Tag: HBO Max

Is Streaming Winner Take All? My Question of the Year for 2021

Well, give 2021 credit for trying to catch up with 2020 in terms of monumental new stories. This is absolutely one of the craziest weeks in my lifetime and I assume many of the folks who read. (Though, for historical hindsight, we tend to forget how absolutely chaotic the 1960s were, which featured the assassinations of at least 3 major political leaders. This isn’t to downplay the events of this week, but to emphasize that US democracy is always a fragile creature.)

The holidays tend to be slow for entertainment news, so we can take our time catching up on it. The biggest story–how did the big straight-to-streaming films perform?–I’ll handled over at Decider. In the meantime, let’s get reflective on the year that will be.

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Most Important Question of the Year – Is Streaming a Winner-Take-All Market?

In my first column last year, I said that 2020 would be defined by this question:

“What is the same and what is different between streaming and traditional distribution?”

Little did I know that we’d have a lot of things that were extremely different in 2020, namely a global pandemic that threatened to upend streaming and traditional media. (The biggest hypothesis is still that Covid-19 “changed everything”. I don’t really buy that; flashy world-altering headlines get the clicks but I’m a little skeptical about how much actually changed. We’ll see.)

My 2020 question and the lack of an answer shows a lot of the problem with articles predicting the future. It turns out that’s really hard! That’s why I like the approach of not predicting the future, but figuring out the most important question for the given year. And I have the question that I think 2021 will potentially answer. And if it does answer it, the consequences for entertainment are huge:

Is Streaming Video a “Winner-Take-All” Market?

Specifically, will one firm take a commanding lead? Will they capture a huge portion of the marketplace? Something like 70-90% of the value of the market? Contrariwise, do the streamers split the market—defined by subscribers, revenue, viewership, you name it—roughly evenly? Or does it land somewhere in-between? Say a few big winners with a lot of smaller players fighting for scraps?

Take the United States, which is probably the most mature market. As it stands, we’re in between the extremes of market consolidation. There is one clear dominant streamer, but it has by no means a monopoly on viewing. Specifically, Netflix has roughly 30-35% of the viewership depending who is measuring and when:

Comscore via Hedgeye by Type copy

This year, that number grew a pinch. Long term, that share of streaming viewership is declining. This massive viewership translates into the largest streamer by total subscribers:

chart-us-paid-streaming-subscribers

That said, Netflix got to develop such a dominant position because until 2019, Netflix only had two real rivals, Hulu and Prime Video (CBS All-Access is older than you think, but until recently has felt like a side project for CBS.) Now Disney, HBO and NBC are all-in on streaming. And ViacomCBS is half-in on streaming.

Can those firms catch up to Netflix? Or does Netflix keep growing and outpace its rivals? Can Disney+ catch up with Netflix in total US subscribers? Or Peacock and HBO Max? 

I think 2021 is the year we find out. Not all the services will catch up to Netflix in one year, but we’ll at least find out if this is going to be competitive or not. And that’s huge.

The Ramifications of this Question

To start, Netflix is the biggest beneficiary of the assumption that there will be one winner in streaming. The thesis is that “Netflix will become TV”. Not just a channel, but the whole shebang. That’s a winner-take-all economy. That’s network effects. That’s what has driven the huge valuations of the rest of the FAANGs (Facebook, Apple, Amazon and Google).

If Netflix can’t dominate streaming, then the better analogy is that Netflix is a new “bundle of channels”, much like what Disney, NBC-Universal and Viacom-CBS already were in cable. What has changed is the distribution. If that’s the case, woe to Netflix’s stock price.

This also matters for all the other streamers. They want to be a piece of the streaming pie. If Netflix owns the whole pie outright, then the investments of Amazon, AT&T, Disney and Comcast will utterly fail.

Further, this impacts the device and operating systems of the world, Roku, Amazon, Microsoft, Apple and Sony (the RAMAS if you will). If Netflix is the once and future king, it will have the leverage to negotiate those devices into oblivion. If they aren’t, then all the streamers may lose to the RAMAS’ value capture. (Their fees to sell subscriptions will capture most of the profit margin from the streamers.) 

My Take? Streaming Won’t Consolidate

If you’ve read my website for any amount of time, you can guess how I think this question will be answered. (So fine, I am making a prediction!) While content often performs with “logarithmic distribution of returns”, channels don’t have quite the same variability. (Or the winners can shift over time fairly easily. NBC won the 1990s, CBS won the 2000s; HBO won the 2000s, but Showtime almost caught them until Game of Thrones.) Frankly, this is where I see streaming headed: consumers will have multiple streaming services simultaneously, meaning there will be leaders, but not dominant winners.

Notably, part of this thesis stems from a skepticism on the presence of “network effects” for streaming video. (And the dreaded “flywheel” for Netflix.) For user-generated content, network effects were very, very real. The more users posting videos on one platform, the more viewers used the platform, so the more creators who posted videos on that platform. Hence, Youtube has demand-side increased returns, and it’s winner-take-all. Same for Google in search, Facebook in social, and Amazon more web marketplaces. 

The biggest input for streaming video, though, isn’t user data—which allegedly is Netflix’s driver of their winner-take-all flywheel—but the quality of content. And since the difference between 30 million subscribers and 60 million in data terms doesn’t produce that much better content, network effects in streaming video likely won’t appear. So it won’t be a winner-take-all market.

At least that’s my theory!

I’m not certain and as an analyst I’m willing to be upfront with you, instead of pretending to a level of uncertainty most analysts can’t truly possess. (Is this a bit of shade throwing at some of my entertainment business peers? Sure. Welcome to 2021!) The rest of this year will help me/us figure out if we are/were right or wrong. 

