Aggreggedon: The Key Terrain of the Streaming Wars is Bundling

(Welcome to my series on an “Intelligence Preparation of the “Streaming Wars” Battlefield”. Combining my experience as a former Army intelligence officer and streaming video strategy planner, I’m applying a military planning framework to the “streaming wars” to explain where entertainment is right now, and where I think it is going. Read the rest of the series through these links:

An Introduction
Part I – Define the Battlefield
Defining the Area of Operations, Interest and Influence in the Streaming Wars
Unrolling the Map – The Video Value Web…Explained)

In war, what really matters on a map is the “key terrain”. The place on the map that if you control it, you have a much better chance at winning the upcoming battle or war. In Army lingo, terrain that control “affords a marked advantage”. Usually this is the high ground, but can be anything from a bridge to a national capitol, or airfield or even castle, in olden times.

So take a gander at our “map” of the video landscape from last week.

Image 7 Video Value WEb

As a commander, where do we want to control? What gives us a “marked advantage”? Well, I highlighted it in yellow. 

Last week, I “defined” the map and area of operations. Now we move onto the challenging tasking of describing that map. While I won’t use all of the Army’s frameworks, the concept of “key terrain” really does resonate with business. (Don’t worry, we’ll use other business analysis frameworks as well.)

Today, I’m going to highlight the key terrain the streaming wars will be fought over, and it’s not what most streaming observers and customers think it is. (If I had to guess, they’d call it subscribers.) I’ll start with the “BLUF”, then describe the situation in broad strokes, the reasons why digital bundlers are in a powerful position, the stark choice facing streamers, and finally the ramifications for all players in digital video. 

Bottom Line, Up Front – Digital Streaming Bundlers Are Best Positioned to Capture Value

While streamers started as the aggregators—Netflix inspired cord cutting by offering it’s own bundle—in the next five to ten years, the new digital video bundlers (who I call DVBs) will be in the best position to capture value (meaning profit and cash flow) in the video landscape. This means the winners will be folks like Amazon, Apple or Roku, and not Netflix, Disney, Comcast or AT&T.

The Situation: Netflix breaks the user experience monopoly of cable TV

In the past—meaning just ten years ago—the landscape was relatively simple for TV: you turned on a cable or satellite box, and scrolled. Netflix changed that all. Using its installed base of DVD subscribers, it started offering streaming video to its customers. Thus, when you sat down at your TV, you could decide, “Netflix or cable?” Netflix provided a second user experience to watch TV. Some people—though less than usually hyped—cancelled cable just to use Netflix and were dubbed “cord cutters”. 

Netflix was so successful, it inspired copycats from Amazon Prime to Apple TV+ to Disney+, who launched this week. Of course, the best place to watch TV isn’t from a computer screen, but from a living room TV. Devices were released to manage all these different streaming platforms, like smart TVs, Google Chromecast, Roku, Amazon Fire TV and Apple TV.

Which leads to my biggest theory of the landscape: customers will want to return to one operating system to manage all their television watching. Crucially, this may include bundling content. The cable companies didn’t just provide one user experience, they provided a bundle of cable channel at one fixed price. That bundle is dying.

But it’s returning. Instead of just channels, though, it will be a combination of virtual MVPDs (like Hulu Live TV, Youtube Live TV or AT&T TV), FASTs (like Pluto, STIRR, Xumi, and Tubo) and SVODs (like Netflix, Disney+, Hulu and Amazon Prime). The question is who mediates that experience. Someone will. And potentially to manage all their payments. And if you’re managing all the payments, you can bundle all the streamers/FASTs/vMVPDs into one monthly or annual price. A bundle.

The question is what do we call them? I’ve taken to the acronym DVB:

Digital Video Bundlers. 

I’ve colored this in yellow on my map because of how important I think it is. If an Amazon or Apple can own the customer relationship, they’ll own all the data and be best positioned to capture value from suppliers or competitors. Before I get into the ramifications, let me explain why I think this will happen.

Reasons Why The Bundle Will Return

The return of the bundle doesn’t just seem likely, but almost inevitable.

First, a clear customer value proposition – One user interface for all content.

Both Amazon and Apple have touted a clear proposition to users, which is the idea that you have one place to go to watch all your content. Meaning: if you log in, every subscription video service is in one location to easily search and browse without having to switch between apps. 

(In some cases, this vision is still aspirational, as opposed to realized. But it’s both companies’ dream user scenario.)

This makes sense from the cable example. The big revolution wrought by Netflix stemmed from the idea that suddenly customers now had to choose between two different ways to interact with the TV screen. Once that was severed, the cable bundle no longer offers it all. But neither did the “Netflix only” option, since you missed all traditional cable channels. Or other streamers like Hulu. This makes deciding what to watch just that much harder (and was to Netflix’s advantage).

Most smart TVs don’t offer a simple way to scan between streaming services. Instead, you decide what app to use and go to its platform to browse. Amazon and Apple want to incorporate everything into one user interface, so HBO content would sit next to Disney+ content which is next to CBS All-Access, for example. Meaning you can organize all your video in one place. Here’s Amazon Channels right now to show this vision:

Screen Shot 2019-11-14 at 10.38.31 AM.png

(By the way, Amazon and Apple both ruin this customer experience with a clear user experience fail. When customers surf TV and streaming, the expect everything to be watchable for free. Pay Per View, historically, was always limited to clearly defined section of the cable interface. In their efforts to have an accurate search, Amazon and Apple both surface results for their TVOD businesses, which customers despise. Loathe. Hate. Keep your “pay for it” shows and movies clearly separated from your TV experience.)

Second, a vague customer value proposition – One source for payments.

The second reason cited by folks selling subscriptions is it offers simplicity in payments. I’m less sold on this value proposition because people will likely still search for the best deals. But it’s a potential for some customers and has some value.

Third, a potential value proposition: the new bundle. (Which everyone is predicting)

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Most Important Story of the Week – 8 November 19: Franchise Lessons from all the Game of Thrones and Star Wars News

What happens when one week has so much news and the next has very little? Well, you roll one topic over. So the “most important story” this week is last week’s runner-up. 

