonder Woman 1984. As I write, Warner Bros is debating between keeping the date (and getting it on HBO Max early) or moving it to the summer, now that a vaccine is for sure on its way. My bet is it moves, but if it stays to bolster HBO Max, that’s a sign that Jason Kilar has his hands on the strategic steering wheel.

Discovery Earnings

Discovery will enter the streaming wars at some point. Because they have to. Rumors are that Discovery+ will premiere sometime in early 2021 and CEO David Zaslav has been promising a direct-to-consumer service soon. In their earnings call, they repeated plans to launch a streamer. When we learn more, we can discuss the strategy in depth.