Other Questions That Will Define 2021

Does the live/experiential economy feature a boom?

When a vaccine was announced, I speculated about the upcoming “year of bacchanalia”. Over the break, I was glad to see another pundit take this same stand in Andrew Sullivan. His/my thesis is that once the vaccine begins rolling out in force, we’ll see folks make up for the lost time of 2021 by partying. For entertainment, this means lots of potential revenue. Concerts will see booming attendance, same with music festivals, bars, parties, travel, theme parks. You name it, we celebrate it. Quoting myself:

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.

The challenge will be figuring out if this is happening. If we use full-year numbers, it will be hard to see, since no one knows when we’ll feel safe to party again. It could be by March (if deaths fall quicker than expected) or fall (when we achieve herd immunity). Or somewhere in between. I’ll be looking to use per capita numbers as much as possible to untangle this.

What happens to theaters?

They’ll suffer the same uncertainty as the live economy, with more pronounced scheduling problems. The key date for me is May 7th, when Black Widow premieres. If theaters can be at full capacity in America by then, the entire world looks better. The other question is how firm the theatrical release slate is and how much the studios are willing to spend on marketing. And then whether or not the theaters can make it to May. Lots of question marks.

What happens to the economy?

The entertainment industry isn’t quite as recession proof as folks have made it out before. If wallets are trimmed, some entertainment spending goes with it. Some cheaper forms of entertainment, though, can resist this trend (like theaters) and some limited capacity forms of entertainment can also focus on high-wealth individuals (like concerts, sporting events and some theme parks). 

Thus, in 2021, entertainment folks would rather have a booming economy than a stagnant one. Folks are now openly speculating about a “v-shaped” recovery again, but it remains to be seen if the damage of 2020 can be overcome that easily. (Lots of businesses closed that may never come back, and that damage can take years to overcome.) The solution is lots of stimulus, which it sounds like Biden is considering.

Other Contenders for Most Important Story

If I weren’t speculating about the future of this year, what could have been the story of the week? Glad you asked. 

Roku Acquires Quibi’s Library

Is this a good deal for Roku? Who knows. If I knew the price, I still couldn’t tell you because I don’t know how good these shows are. If the price was very, very low, then maybe. Really, though, this is still a content licensing deal since Quibi didn’t own most of the shows, but was either licensing them or co-producing them with top talent.

Apple TV+’s Bold January Release Schedule

I’m sure if Apple TV+ could have, they would have released a lot of season 2 TV series back in the fall, a year or so after they launched. Instead, a lot of shows got the “Covid-19 pause” and it looks like Apple TV+ is on track for a big January, with Dickinson, Servant, Losing Alice and Palmer releasing each week in January. Also–and this is big–Apple TV+ is moving some shows to a weekly release

The upside is this will keep folks engaged (hopefully) through Q1. So I love that. The downside is a few other big shows still have vague “2021” release dates, like The Morning Show and Foundation. Apple TV+ still has new service growing pains, clearly.

For those keeping track, Disney+,  Apple TV+ and Prime Video have all released some shows weekly. (HBO Max has flip flopped on this point.) At this point we have to ask, who really knows more about release schedules: the rest of the market or Netflix?

Discovery Plus Launched

And it’s here! Discovery+ launched this week, and the reviews are much stronger than I anticipated. Rick Ellis makes the case that Discovery+ will help a lot of folks cut the cord, what I would call the next gen of cord cutters. Dan Rayburn says it is intuitive to use and has a massive library. I’ll be curious when we see the numbers on this one.

I’d also add, the Food Network Kitchen experiment doesn’t seem to be going well, and I wonder how long that standalone service lasts.

Netflix Increases Prices in the UK

This brings the UK in line with US prices (roughly) so it wasn’t unexpected. (The price increase in the US was!) Still, it will be fascinating to see how these latest price hikes fare in the next year with much more competition.

CyberPunk 2077 Security Fraud Case

Read about this interesting case either at Sportico or Matt Levine’s newsletter. Essentially, some folks are suing the makers of CyberPunk 2077 for releasing a game that was so bad it had to be recalled. Of course, some entrepreneurial lawyers will always sue claiming “securities fraud” for almost anything. However, this could set a precedent for digital products that are released and fail to meet their billing.

M&A Updates

Amazon is acquiring another audio platform, podcaster Wondery, to boost its Amazon Music platform. As the article notes, Amazon also owns Audible, which competes with a separate subscription in narrative audio. When a company is so big it’s competing against itself, that’s probably too big, right?

As for the strategy, it’s fine. The biggest harbinger of doom is for Spotify, though. It would be much easier to corner the market on audio if Apple, Google and Amazon weren’t all fighting you for it. (We could also ask, is music streaming winner take all?)

Context Update 

When it comes to regulations, I have my eye on antitrust for 2021. (I should have put that in the other questions above!) I hadn’t really considered unionization, but this could absolutely become an issue for the big tech firms. Like antitrust, this is a regulatory issue where a motivated Biden Presidency could make lots of changes without Congress passing new laws. So keep an eye on Amazon to see if unionization pushes come to them.

How the Antitrust Case Against Facebook Could Upend the Streaming Wars: Most Important Story of the Week – 11 Dec 2

Disney is a marketer’s marketer. With the biggest brands in entertainment, they can serve up an investor day—an investor day that is for Wall Street investors!—that gets regular folks to turn in and trends on Twitter. Yet, for all the buzz, the basic story was that Disney is releasing Disney content on the Disney branded streamer. We’ll get to that, but another story could have bigger implications for entertainment.