The Most Important Story of the Week – Game of Thrones and Star Wars Franchise Lessons

Last week began and ended with dueling Star Wars and Game of Thrones news….

– First, HBO cancelled it’s “Age of Heroes” prequel series for Game of Thrones.
– Second, HBO announced another prequel series for Game of Thrones, based on the book Fire & Blood about the Targaryens.
– Third, David Benioff & DB Weiss—the Game of Thrones showrunners—had left the Star Wars prequel they planned to make

Since HBO Max sucked up the oxygen out of the entertainment biz room last week, I didn’t really have time to examine what the big franchise moves meant for entertainment. Which is a shame; monetarily, these announcements would have been the most important story in most weeks.

Here’s why: both of these franchises are worth billions. As I’ve written extensively on here and here. And it’s not too bold to say that how HBO manages Game of Thrones and how Disney manages Star Wars will play a key role in either launching successful streaming services or failing (and losing billions).

Today, let’s look beyond how fans will feel about these announcements, to what we can learn from a business strategy perspective. Meanwhile, Marvel will keep coming up, because it’s the most well-run franchise in the game right now.

Business Issue 1: Pilots Are Great Investments

You’ve probably heard the old story that Seinfeld tested very poorly as a pilot. Development executives bring this up all the time when a pilot inevitably gets bad reviews. “Well, Seinfeld tested poorly too!” It ignores obvious counters that most pilots that test poorly ended up being poor TV series. Conversely, quality pilots are highly correlated with successful series. Take Game of Thrones. Sure, the initial pilot tested poorly, but the reshot pilot is one of the greatest in TV. The Breaking Bad pilot was similarly fantastic. 

This is why, I praised HBO for making a pilot for their “Age of Heroes” GoT prequel. You’re about to invest maybe a hundred million dollars in a TV series. Make a pilot and see if it’s good. Except then HBO went straight-to-series on their House of the Dragon prequel series. Sigh. Essentially, HBO Max made a good decision (make a pilot, it tested poorly, don’t go forward) and then made a bad decision (go straight to series). 

When it comes down to it, overall going straight-to-series is just another example of how prices are increasing for distributors without actually increasing the top line. It increases the upfront costs (full season commitments to talent) while decreasing the hit rate (no pilot data to kill duds early). HBO feels like it has no choice, though; since Netflix and Amazon are pushing everything straight-to-series, to stay competitive, everyone has to make everything straight-to-series.

Creative Issue 2: The Source of Game of Thrones Greatness

Still, there may be business logic for why HBO chose one pilot over the other here to go straight-to-series. Looking at what made Game of Thrones great, a lot of things contributed from the showrunners crafting a great story to Peter Dinklage just owning it. But if I had to pick the single biggest driver, it would be George R.R. Martin. Yes, Benioff & Weiss successfully managed a monster TV show, but at its core they wrote in an extremely fleshed out world of George R.R. Martin’s creation.

As a Game of Thrones fanatic, I’ve read everything GRRM has written on the series. Including a history book and the Targaryens Fire & Blood book (the one that is the basis for the straight-to-series order). If you asked me, what has a more fleshed out world, the Targaryen reign or the “Age of Heroes”, it’s the former by a landslide. (The Dunk & Egg books seem like a no brainer for a limited series as well.)

If that’s where you think the source of GoT’s success comes from, that makes the decision for which prequel series to order much easier. Go with the “Targaryens” every time. It has literally hundreds of pages of source material that will require much less from its showrunners than the “Age of Heroes”, which has about a dozen pages of material to draw from. 

Even in Disney’s own house, as the latest departure shows, they can’t  learn any of the lessons about leveraging your source material. Star Wars decided to toss out all it’s source material after the Lucasfilm acquisition. Specifically, the dozens of books in its “Legends” universe. (I’ve, uh, read all these too.) Instead, Kathleen Kennedy and team burned it all to the ground, and as a result had to come up with new stories from scratch. (Sometimes these stories had a vague connection to the Legends universe, but emphasis on vague.) Which makes the hit rate much lower than what Marvel is doing. It also requires A-List directors–or at least Kathleen Kennedy wants to work with A-List talent–which makes business point four below much harder.

Alternatively, Kevin Feige leaned into Marvel’s history. This source material is part of the reason Marvel has been so successful. It’s not like Kevin Feige is writing all these Marvel stories from scratch. He’s just adapting the best Marvel stories of all time, like Civil War or The Infinity Saga. 

Business and Creative Issue 3: Avoid Bad Villains

Multiple friends—all Game of Thrones fans; all unsatisfied with the finale season—complained to me about the prequel series being about the rise of the White Walkers. The logic goes, “They were dispatched so quickly and easily, I don’t want to see them in another series.” Yes, this is an unrepresentative sample size, but it speaks to very real creative issues.

If that sentiment showed up in the testing—and I believe HBO tested the latest pilot with focus groups—then that alone could explain why the prequel didn’t move forward. Doubly so if combined with the lack of source material on the “Age of Heroes”. 

There is a business lesson here too, one about coordination and intertwining storylines. If the ending of the White Walker story was more satisfying for viewers, then maybe my friends message saying, “Man, I can’t wait to see the beginning to that.” Instead, the abrupt/rushed downfall of the White Walkers in a dark episode of television fundamentally ended the ability to create another revenue stream for HBO/AT&T. 

Star Wars faces this too. The last trilogy create a brand new bad guy (Snoke), then [spoiler alert] killed him off, and is currently debating if the big bad guy–Kylo Ren–will become a good guy. Notably, in Avengers Thanos stayed bad the whole time. And now Star Wars may bring back Emperor Palpatine. In other words, after one of the best bad guys of all time–Darth Vader–Star Wars doesn’t know what to do.

Business Issue 4: Franchise Management is Hard. Really Hard.