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Most Important Story of the Week – The Antitrust Case Against Facebook

A few months back, following Epic’s Games epic lawsuit against Apple, I stated that I planned to follow “antitrust” news fairly closely. Because antitrust could be the new “deregulation”:

I’ve been scanning the landscape more over the last couple of months to look at the future. And the “blue ocean” space in the entertainment strategy landscape for me isn’t technology–again, the futurists have it covered–but how regulation could change business models. And this is a hypothesis I’m monitoring: 

Could antitrust enforcement could become the new deregulation?

Deregulation was arguably the biggest driver of disruption in the 1970s and 1980s. Deregulating industries across the globe from airlines to energy to telecommunications repeatedly enabled smart firms to seize new advantages. That airlines example above is a perfect example; Southwest likely doesn’t become Southwest without deregulation.

Generally, everything has been deregulated. So what comes next? My guess is a reversal of antitrust. 

Since then, the signs that antitrust is on the agenda have only picked up steam. Consider:

– The House Antitrust Subcommittee released the “Cicilline Report” which laid out how the four big tech firms have used their market power to hinder competition.

– The Department of Justice filed a lawsuit against Google for specific antitrust violations. State Attorneys General are expected to follow suit.

– Joe Biden was elected as the next President of the United States. While there is some bipartisan support of renewed antitrust legislation (see Google’s antitrust suit, filed by a Republican), Democrats are still clearly more supportive than Republicans on antitrust.

– This week, 48 states and the Federal Trade Commission filed an antitrust lawsuit against Facebook. (Also a bipartisan move.)

In August, I laid out a few waypoints that I would watch to see if increased antitrust enforcement was likely coming. We hit the big one (Biden’s election), the next biggest (Congress increasing pressure) and now antitrust is headed to the courts (Specific lawsuits against Google and Facebook). As the future becomes slightly clearer, then, it’s worth expanding the potential for what comes next, especially for entertainment and media.

Predictions

What happens next?

To start, more antitrust lawsuits for the rest of big tech feels inevitable. Amazon seems particularly easy given that they have leveraged their market power in retail for years to enter new industries or stifle competition. The complaints from smaller vendors are legion. (The diapers.com affair from the start of the decade is particularly egregious.) Apple is more beloved than Amazon, but the Fortnite fiasco basically illustrated in stark terms Apple’s market power, and brought up a host of smaller competitors crushed under their power. Both Amazon and Apple, though, are more popular than Google and Facebook, which have both been embroiled in partisan bickering.

After that? The states/FTC/DoJ will either win or lose their lawsuits. That proposition is dicey because these suits are decided by individual judges, many of whom were appointed by Republican presidents with The Federalist society backing “Borkians” who tend to downplay antitrust concerns. Or in some cases just don’t believe antitrust is worthy of government attention.

If the states lose their lawsuit, then it would require Congress to change the laws around antitrust. That’s a much tougher challenge in today’s political landscape. But not impossible. (The Georgia run-offs will say a lot on whether this is possible.) Assuming that the Big Tech companies lose their fight, then come the potential remedies, which adds another layer of complexity to predicting what happens next.

Potential Outcomes

Let’s be honest and let the air out of the balloon right off the bat: The most likely outcome is that Big Tech is mostly left in place. Think Microsoft in the 1990s. In the worst case, the companies agree to some measures to control their behavior, but immediately go back to not following them and paying minuscule fines.

This is, essentially, what has happened with most merger consent decrees this decade. Facebook said it wouldn’t integrate What’s App’s data, then did it anyways. AT&T said prices wouldn’t go up after mergers, then raised prices. The companies pay the fines and keep consolidating. Disney said it would keep producing Fox movies, but now may release fewer films in theaters post merger than they did before.

The best case would be consent decrees that are enforced. Like the Paramount Consent Decrees of the 1950s. This helped movie studios and theaters thrive. Or AT&T’s forced divestment of patents in the 1950s. This spurred innovation across the U.S. landscape, which really did help competition. (It does say something that success examples of this happened 70 years ago…)

The bigger, and more fun to imagine, scenario is breaking up big tech. (And while I try to avoid my own policy recommendations, this is the outcome that I believe would benefit America the most.) These breakups could be either horizontal (the same industry) or vertical (different business units in the same company in related fields). 

Vertical is actually easier in most cases since the different companies don’t need each other to survive. So for Amazon, spinning off AWS, for example, would hardly impact Amazon’s retail business. (Though it would deprive Amazon of a valuable profit stream.) Google has multiple business units that could easily survive on their own. I’d add that splitting up Instagram and What’s App from Facebook are horizontal break ups, but relatively easy to contemplate since customers wouldn’t notice a change. (I’d make the same case for Amazon breaking up their marketplace from their other retail enterprises.) 

While vertical break ups in many cases don’t address market power, they are still very helpful for competition, since it means the firms left in a given industry can compete more evenly. (And most vertical integration tends to be followed by price gouging, product tying or other anti-competitive behavior.)

The key question for entertainment is whether each of the big tech titan’s entertainment enterprises get divested individually or remain as part of the bigger conglomerate. I could argue that Google should easily divest Youtube. Youtube can clearly survive on its own, but this would also give a powerful new internet advertising option to marketers. Apple could divest its media fairly easily (they are all just apps running on their operating system). Amazon has a better case for Prime Video staying in Prime, but even that isn’t ironclad. (Ask yourself: couldn’t Amazon pay the new Prime Video to stay in their Prime bundle? Yes, obviously. So why wouldn’t they? Because the value isn’t actually in the current video/data, it’s the market penetration to gain dominance overall.)

This is an unlikely scenario I’ve laid out. The plaintiffs have to win their lawsuits and then the remedy has to be the most extreme of remedies (break up). But imagine we do get here. Who are the winners and losers of this world? Imagine that Prime Video becomes its own company (with Twitch, Amazon Music, Audible and maybe a few other assets). Apple One becomes its own company (Apple Music, iTunes, TV+, Arcade and so on). And Google spins off Youtube.

Who wins or loses in this scenario?

Winner: Netflix

Say what you will about being bearish on Netflix’s business model, they aren’t a monopoly. Some investors want them to become one (building a “moat”), but a company with only 8% of all viewing in the United States is hardly a monopoly. Indeed, the biggest threat to Netflix, in my mind, is the unlimited cash reserves of Apple and Amazon. If forced to compete on an even playing field, this would benefit Netflix. (With the caveat that multiple new streaming companies on the NASDAQ may impact all share prices simultaneously, for good or ill.)

Winners: Traditional Streamers

Cord cutting is the biggest pain point for traditional media. But the biggest challenge, more than anything, is competing against competitors who don’t have to make money. If Big Tech had to compete on a level playing field–read not deficit financed–traditional media has a much better chance to survive in a streaming world.

Further, there is a big difference between radical disruption (where revenue drops by double digits year over year), and slow evolution (where profit margins slowly decline). Both get to the same place (which is the likely outcome from streaming), but one has a lot less pain for the incumbents and their suppliers. 

Losers: Prime Video and Apple

These seem like the two biggest losers in all this because most folks acknowledge that their streaming business models just aren’t based on actually delivering a valuable product. Phrased differently, no VC firm would invest in Apple TV+ if it weren’t owned by Apple; there is no business plan there. Spun off from their parents, these new media companies would be valuable, but much less invincible.

Losers: AT&T and Comcast

After Big Tech, if Congress wanted to find the industries that are heavily consolidated and hated by customers, cellular and cable are next on their wishlist. (Then health care.) Breaking up Big Cable would probably be the most popular move of the Biden administration. 

Winners: Roku and Sonos

If devices are sold at cost, the independent device makers have a chance to succeed and thrive.

Winners: Talent…probably.

In a lot of ways, the boom of streaming and peak TV is the best of times and the worst of times for talent. More shows and films are being made than ever before, but back end cuts are smaller than ever before. Meanwhile, junior writers work for some of the worst pay in the last few decades. Arguably, with many more streamers who are less powerful, the guilds could negotiate better rates, especially down the line. 

However, this may be offset by the end of the so-called “Drunken Sailor Era” (™ Richard Rushfield) as firms have to start making actual money. So they could cut back on content spend. That means less potential jobs overall.

TBD: Customers

Like talent, this could go either way. On the one hand, it has been great for customers to have multiple firms willing to subsidize cord cutting. The problem is those subsidies are harmful long term and entrenched market power is awful too. So prices could go up, but they’d reflect economic reality. Meanwhile, customer choice would come either way.

The Caveat: All of this is Unlikely

Does a huge break up of Big Tech, including spinning of media firms actually happen? Probably not. But without throwing out random probabilities, it’s probably twice as likely as it was even in August. (So yes, this is like a streamer saying a show grew 50% year over year. 50% of what?)

Yet, Biden was elected President, and that’s huge. Combined with renewed emphasis by the Democratic coalition, and I think corporate consolidation is on the table for change. He’ll likely appoint attorneys general, federal judges and administrators who could put a renewed emphasis on antitrust. That will impact entertainment eventually.

Other Contenders for Most Important Story

Disney Investor Day

Few analysts are (and have been) as bullish on Disney’s streaming future as I have been. I write that to put in context what I’ll write next: I don’t think this Disney Investor’s Day deserves the hype it has been given.

Take a few of the headlines touting “10 New Star Wars and Marvel” series coming to Disney+. That sounds huge. But given that this will take place over the next few years, is it? In context? Take this analysis by Emily Horgan:

Or take my timeline I’ve been using to model Lucasfilm’s financials:

base

And for kids…

kids

In other words, Disney confirmed what I’ve been modeling for a while now. This Star Wars volume is a pinch higher, but considering the volume of one-offs, not that much more than I modeled. But most of Wall Street/the trades seem surprised by it. I’d add there are a few more caveats for why the total volume of content may not match the reality:

– Shows will likely get cancelled. Like Ghost Rider, Benioff and Weiss’ Star Wars Trilogy, Howard the Duck, Rion Johnson’s Star Wars Trilogy, more Han Solo films, and countless other projects over the years.
– A lot of this content is animated and for kids. Which is crucial to Disney’s future, but likely replaces exactly what they were making for Disney Channel, Disney XD and Disney Junior. Which we weren’t getting super excited for before streaming times.
– Some of the announcements really are for a long way off (like a Rogue Squadron film in 2023). Most announcements didn’t have dates.

In total, then, I don’t think this is really much more content than Disney was planning on making last year or the year before. Some of it may have shifted from film (previous pitches for movies may have turned into TV series, like potentially Obi-Wan), but it’s probably similar. At the end of the day, it looks like from 2021-2023 we can bank on a Disney live-action adult series every 2 months or so on the platform for Marvel and Star Wars. 

That feels about perfect. If they can keep up the quality, that’s a big slate that will keep folks subscribed. It’s also the “if” that defines all success in entertainment.

(Though Disney+ still has a big hole for adult TV outside of Marvel and Star Wars. That’s a tough hole to fill.)

As for business strategy, the biggest news is no news. Hulu stays where it is. Star is officially becoming Disney’s adult brand globally. ESPN+ will continue expanding, and be available within Hulu. And lastly only one film is “breaking” the theatrical window, with Raya going to Premiere Access (like Mulan’s $30 release) simultaneous with theaters. (I have a feeling it will do much smaller business than Mulan on PA.)