The challenge for a network like HBO or a studio like Disney is managing not just the creative for one series, but thinking how the movements/plots in one TV series impact the larger business. Or one film impact the larger brand perception.

My current working theory is that Warner-Media doesn’t have as ingrained “franchise management” as a skill as someone like Disney. Disney has TV series and movies for Star Wars, Marvel, Disney animation and Pixar. Every character worth their salt has teams dedicated to manage that brand, building value over time. They really are experts at it and integrating it everywhere.

Compare that to GoT. Game of Thrones acts like an HBO property first and foremost. So HBO gets first crack at all the TV shows, but then nothing else happens. (Part of this is due to the fact that George R.R. Martin still owns the rights, but obviously AT&T should try to buy those.) We see the same thing with Harry Potter going the other way: lots of movies, no TV shows. (And slipping viewership.) DC probably has the most things being made, but with little connection between the movies and TV shows, just volume. (And a comic strategy of rebooting the whole thing every five or so years.)

This is likely the key issue with Lucasfilm too, in that top tier talent doesn’t want to sacrifice their creative vision for the larger universe’s needs. Which begs the question, “Why doesn’t Kennedy bring in creatives who will fulfill her vision?” That would mean not flashy names–like Benioff & Weiss–but directors who get the job done.

Really, only one person has figured out how to reliably do this right now.

The Reality: Marvel/Kevin Feige is the Best at Franchise Management Right Now

If you take all the lessons from Game of Thrones and Star Wars above, Marvel does each one well. Pilots? Feige does test shoots for controversial films to make sure they’ll work. (He did with Ant-Man, for example.) Source material? Yep, he picks the best stories and adapts them well. Good bad guys? Yep, Feige finds fresh bad guys each film. (Though arguably kills them off too quickly.) Coordination? Um, yeah we just saw that with Avengers: Endgame. (He found a set of directors who shared his vision, by the way, in the Russo brothers and gave them four huge films.)

Finally, he keeps the quality high. That’s a unique skill he has. (Unique as in one of maybe 5 folks in Hollywood.) Which is a credit to him. Marvel was barely anything when this century started. But by giving Kevin Feige the reins, his successful stewardship has created tons of value. And now he’s taking over TV whereas HBO/HBOMax is trying to figure it out and Lucasfilm fumbles for the next creative vision.

Other Contenders for Most Important Story – Apple TV+ Launched

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Unrolling the Map – The Video Value Web…Explained

(Welcome to my series on an “Intelligence Preparation of the “Streaming Wars” Battlefield”. Combining my experience as a former Army intelligence officer and streaming video strategy planner, I’m applying a military planning framework to the “streaming wars” to explain where entertainment is right now, and where I think it is going. Read the rest of the series through these links:

Part I: An Introduction
Part II: Defining the Area of Operations, Interest and Influence in the Streaming Wars)

As an Army officer, getting lost is sort of the death knell for your career. For the Band of Brothers junkies out there, I’ve always had the “hot take” that if Captain Sobel could have read a map he would have stayed in charge of Easy Company. 

Having had to pull out a map and lead a group of soldiers somewhere, I can testify it’s a nerve-racking experience. There was always this moment when I started planning a mission—from my time in ROTC with squads to training in Ranger School with platoons to being on the ground in Afghanistan—that I essentially had to “unroll my map” and figure out where we were going.

Every time, my stomach would start to churn as I looked to see if I could understand what a bunch of squiggles on paper meant in the real world. Inevitably, I could. We’d start and finish planning and head out. Honestly, my stomach is churning thinking about it.

Today we unroll the map for digital video. But where is the map? There are a few lay outs I’ve seen, like this one from the Wall Street Journal. 


Or this map from Recode, which is probably the most commonly linked to image I’ve seen in the streaming wars.

IMAGE 2 - Recode Map

Unfortunately, each has flaws. In both cases, neither links how the various companies relate to each other, merely the sheer size in one case, or the type of business in the other. The challenge is that while you can see the various areas, the concept of the “value chain” is totally missing. Who is producing content versus who is distributing it? Yes, ad-supported is different than subscription, but don’t they fill the same customer need? I’d argue they do. (Also, while the Recode map looks really cool, you know I sort of loathe “market capitalization” as a measure of size.)

So I made my own lay-out. This has been an idea I’ve been tweaking for over a year. Essentially, I’m not just reading a map, but drawing my own of the entertainment landscape. Which is even more nerve racking then just reading the map.

Today, I’m going to explain the two business school frameworks that inspired my map of the entertainment landscape. Next, I’ll talk about the “jobs” completed by various steps in the process. Then, I’ll show the “Digital Video Value Web”, with some explanations about the key pieces. Finally, I’ll highlight the most important terrain of the streaming wars.

A Quick Reminder on Value Chains, Porter’s Five Forces and the “Value Web”

The value web is the name I picked for a mashing together of two well established frameworks for business. The first is this little guy, “the value chain”, who I explained back in May:

True Full Value Chain(I use potato chips to explain concepts.)

Reread that article for a fuller description, but a value chain is essentially every step of a business process that results in a good. So suppliers provide the raw materials to factories that turn it into goods, which go to distributors to send to stores, who sell it to customers. The “value” component is really asking creates or captures the most value along the way. 

The limitation to “value chain” analysis is revealed by the WSJ image. I could make a value chain for ad-supported video on demand, for streaming TV hardware, for sports, subscription video and traditional cable bundles. All those value chains would start to get confusing. But to understand the landscape, we need to understand those connections between the value chains.

We have another tool for that, fortunately. In the past, I’ve also explained “Porter’s Five Forces”. (It’s one of my most popular articles, actually.) Read that article here. Here’s a visual of that…

Screen Shot 2019-04-10 at 3.11.46 PM

Porter’s Five Forces is a good organizing tool to lay out the potential threats and opportunities for a specific business. Its limitation is its focus: it only looks at one specific company in one part of the value chain. For example, if I used it for “cable companies”, it would leave out the studios distributing the content, merely the channels providing them content. That’s like a map that is zoomed in to one hillside when we need to look at the whole mountain range.