An NFL Update: Ratings are Down, but Good for Broadcast

Is the state of the NFL viewership good or bad? Maybe both. Americans consume NFL football more than any other sport–arguably more than any other type of content period–yet the ratings aren’t as high as past years (down about 8%) because linear TV viewing just isn’t as high as it was (down about 30%). This of course begs the question for what happens next. I can’t see a world where broadcast TV doesn’t nab a few more years of NFL rights, even non-exclusively, but the key question is, “At what price?” Likely they will be high.

Disney+/HBO Max and Comcast Integration

Disney+ and HBO Max will soon be available on Comcast’s Flex operating system. This is a smart next step for both Disney+ and HBO Max. (If anything it should have come sooner.) For all the talk of cord cutting–and there is a lot!–one of the surprising survivors is the cable box. This makes it much easier to reach another big group of customers that Netflix and Prime Video are already reaching.

Data of the Week – The Hallmark Channel Is Still Winning Christmas

Josef Adalian has the details in a recent newsletter, but 3.4 million folks tuned in on one Sunday for a Christmas movie. Linear TV is dead, but it won’t lie down.

M&A Updates

Just because antitrust is back on the agenda doesn’t mean that mergers won’t continue fast and furious. The two latest biggies both have tangential relations to entertainment. Slack is the de facto messaging service of lots of Hollywood, and it was just purchased by Salesforce. Meanwhile, S&P and IHS are merging for a huge price tag because they are both financial data firms. S&P fascinates me because they had earlier purchased SNL Kagan, and Kagan was a tremendous source for entertainment data back in the day.

Discovery+ Is Almost As Big as the Warner Bros 2021 News – Most Important Story of the Week: 4 Dec 20

Well, after two and a half years of writing this column, I’ve finally come to a tie. Sure, the buzz is with Warner Bros and the decision to finally end the exclusivity part of the theatrical window. Every columnist from here to Timbuktu will feature that in their entertainment newsletter this week.

And yet, Discovery+ feels as big. I could even make some back of the envelope numbers work for it too. Discovery makes $11 billion in revenue every year, which is, funnily, the same size as the US box office. If Discovery+ is as big of a success as David Zaslav hopes, that feels as important as the $10 billion a year theatrical window. (And that’s assuming theaters die completely, which is unlikely as I’ll cover below.)

But sure, I hear you. You want thoughts on both. We’ll start with Discovery+, and move to Warner Bros big plans.

Most Important Story of the Week – Discovery Announces Discovery+

Maybe it’s just the contrarian in me, but I’m fine with Discovery’s late entry to the streaming wars and their general plan. Actually, “fine” probably doesn’t cover it. I think this could be a shockingly strong entrant, given how many folks have given Discovery up for dead.

Let’s start with Discovery’s biggest strength, which is owning its own content library. This is one of the first things that Discovery pointed to during their announcement of Discovery+ and it’s a great thing to point to. There’s the old saying that you don’t make money making movies, you make money owning a content library. Well, Discovery has that with, as they said, 55,000 episodes of reality TV to provide. Sure, this isn’t “buzzy” content like Disney or HBO’s libraries, but it is a lot of content. And it’s valuable to different demographics.

Discovery is late to the streaming game, but in this case, I don’t think that’s the worst outcome. As I’ve been writing a bit over the last few weeks, the name of the game is building streaming revenue while not obliterating the more valuable cable revenue. And don’t kid yourself, that revenue is valuable for Discovery. Here are their affiliate fees for their top four channels on linear TV:

Screen Shot 2020-12-04 at 11.41.09 AM

And that’s leaving out a few channels and all their advertising revenue. In other words, for every customer that leaves traditional cable for streaming, Discovery will lose money. So they waited as long as they could. Plus, Discovery probably figured that their customers are some of the laggards in cord cutting, so they could hold off as most of the early adopters of Netflix were hungry for prestige, scripted content, which isn’t Discovery’s forte anyways.

Discovery also flies under the buzzy radar. If you use linear viewing as a proxy for overall value, Discovery doesn’t have a presence in the top five channels. But after that? Yeah, Discovery is basically the channels to go to watch something pointless in the background, especially after the merger with Scripps:

Screen Shot 2020-12-04 at 11.41.37 AM

Even if you, the New York or Los Angeles Millennial/Gen-Xer, don’t watch those channels–and in some cases look down on those who do–tons of folks do watch. (Maybe even folks you know. We just don’t talk about it…) And since this isn’t buzzy content, those primetime ratings probably undersell Discovery’s content a bit.

To finish, this is also a great “zig while others zag” move. HBO Max and Disney+ went right at Netflix, Hulu and Prime Video with scripted content. Discovery is playing a different game and it will be interesting to see if it works. (To be fair to Disney+, it has its share of cheaper reality content too.)

What’s Next? A Merger with A&E Would Make Sense

The other distinctive part of Discovery’s plan is to include some A&E content in the lineup, specifically from their more reality/lifestyle brands. I haven’t heard anything specifically, but you’d have to wonder if Discovery has floated buying out Disney’s 50% ownership so that they could get a near stranglehold on cheap reality programming. Adding the buzzy A&E channels would also help Discovery brace for the reduced channel lineup world with even more channels to negotiate with MVPDs and vMVPDs.

The What If? Netflix Had Bought Discovery…

In a lot of ways, Netflix knows how valuable Discovery’s content is. That’s why so many of their shows are clearly in the mold of Discovery programming that has left the service or will leave as Discovery+ launches its own programming. Nature programming? Netflix is building that. Shows where folks buy houses? Sure. Shows where folks renovate houses? Check. Cooking shows? Check. Cooking shows that are just reality shows? Check that box too. 

The problem is Netflix has to buy or rent it all. And they can’t replace nearly that volume or for nearly that price. From scratch. Can you imagine if they had bought Discovery a few years back and could add 55,000 episodes to their catalogue? Heck, even the cash flow from Discovery would have made Netflix breakeven. I’m not a fan of M&A as a strategy in general, but this move would have made sense to me.

Most Important Story of the Week – Warner Bros. Sends Their 2021 Slate “Straight” to HBO Max

If AT&T was reading my advice, they’d have seen a few pieces urging them not to release films straight to streaming. Like here. Or here. Or here. If anyone on the Internet writes about how valuable the theatrical window is to traditional movie studios more than I do, I’d love to see it.

My thesis is simple: skipping multiple windows decreases the overall revenue of a given film. Even today I was tweeting that:

Yet, multiple big studios seem to have said by their actions that I’m wrong:

– Disney’s Studio chief speculated that that several live-action adaptions would be headed for Disney+.
– Warner Bros. moved Wonder Woman 1984 straight to HBO Max on Christmas.
– Universal launched a new partnership with theaters for a new 3-week premium window for their films.
– Then, the big move, Warner Media moving its entire 2021 slate to a “day-and-date” HBO Max window with theaters.
– (Plus, there has been a lot of speculation, including hints from Disney, that on their investor day next week they’ll announce an expansion of their premium plan.) 

Who are you gonna trust, some guy on the internet or all the studio heads? Taken together, this seems like a clear indictment of my belief that studios will make more money by keeping theaters around then going straight-to-streaming. 

So how do I explain this discrepancy? Well, I did that over at Decider. And I have four reasons:

            – Clearly subscribers are the only metric that matters to Wall Street.

            – If you’re in the growth phase, losing money to gain subscribers makes some sense.

            – Covid-19. Covid-19. Covid-19.

            – The calendar is going to be jammed in 2021 anyways for box office.

For the details, head over to Decider. 

Yet, while I explained why this move happened, I didn’t explain what happens next. Because I don’t know. Because I can’t predict the future. Still, that’s the fun part, right? And there is one key tradeoff that will impact all the players. 

The Big The Tradeoff (Defined)

The best article I’ve read this year is from Doug Shapiro’s “One Casualty of the Streaming Wars: Profit”. Shaprio focuses on TV in that article, roughly arriving at the idea that TV in the United States is something like a $110 billion dollar industry. And one with some of the highest profit margins around.

Well, theaters are an extra $10 billion piece of that pie in the United States, of which the studios take home about 50%. Moreover, that leads into a fairly lucrative window of purchasing, whether formerly of physical discs, but now mostly digital sales. Which is billions more. 

As Shapiro quantifies, this streaming window just doesn’t have the same margins or volume as the old theater to home entertainment to premium to secondary windows model had. There are lots of folks who insist this isn’t the case, and they usually base their view on rosy customer lifetime value scenarios. But the math is the math. (Even if Celebrity Wall Street Media Futurists insist it is the case.)

This is why studios held off from going straight-to-streaming for so long. They don’t want to add $10 billion more in lost revenue to the huge potential lost revenue coming too. As I wrote in Decider, though, they may have finally been forced by this once in a century pandemic. 

This also explains why the studios all have different plans. No one quite knows what the right new distribution plan, but straight-to-streaming by itself likely won’t cut it. Here’s my landscape of the current situation:

IMAGE 1 - Approaches to Theaterical

Or this septet chart: 

Screen Shot 2020-12-03 at 2.57.33 PM

 What does this mean for all the parts of the value chain? Let’s explore. 

Theaters

One of the big questions is whether Warner Bros. had a plan for the theaters. The answer? No.

As of now, the theaters won’t get an extra piece of the theatrical pie. I expect this to change and both sides will keep negotiating, but if theaters don’t get on board, then a lot of extra revenue is at risk. 

Let’s assume Warner Bros (and Disney if they follow a similar course with “Premium Access”) eventually come to terms with theaters as Comcast did. What does this mean for the future of theaters?

Well, I don’t know. Here’s a range I’d give you: theatrical revenue could drop to $0, or stay the same ($10-11 billion per year) or even grow. And that’s in the United States. In China, where the streamers aren’t allowed, there will be much less change. 

If I had to bet, I’d guess theaters definitely lose some theatrical window revenue. How could they not when subscribers could watch the films for free? On the other hand, Comcast’s plan may not change things very much. And Disney hasn’t committed to this path for all films. 

Yet there is a large range from “lose some” revenue to “wiped out to zero”. (Which I saw headlines touting the “death knell” for theaters. Death knell implies zero.) It’s very rare for an industry to go to zero overnight, and even if theaters are losing some revenue, like DVDs it will likely take decades to truly, if ever, disappear. 

Plus, if the losses mount without driving huge subscribers growth, or tapping out at some level, theater only windows could subtly creep back into our lives.               

Smaller Studios

Meanwhile, without streamers boosting the bottom line, it’s tough to see what Sony and Lionsgate do from here. In some ways, theaters may appreciate their films even more since they are—for now—exclusive to theaters. You could also expect some “arms dealing” as some of the streamers vie for their films as they’ll need inventory. (Amazon and Netflix)

Still, if the overall theatrical pie shrinks (say some theaters go out of business), that’s bad for the smaller studios overall, especially as streaming will eventually pay less for films. (See below.) 

Other Streamers    

For Warner Bros in particular, this move will be great for HBO Max adoption. Though how great, sort of like for theaters above, remains to be seen. It’s not like HBO didn’t have a supply of top tier theatrical films. They’ve always had a steady selection of Warner Bros, Universal and Lionsgate films in the first window after home entertainment. It’s unclear how much bringing films 3-6 months early will boost the perceived value.