My insight was simply to realize that the value chain is going across the middle of a Porter’s Five Forces diagram. If I combined them on one table, I could make essentially an overarching view of any rough industry. My name for this is a “value web” because I couldn’t find anyone else making a similar layout and I elevate value above all other business concepts. Here’s my version from my Porter’s Five Forces article.

Screen Shot 2019-04-10 at 3.12.03 PM

Now we can make one for digital video.

The “Jobs” Done at Each Step of Digital Video

The first step was to pull out my value chain for streaming video. I’d previously made that here:TV Value ChainThe challenge was that I left out a fairly big component of the video value chain when I focused on distributors. Really, after a distributor sells their film to a cable channel, they don’t care how customers get that cable channel. But someone is “providing” that feed of cable channels. For the streaming wars that matters.

To borrow a phrase from Clayton Christensen, essentially the cable companies do the “job” of providing access to bundles of entertainment. I like putting “ing” after a step of the process because it gets at the type of work being performed. Applying this to my value chain you get:

Talent (acting, writing, directing, so on)

The challenge is that “TBD”. What is it that a cable channel is doing? Or a movie theater? Or a streaming video service? I’d argue they’re all providing the same job, which is creating a library of content to watch, even if they use different monetization methods for those libraries. Frankly, the best word to describe that is “aggregating”. (And yes, we’ll get to Ben Thompson’s Aggregation Theory later in this series.)

That explains part of the “TBD”, but not really the whole thing. Because cable companies then aggregate the “aggregators” or channels. So what do we call them? They are definitely NOT in the same step of the value chain. A a group of cable channels is a separate business from the channels themselves. In reality, they’re providing access to a “bundle” of content which they charge for one price. I call that bundling.

(To quote a second business thinker—cited by Mike Raab recently—James Barksdale has said all business is either bundling or unbundling.)

With that, we have our six jobs being performed (with customers waiting at the end). 

The Video Value Web

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Defining the Battlefield – Areas of Operation, Interest and Influence in The Streaming Wars

(Welcome to my series on an “Intelligence Preparation of the “Streaming Wars” Battlefield”. Combining my experience as a former Army intelligence officer and streaming video strategy planner, I’m applying a military planning framework to the “streaming wars” to explain where entertainment is right now, and where I think it is going. Read the rest of the series through these links:

Part I: An Introduction)

Certain parts of the US Army’s IPB process have such a good correlation to business planning it makes me wish I had connected these two ideas—intelligence preparation of the battlefield and business strategy—earlier. (As a professor described me once before, I’m a sucker for frameworks and planning processes.)

Take this map from a Wikipedia page, based on the US Army’s IPB manual (available free/open source online, I was taught off an older version):

Image 1 Battlespace Lay Out

It’s a subtly simple concept: the area you are assigned (your area of operations) is part of larger area you can directly “influence”, but you still need to be aware of the even larger environment, the “area of interest”. 

Today, I’m going to define the entertainment battlefield within those three terms. I have four rough categories: entertainment business, related industries, geography and regulatory environment. But first, let’s define these terms to make sure we’re all on the same page. 

Defining “Area of Operations”, “Area of Influence” and “Area of Interest” in war and business

Let’s start with an example to illustrate this. Say you have an Army Brigade deployed to Afghanistan. (About 5,000 troops.) If they are assigned “Kunar Province”, that’s their area of operations (AO). The definition of this in the manual is (paraphrased) “the territory your boss gives you”. In practice, this means the place with all your troops that you defend, protect or attack into. 

Of course, while your area of operations is “Kunar Province”, that brigade commander could influence a larger territory. This could mean being able to deploy their troops or fire artillery into the surrounding area. In Afghanistan, this would likely mean the provinces around Kunar, like Nuristan, Nangahar or Kabul. (Here’s a map of Afghanistan for reference. Kunar is the upper right.)

IMAGE 2 Map Afghanistan

Of course, the commander can’t influence Pakistan directly, because it’s off-limits, but Pakistan can influence Kunar Province. (Specifically, by acting as a logistics base for insurgents.) Making it an “area of interest” the commander needs to monitor.

It’s a great framework because it reminds you to broaden your thinking to solve your problems. If you only focus on your area of operations, you miss new trends and forces from outside your day-to-day focus. On the other extreme, though you can monitor what is going on in your “area of interest”, you can’t influence it without losing focus. As well, the most important events that could impact your mission will happen in your area of operations. And if your area of operations is bigger than your area of influence, you’re likely spread too thin.

Do these lessons apply to business strategy? Absolutely. 

Let’s use my default explanation of potato chips. The brand manager for Kettle Chips has “chips” as their area of operations. That’s their AO; they focus on managing and impacting potato chip sales. But they can “influence” the entire snack market. They’re fighting for shelf space against pretzels, nuts, healthy snacks and candy. Of course, the rest of the retail industry is an “area of interest”. 

Most business leaders probably don’t think in these terms, but doing the thought exercise may reveal some insights into either blind spots or areas you’re spread too thin.

Defining Our Area of Operations: Digital Video

Since we don’t have a “battlefield commander”, our “area of operations” is up to me to define. As I said last article, I’m focused on digital video. This is the heart of the “streaming wars”. But I’ll include anything “digital” in this from streaming (SVOD) to ad-supported (AVOD) to virtual MVPDs to FASTs (free-ad-supported streaming). These “areas of operation” mean those things the digital players can directly control, including the apps they roll out, how they distribute those, the prices they charge, but most importantly, the content they put on those platforms.

Geography: The United States

I don’t have enough bandwidth to cover the entire world in this series. Though Netflix and Amazon have notably turned the streaming wars into a world war, with global launches in a hundred plus countries, the start of the streaming wars will be US-centric. The United States produces the most content and if its streaming companies cough, the whole digital ecosystem will catch a cold. 