Still, even more than buzzy TV shows, theatrical films are great at acquiring new subscribers. This is the dirty secret of most straight-to-streaming films by Netflix and Prime Video. Yes, they’ve had some “hits”, but nothing compares to true box office blockbusters like Avengers, Star Wars or animated kids films. The key question though is what drives that: is it the films themselves, or the marketing of the films which builds anticipation? If HBO Max drastically cuts marketing budgets with less theatrical revenue coming in, then maybe these films don’t play as theatrical releases on streaming.

I’d be willing to wager that Netflix’s films will keep doing well on their platform, but the HBO Max slate in 2021 will likely beat it overall in terms of minutes viewed (in the United States).

As for Apple TV+, they have the biggest opportunity here. If they committed to theatrical and big back end, they could easily become a go to spot for filmmakers. Plus, Richard Plepler has the cachet to make this work.

Production Budgets

Right now, HBO Max, Comcast and Disney are making a lot of release decisions for films that are already made. Those are sunk costs. Meaning they are just trying to maximize what they can going forward.

However, with these new models, films that are greenlit going forward are in this new reality. And if the new, streaming only reality really does have less upside than the old model, then something has to give.

Doesn’t it?

That’s why, when I first heard about Disney+ floating the idea of some of their live-action films going to Disney+, my response was “Oh, they’ll lower the budgets.” Even Alan Horn mentioned that going straight to Disney+ would save on marketing costs. But that was fine because no one cares about cutting costs on marketing. 

Folks do care, though, if you skimp on production budgets. (And talent cares about their pay!) Making a film that could cost $80 million for $20 million feels cheap. But it’s also inevitable. Again, Disney Channel, HBO and even Lifetime have made movies for years for TV. But they know that a movie going straight to TV has a limited upside, so the budgets are similarly limited.

That’s something to watch in 2021. If films really aren’t marking as much going forward, something has to give.

Talent and Backend

This is the biggest wildcard for me. Right now, the current workaround to go straight to streaming is to just guarantee more payment to top talent up front. This has its own risks, though. Mainly that instead of shifting the risk of backend to only guaranteed hits, you essentially make every film a “hit” in terms of talent costs. That hurts the bottom line.

So again, something will have to give. Either talent will make less money or the studios will.

Data of the Week – Daytime TV Viewing Is Up

I just wanted to point out this fun article from Nielsen because it is the worst indictment of working from home imaginable, and I think more managers should be aware of it. If your employees have time to watch TV, you need less employees. (And probably fewer Zoom meetings, not more.)

“The Mandalorian vs The Queen’s Gambit: Who Won November” at Decider

In what is now a recurring column, over at Decider I took a look at all the ratings data I could find to declare the streaming winner in the US for November. This one is packed with with charts, tables and data.

(If you’re curious for the older editions, here’s September and July.)

Also, I discuss the latest Nielsen streaming data in this thread:

Disney Has Almost Caught Up To Netflix in the Streaming Wars: Explaining the EntStrategyGuy’s US Paid Streaming Subscriber Estimates- Part I

(This is the last article in a three part series estimating how many US paid streaming subscribers there are in the US. Read the numbers here, and the second half of the explanation here.)

I’ve become a pinch frustrated with media folks who don’t differentiate between the US subscribers compared to global subscribers. Why? Because it violates the number one rule of data, which is to compare things “apples-to-apples”. Meaning, one should compare the most similar numbers to each other. 

Not to pick on them because they do great work, but the wonderful Axios Media Newsletter (which reaches a lot more folks than I do) was guilty of this this week:

IMAGE 1 Axios - Total Subscribers

That looks at Netflix’s global numbers to HBO Max’s US only numbers. That doesn’t make sense, does it? Meanwhile, it’s compares Prime Video customers, who get it for free, to those genuinely paying for Netflix. And Apple TV+ can’t make the list since we know nothing.

So, as I wrote yesterday, I stepped up to provide some estimates for each of the major streamer’s US subscriber totals:

Chart - Updated Totals not title

And the chart. (With some typos fixed from yesterday.)

Table Abbreviated

If yesterday is the data shot, today is the analysis chaser, describing the details of what I did and how. Which is just as important. If you read yesterday’s article, you’ll learn some statistics. If you read today’s—and yes it’s long—you’ll learn about what is driving these numbers.

We have a lot to get to over the next two days. Here’s the outline:

– The rules I used to estimate US subscribers.
– The confidence levels for each estimate.
– The explanation for each of the twelve major streamers.
– The reason for this deep dive. (Mainly the need for “apples-to-apples” comparisons.)
– Finally, a chart with the ranges for each streaming estimate.

(As a reminder, sign up for my newsletter to get all my writings and my favorite entertainment business picks from the last 2 weeks or so.)

The Rules

In a quest to get to “apples-to-apples”, I had to figure out what type of apples we were dealing with. Here are the ground rules, in rough order of priority:

– First, US only. Global subscribers will come later.
– Second, subscription was the key. Free or advertising-supported services from Youtube to Pluto TV didn’t make the cut.
– Third, the goal is “streaming”, but I added “premium” channels too. Because frankly, lots of folks subscribe to HBO, Showtime and Starz directly. Ignoring that provides less context than more. So the premium companies made the cut. The linear channels paid through a cable bundle did not.
– Fourth, the goal is to focus on who “would pay” for a service. In other words, for Apple and Amazon, to try to figure out who would pay for those services if they suddenly cost money.
– Fifth, I had to draw a line somewhere or I’d have too many subscription services. I decided to focus on “major” services, which I defined as 2 million customers and above.
– Sixth, some services are very cheap as well, so I’m assuming roughly a $5 per month price point as the cut off. Yes, there are tons of discounts that get applied, but this is a good starting point.