Other Industries: Communications

In this case, “communications”—my catch all for cellular, telecoms, cable and satellite connections to transmit data—is the key industry included in our area of operations. If you can’t distribute your content over the pipes, you can’t compete. So we’ll check in on the big players in communications like AT&T, Comcast, Charter, Dish, Verizon and Sprint/T-Mobile.

Regulation: The FCC (and Other Antitrust Regulators in the US)

Since our geography is the United States, the roles of the FCC, FTC and antitrust regulators could have a key impact on our area of operations. In the last twenty years, the trend has been toward lax regulatory footprint. Whether that continues is a key question for entertainment companies, and it’s coming right as the streaming wars kicks off. (Meaning November 2020 could be important.)

Defining Our Area of Influence: Video

The story of the streaming wars is really a story of the evolution of “video”. There are the traditional distribution methods (theaters, home entertainment, broadcast, etc) that are being disrupted by digital methods. What that means for us is that the giant conglomerates battling in the streaming wars can heavily influence these others parts of the value chain, even if that’s not the ground being fought for. 

We’ve already seen the influence of digital video in one of the most important areas of Hollywood production: the price of content. Essentially, everyone is paying more for scripted TV series, with a parade of articles on how much more these cost every studio. Netflix—a digital only provider—started this push by its winning bid for House of Cards, but Amazon, Disney+ and now HBO Max are al competing to raise these prices even further.

When I roll out my “map” of our area of operations, I’m going to include all of the video ecosystem since it can so easily be influenced and influence the digital video space. 

Geography: High Income or Growth Countries

Just because I’m focusing on the United States doesn’t mean I won’t acknowledge the rest of the globe. Indeed, one of the descriptions of this battlefield is how certain firms paying for global rights—whether accurately valued or not—is impacting those content prices I just mentioned.

When it comes to what can really influence and be influenced, high income or high growth countries such as the European Union, Latin America, India and parts of Asia fall under this analogy. While lots of potential customers may live outside those limited territories, the bulk of near term streaming revenue will come from there.

Other Industries: Technology

Arguably, the tech firms are already inside the area of operations, but for this category I’m specifically referring to the new innovations in technology that can change the next generation of streaming. Digital video is already our battleground, but what comes next? Virtual reality? Artificial Intelligence? And how can the entertainment companies influence that in turn?

Regulation: The EU Antitrust Authorities

The European Union’s antitrust authority is the biggest influencer here. Already Google and Amazon are heavily trying to influence how they are regulated in Europe, to more or less success. Again, only some of these will impact our United States area of operations, but we need to monitor it.

Defining Our Areas of Interest: Other Entertainment Options

As Reed Hastings pointed out:

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Introducing An Intelligence Preparation of the “Streaming Wars” Battlefield

As the streaming wars kick off this month, one question is dominating every conversation online, whether implicitly or explicitly:

Who will win?

As if this were a professional sports league. And only one studio gets the championship each year. Or even more extreme, like it is a war to be won. To steal a quote from Game of Thrones, “When you play the streaming wars, you win or you die.

Listen, it won’t be that extreme, Mike Raab explained on Medium last week. Or as Alan Wolk has said, no one will “kill” Netflix anytime soon.

But if you’re an executive, there are plenty of questions about the streaming wars you still need answered:

– What is the landscape of digital video, and how is your company positioned?
– Who are the strongest competitors in digital video?
– What are the biggest economic, technological and regulatory forces facing streaming?

If you can answer those questions, you can then answer the most important question for your company, business unit or team:

– What should we do to “win” the streaming wars?

Frankly, what I described above is how an intelligence officer in the United States Army would approach the battlefield in a war. Before a military commander can decide what to do, she needs to know what she is facing. That makes this analogy between real wars and the streaming wars fairly apt. The biggest change is we’ll change “win” to “create or capture value”.

So if we want to explain the streaming wars, we need someone versed in both intelligence planning for the military and the economics of streaming.

Fortunately, I’ve worn both intelligence officer and entertainment strategic planner hats in my life…

Introducing: The Entertainment Strategy Guy’s “Intelligence Preparation of the Battlefield” for the Streaming Wars

As the streaming wars kick off in earnest, it seems like the perfect time to reflect more broadly on the streaming war, going a bit beyond my weekly columns and analysis. There have been some great layouts of the industry the last few months, but none that captured everything I’ve been seeing (with my own unique nee skeptical) take on the industry. 

So that’s my job for November. A lay out of the streaming video landscape. An explanation of the business of streaming. An intelligence briefing for the streaming wars. Since I used to make those for the US Army—a story for another time—that’s the framework I’ll use to organize my thinking.

In today’s article, I’ll explain what the IPB process is, and how I need to translate it to the streaming wars. Then, I’ll explain what I will and won’t cover in my first version of this.

What is an “intelligence preparation of the battlefield”?

In truly US Army fashion, an acronym fills in where regular words will do. So Intelligence Preparation of the Battlefield becomes IPB.

An IPB is both a process completed by a staff (the IPB planning process) and the product(s) that results, usually a powerpoint presentation, but sometimes a document or brief. It also usually results in maps and graphics. It can also include a plan to collect further intelligence.

The strength of an IPB is the clear process. For a bit now, I’ve been collecting thoughts on specific companies and larger issues in the streaming wars, but I didn’t have an organizing framework. The IPB process provides that. It’s a great tool because it’s flexible enough to be used by intelligence officers from small battalions to gigantic corps managing entire theaters of war, in situations involving a pitched battle with tanks in the desert to combating insurgencies in the jungles. 

Or in our case, the streaming wars.

Which battlefield in the streaming wars?

Crucially, I need to pick which battlefield I’m analyzing. The streaming wars will be a global war, but I’m going to start by focusing on the United States. Frankly, each country probably deserves its own analysis because of its own unique situation. But we have to start somewhere and I think covering the entire globe will be too tough for one month. 

Moreover, even in the United States, I’ll be focusing on digital video. Meaning streamers, bundlers, aggregators and virtual MVPDs. But digitally distributed. Broadcast, cable, theaters and home entertainment are all interesting, but for a future analysis.

With that, let’s explain this tool. (By the by, if you want to download a copy yourself. The U.S. Army hosts them online.)

Intelligence Preparation of the Battlefield…Explained

An IPB consists of four parts:

– Define the Battlefield (in jargon terms, “operational environment”)
– Describe the Battlefield
– Evaluate the Threat (formerly “enemy”)
– Determine Threat Courses of Action

Let’s define a few terms to unpack that simple four step process. In previous iterations, the operational environment was called the “battlefield”, but that wasn’t an acronym so the Army had to change it. We’re going to stick with “battlefield” since it is so much clearer of a phrase to use and “IPOE” just doesn’t sound right.

The battlefield is where your unit is conducting its operations. In a lot of was this is the military analogue to properly defining the problem. If you don’t know where you can and can’t operate, you can’t properly plan. It’s also particularly important in the military context because knowing where fellow military units are prevents friendly fire. (It’s a simple leap to make an analogy to a giant conglomerate with competing business units here.)

Once you know the battlefield, you then describe it. For the Army, this usually means three areas: terrain, weather and civilian considerations. Weather is just weather. But the terrain is what most Cold War military veterans were raised on, and it was summarized by the acronym OACOK: Obstacles, Avenues of Approach, Cover and Concealment, Observation, and Key Terrain. After the post 9/11 wars, when counter-insurgency became a thing again, the civilian part of the OE was described with ASCOPE or Area, Structures, Capabilities, Organizations, People, and Events. We’ll use different tools to describe the streaming war’s battlefield.

Next comes the threat. In the olden times, the Army called this the enemy. But then insurgencies were filled with political and non-violent actors, so this became “the threat”. During the evaluation part of IPB, you basically ask, “How dangerous are they? How many of them are there? What weapons do they have? What can they do?” When the Russians were the main bad guy, this meant a lot of maps with graphics describing effective firing ranges for artillery and machine guns and what not. For insurgencies, it meant capturing a lot more data about the relationships of society. The best word to capture this is “capabilities”.

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Most Important Story of the Week – 1 November 19: My 6 Strategy Thoughts on AT&T’s HBO Max Rollout

Whoever writes the book on the (hashtag) streaming wars may call this week the seven days that truly started the fighting. Sort of like how Germany and Japan were doing bellicose things like building navies and mobilizing armies before World War II truly kick off in earnest. Disney started the week with a marketing blitz (a strategic bombing campaign?), Apple TV+ ended it by launching their service (a maritime invasion?), but in the middle came AT&T with their plan for the streaming wars (a mission brief?). 

Which by popular acclaim will take the spot as…

The Most Important Story of the Week – AT&T Unveils HBO Max

Before this week, we could only speculate on what HBO Max could or would be. Now we have a plan with the tactics to back it up so we can start to judge. My goal is to try to probe for insights we may have missed, but mostly, to talk about the strategy. Because finally we can.

A caveat. A giant one: this article will not contain all the thoughts needed to evaluate AT&T’s strategy. Consider this the appetizer for future strategy entrees in longer articles.

Strategic Thought 1: Offering AT&T Live TV with HBO Max is the Biggest Strength

Yep, content and product and marketing and even gratis distribution to current HBO subscribers are all important strategic factors here. But in my mind all of those are superseded by this chart introduced by John Stankey:

IMAGE 1 - Three Tiers

Frankly, most customers will want live TV of some sort in their lives. From sports to news to local channels, it’s just something folks want, and why, as Alan Wolk has banged the drum on, cord shaving or shifting is more common than cord cutting. By putting AT&T TV into their presentation, clearly AT&T sees a similar upside that I wrote about for Disney/Hulu here. It’s more profitable to be a distributor then just a streamer/channel.

Which isn’t without risks. The first risk? Playstation shutting down Vue shows the money burning proposal that MVPDs currently are. The second risk? Even AT&T is losing cable and faux-cable subscribers, as it announced on Tuesday. The third risk? See customer confusion down below. The fourth risk? Jamming in advertising, which will only muddy their offerings further.

It also dangles the biggest question mark which is does AT&T TV stay “vMVPD” or become “OTT distributor” too? Amazon, Roku and Apple are the latter with their dueling channels businesses, but Hulu Live TV, Youtube TV and AT&T TV are the former. The upside for AT&T is that once you have a streaming platform and a billing business, adding OTT add-ons from a technical perspective is relatively minor. But it could be lucrative.

Strategic Thought 2: Jargon May have Replaced Strategy

If thought 1 is the best case, this thought is the worst case. Let’s pair a key quote with the slide for it:

“We’ve created a vertically integrated company that will allow us to benefit from a virtuous cycle of development and growth. When you take our beloved, high-quality premium content and add innovative features to provide a superior user experience, it promotes subscriber engagement.”

That is a lot of buzz words packed into one sentence, and they laid it over a virtuous cycle/flywheel!

IMAGE 2 Flywheel

If you unpack Stankey’s words he’s saying: offering good content and a good product will increase our subscribers. Groundbreaking stuff here. But does he say how they will take an edge to get there? Crickets.

Instead, as the presentation eventually made clear, AT&T’s real strategy is about taking the past and just applying it to the future. AT&T is pretty much making the bet that “we have cash flow from cellular subscriptions to fund a streamer at a loss” and “Warner Bros/HBO have huge libraries” to be its content backbone. That’s their actual plan, not the virtuous flywheel above.

Having a jargon filled presentation doesn’t mean you strategy is bad, but I’d say it is highly correlated.

(And with this section, cross AT&T off the places I’ll ever get a job at.)

Strategic Thought 3. Targeting…Everyone?

To continue the negativity, if you had a clear strategy, you’d target a specific group of customers. Who is AT&T going to target? People. All of them. Which was probably the most-shared slide on Twitter. Specifically, how HBO Max targets all four quadrants:

IMAGE 3 Targeting Everyone

I’m not ready to condemn this though. Netflix, Amazon, Hulu, Apple TV+ and AT&T all see an upside in targeting “everyone”. (Netflix takes it a step further and is trying to target everyone in every country simultaneously.) Indeed, broadcast TV started by being “broad”, didn’t it? That’s the same plan for the streaming wars, we’re just replacing ABC, CBS, NBC, PBS and Fox with Netflix, Prime Video, Hulu, HBO Max, Peacock and CBS All-Access. Everything else will be targeted, like our current cable channels.

In other words, we could rename the streaming wars, “The battle to be the new broadcasters.”

Disney+ benefits from this approach by their competitors, though. They alone among the streamers have said, “Our family channel is our family channel” and can then focus on Hulu not paying extra for kids content. Netflix, Amazon and HBO Max clearly can’t support a kids-only channel so they’ll be competing for families against that juggernaut as an add on to their broad option. (My quick take on the SWfK, streaming wars for kids, here.)

Strategic Thought 4. Let’s Talk the Biggest Upside: Content

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Most Important Story of the Week – 25 October 19: The Streaming Revolution Will be Metricized

I hope any of my readers impacted by the ongoing wildfires in California are okay. This is a problem as a community California/America/the globe needs to address, but that’s not the subject of this column.

The Most Important Story of the Week – The Streaming Revolution Will Be Metricized

The news story is that Nielsen added Amazon viewing to its data collection on streaming. Last December,  I wrote that “measurement” and Nielsen aren’t sexy topics for news outlets, unless they involve popular movies or TV series. Indeed, I hadn’t written about them since. For executives, though, this is a classic “most important story you may have missed”; data will be the currency of the streaming wars just as it was for the broadcast wars; good data will enable you to make better decisions. 

So let’s understand it with a few thoughts. (Full disclosure I trial ballooned some of these thoughts on Twitter here.) 

Thought 1: The limits of Nielsen’s streaming data.

Nielsen only collects “Living Room TV” viewership in the United States. Alternatively, when Netflix releases their household viewership numbers, that’s every device globally. That’s a pretty clear difference we need to account for if we want to make numbers “apples-to-apples”. 

The other measurement services have similar limitations. Some only cover desktop viewership, like Jumpshot, whose article on viewership I linked to last weekend. This, though, isn’t as big of a problem as it seems. If you know how to weigh the size of a distribution platform, given the behavior of customers is mostly the same across devices, knowing just one part of the ecosystem can allow for pretty accurate estimates across services. Device usage doesn’t tend to skew demographically too much in any direction, meaning it’s fairly representative. 

Thought 2: Speaking of…there are more and more companies in this space.

Last year, writing quickly on this, I referenced a few companies like Nielsen, Hub Research and TV Time trying to crack the streaming ratings game. Now we can add Parrot Analytics, JumpShot, and 7Park to this group. Some companies like Second Measure have tangentially related data (sign up rates).

Why so many? Well, unlike Nielsen in the golden age of TV, who had to send surveys out to folks in every market who had to hand write down their TV viewing, nowadays, every way you watch TV can be captured in digital data. It requires some partnerships and permissions, but once it is set up you can draw lots of data insights as long as you have a representative sample, which is really these companies secret sauce.

I’ll add, the hope is that if these companies go global, we may have more, better data than ever before. As I’ve hit on a bunch recently, when it comes to second windows of theatrical movies, we really don’t know what their global viewership looks like. So 25 million may be a good number for Netflix, but how does it compare to Jurassic World? Or Avengers: Endgame? Until we have comparisons, we don’t really know.

Thought 3: Hey, this isn’t too inaccurate. 

To show this, let’s look at the latest datecdote from our friends and Netflix and Nielsen. Nielsen said 6.5 million folks watched El Camino (the Breaking Bad spinoff film). Meanwhile, Netflix said 25.7 million watched. Knowing that Nielsen only measures US, and making the conservative assumption that 50% of that viewing was on living room TVs…then the measurements line up! (Scroll down to data to see where the 50% comes from.) Again, the data isn’t perfectly correlated, but we shouldn’t expect it to be, especially if we have to estimate the US versus international split. 

Thought 4: Really, the difference here isn’t measurement, but publicizing the rating.

For a bit, I’ve wondered why NBC and other broadcasters let Nielsen publish their viewership. Imagine that: you wake up one Monday morning and every trade is prohibited from releasing any viewership numbers. Imagine if NBC insisted that Nielsen couldn’t distribute its ratings to its competitors either!

How would we know what is what?

Essentially, in a bid to increase their streaming subscriptions, Nielsen and other competitors are aping Netflix’s strategy of just releasing PR-friendly data points like on El Camino or The Boys, then asking for big companies to sign up to see the rest. Which is mostly fine since I assume most streamers have access to the data and as I just said, directionally it’s pretty accurate.

The bummer is more for the general public and folks like me who don’t have access to the data. Moreover, the more data stays hidden for the streamers, versus the publicly available data for the broadcasters, the worse it looks for them, even as we don’t quite know the true story.

The Future?

Here’s what I wrote last December, about Nielsen and the (hashtag) streaming wars:

It’s tempting to make exaggerated predictions going either way on this: 

Exaggeration 1: Nielsen will die and we will have no measurements!
Exaggeration 2: Netflix and Amazon watch out, someone will figure out all your measurements!…

The future is likely somewhere in between…So we will have the visibility into some of the viewership metrics that Netflix and Amazon fear….And we also will have less clarity because the era of a dominant researcher providing universally accepted metrics–Nielsen–will end, which means firms can cherry pick from the different measurement services even more in the future.

I think that’s too negative in hindsight. In other words, I’m much closer to believing exaggeration #2 will come true than I was last year. For two reasons. First, it’s so easy to get into this space that likely as consolidation occurs at some point, Nielsen or someone will start providing comprehensive ratings on a regular basis. Second, eventually someone will begin publishing lots more data on a regular basis in the trades in a race to win the publicity battle.

Other Contenders for Most Important Story

Hulu Live TV Crashes During MLB Playoffs and NBA Tip-Off

Clearly, I love basketball and went all in on the return of the Lakers. I went to my brother’s house–we share the love of purple-and-gold–to watch using his Hulu Live TV. So guess what? Halfway through the game, the game started freezing and crashing.

This was a bad user experience!

Two points about this. First, when it comes to “user experience”–a topic I think we as a community still don’t quite get, based maybe a pinch too much on my personal experience at a streamer–I think “failure” is probably the most important criteria to judge UX. If a video fails to load, that’s a failure. If a live stream stops live streaming, that’s a failure. If a program on the iPad crashes, that’s a failure. 

While we love to talk about algorithms, search bars and design, really the “failures” will determine streaming video success or failure. (So Disney+, watch out for this! Apple TV+ too!).

Second, right when you think sports is dead, you remember, oh yeah, folks love, love, love their sports. If Hulu Live TV was crashing for a rerun of House Hunters, no story. But for big events–this previously happened with the Democratic National Debate–then outrage. Just another data point that shows the power of live events like sports for TV. 

TCM Moves Off Basic Package for Comcast

On the surface, Comcast moving TCM to a higher tier sports package will NOT move tons of needles. But it speaks to a few themes I’ve seen again and again as the streaming wars heat up:

– First, conglomerate-launching-streamer on conglomerate-launching-streamer crimes. Comcast, who is launching Peacock, tells AT&T, who is launching HBO Max, they won’t keep paying for TCM, banking that not enough customers will complain. They may be right, but this won’t be the last tit-for-tat in the war between distributors to keep costs down.

– Second, the ever shifting value of “classic movies”. As Andrew Rosen is fond of pointing out, The Criterion Collection wasn’t enough to prop up FilmStruck, which AT&T shut down last year. Yet, classic movies and collections like Criterion continue to shift from streamer-to-streamer as the perceived value stays high, but the costs seem too much. I have a feeling that for all the hopes for classic films, outside of a handful of truly valuable films, most older films don’t generate the ROI to keep these pricey deals going.

– Third, yet, there may be some value that may not show up in usage metrics. There is that old anecdote that Netflix saw that folks kept “classic” DVDs in their queue like Citizen Kane, even if they never actually rented them. They just planned to watch at some point because classic movies are the “broccoli” of videos. This, my friends, is a tough data problem: how to value films folks don’t even interact with. (Meaning the presence of a film or TV series may be valuable to customers, even if they aren’t currently interacting with it.)

Disney and Verizon Deal

Disney signed a deal with Verizon, where Verizon will offer 12 months free Disney+ to its cellular subscribers. As I wrote last August, nothing shows the power of oligopolist subscriptions better than these free video giveaways. In layman’s terms, Verizon, Sprint, AT&T and T-Mobile make so much off your cellular bill each month that these giveaways barely show up in the bottom line. 

To watch for, though, is the exclusivity piece going forward. AT&T will focus on HBO Max, because they own them. T-Mobile offers “Netflix on Us” (plus my update below) and Sprint sells Amazon subscriptions and offers Hulu for free. So Peacock likely won’t have a cellular partnership option, unless all the cellular companies offer multiple free giveaways or make it the subscriber’s choice, which I doubt. (Apple TV+ is also essentially the give away for its own devices, but likely won’t make any of the cellular deals either lest it offend the other carriers.) Honestly, I’d love to see/write a rigorous rundown on this topic.

Data of the Week – Living Room TV is Biggest Device for Streaming

By the way, my “data of the week” doesn’t have to be current! I missed this article from Recode at the time, but apparently at one of their journalist soirees, Netflix revealed some usage data. Specifically, how people watch, and it’s overwhelmingly living room TV. Even Youtube has more and more viewing on living room TVs. Which, if you’re about to launch a mobile-only subscription video service would be a pinch worrying. 

M&A Updates – Banijay May Acquire Endemol

Here comes the M&A tidal wave. Two indie–as in non-Hollywood, specifically European–production companies could merge. This could be a $2.2 billion dollar deal, but most of that would be Banijay acquiring Endemol’s debt. (The article does a good job laying out the facts.) This is the type of “content arms dealer” that would benefit the most from leaning into the streaming wars–they don’t own distribution currently–though it also shows the limitations from a profit perspective of that approach: if you don’t make hits, you aren’t as valuable. (Also, somehow Disney owns part of Endemol, because of course they do.)

Entertainment Strategy Guy Update – Quibi, Quibi, Quibi

Two news stories on Quibi, which launches next April. First, Quibi sold out its advertising inventory of $150 million. This is a great example of why you should have “priors” before you judge news like this. Is $150 million a good number? I don’t know. $500 million would be better, $50 million would be worse. Meanwhile, if Quibi doesn’t have subscribers, none of the advertising commitments matter because they’ll have to be returned. 

Also, Quibi has T-Mobile as a launch partner. Which again is fine. Probably not as good as Verizon, but they went with Disney+.

Lots of News with No News

Netflix and Password Sharing

If you read the actual transcript, Netflix had nothing new to announce on password sharing. This has been a misreported story. Netflix is not cracking down on password sharing.

Netflix Issues More Debt

On one hand, we obsess about Netflix. On the other, with their cash flow, this was totally expected and seemed to go off without a hitch.

All the conferences (Vanity Fair New Establishment; WSJ Tech Live)

I didn’t get invited to any fancy conferences, mostly because as an independent, anonymous writer I choose not to pay for them. Still, the amount of actual news seemed fairly sparse from the two dueling (Wall Street Journal vs Vanity Fair) conferences.

Management Advice – Try a Five Hour Work Day

Scroll down to the end of Matt Levine’s latest column or read the full thing at the Wall Street Journal for some terrific anecdotes about a unique German workplace. Essentially, the average human has about 5 great hours of work in them, and if they focus on those they’re more productive. Which aligns with the theories about Deep Work from Cal Newport. So a German compnay only has employees come in for 5 hours, and you can’t get distracted during those five hours. I love it.

Again, ask yourself: Is your work productive (adding value) or work?

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