My Confidence in Each Prediction Explained

Last year when I calculated how much money Game of Thrones made for HBO (a lot!), I realized I was dealing with a few different types of information. And I needed some categories to describe them. So I came up with this:

IMAGE 2 - Confidence Table

A fact is something a company has confirmed in a specific report or statement. Or in some cases ratings numbers and what not. Those are numbers we can believe in. Leaks are also from companies, but usually anonymous. They are fine, but always be careful with leaks. Companies are very self-interested and their PR folks—who are still good people—will mislead you. Specifically, with data that reinforces how well they are doing and hides any bad news. (The definition of bias.)

Estimates are predictions I am confident in. Usually it means I’m taking a few specific numbers and applying good models to them.

A guess, on the other hand, is usually when I have to estimate too many things. At which point my confidence in the estimate starts dropping. Which doesn’t mean educated guesses are bad, just uncertain. (Magic numbers are briefly explained here.)

Analysis: How I Determined Each Number

Enough preamble to the meat of this article. In order of the table above. 

Netflix

While Netflix discloses a lot of information compared to its streaming peers, on its US numbers it has become frustratingly vague. At the start of this year, Netflix decided to split the world into four territories to better show how its business is doing globally. Which meant for years we knew US subscriber numbers, but now those were bundled with Canada. Fortunately, they provided three years of data. Here you go:

IMAGE 3 - Netflix Subs over Time

In other words, US customers are about 90.3% of the UCAN total. That means we can estimate fairly well the current US subscribers based on the UCAN number. About 66 million US subscribers. Even though these numbers are so tight we probably don’t need it, I made a range for the estimate, and call this my 90% confidence interval:

IMAGE 4 - Est US Subscribers

(If you’re wondering where these numbers come from, I collected every Netflix subscriber number from here to olden times for this article. An update is coming next week as my “visual of the week”.)

Disney

Disney isn’t one service, but three. Two of those services aren’t globally available, which means we know for certain how many US subscribers they have. (ESPN and Hulu.) 

What about Disney+? Well, we have our first tricky estimating process. To figure it out, I looked for some historical data. To start, here’s my historical growth chart:

IMAGE 5 - Chart Disney Subs

That helps, but not perfectly. The best way to estimate Disney+ subscribers is to use some correlated variable we do know, and assume the subscriber numbers are related to that. For example, if a country is 25% of the worlds population, then you assume they are 25% of the Disney+ subscriber total. The problem is that no one variable is perfectly correlated. You could use population, but some countries are wealthier than others. You could use GDP, but it doesn’t quite account for size. Broadband and mobile penetration are also potential options. Ultimately, I decided to compare all the countries by population.

Yet this has a big problem for Disney+. The big wild cards are India and Indonesia. While most of Western Europe and Japan have similar economies to the US, India does not. Fortunately, Disney leaked that they have 18.4 million or so (a quarter) of their subscribers from India. So that means we now have to parse out how many of the 55.3 million or so are from the US.

In this case, I looked at various populations of the countries Disney+ has entered, compared to the total size.

IMAGE 6 - Disney Population Numbers

In other words, if countries adopted Disney+ simply by population, Disney has 40% of the population, so jeu would have about would have 22 million subscribers. That’s too low. When Disney first announced numbers in December of 2019, they’d have already been at 21 million subscribers using the population method. So did Disney+ only gain 1 million customers this year? With The Mandalorian season 2 and Hamilton? Probably not. So I made a sensitivity table, which netted me this:

IMAGE 7 Sensitivity Table

Looking at it, the 54% of non-Indian subscribers having Disney+ is the most likely number. Or better phrased, between 25-35 million of all Disney+ subscribers are in the US. Any lower or higher feels unrealistic. And yes, I wish I had a more scientific way of triangulating this. Frankly Disney has released so little US data, and the data they have released has so many confounding variables that it’s probably the best we can do.

(Also, for the first of several times this article, if you want to disagree, feel free to do so in the comments or on Twitter and explain why.)

About The Headline “Disney Has Almost Caught Up To Netflix in the Streaming Wars”

Yesterday, I also included the total unique subscribers by company, because I do think that is the best way to compare companies. (See the table above.) 

Logically, if Disney could get to 50 million Hulu subscribers and 50 million Disney+ subscribers, and each was paying $10 a month—and those are numbers that are only possible 3-5 years in the future—then it would be hard to say they aren’t “beating” Netflix, if Netflix stays at around 65 million subscribers, but at a say $16 price point.

To be clear, I’m not predicting that happening. But that scenario is one of the possible futures. The fact that Disney has nearly caught up to Netflix with its three streaming services in terms of customers matters since it’s just starting out, even if average revenue per user is lower right now. (And yes, I only counted the “bundle” customers once for my summary yesterday. I assumed that all the ESPN+ growth, 6.5 million customers, since Disney+ launched was due to the bundle, which is a conservative assumption.)

HBO

HBO releases US subscribers and the number that have turned on HBO Max, which they call activations. The number of folks who would subscribe to HBO Max (if linear HBO disappeared entirely) is somewhere between those two numbers.

I’ll defend my lumping premium subscribers with streamers now. Frankly, I’ve never understood the logic of not comparing HBO linear subscribers to Netflix subscribers. Yes, one is direct-to-consumer and the other is sold through MVPDs. But ultimately, the customer is what matters. And HBO customers are very loyal. If the bundle goes away tomorrow, some customers may not continue subscribing to HBO, but more will. (And still do, frankly. HBO passwords are as borrowed/shared as Netflix, especially when Game of Thrones was on.)

As for the range, it’s between the activations and the total subscribers. So I provided both numbers. I’ll take the top of that range as my estimate (for now), but you can choose somewhere in the middle.

(If you want more details on HBO subscribers over time, check out my visual of the week from a few weeks back.)

Viacom-CBS

If I was going to count all premium subscribers for HBO, it only made sense to do so for Showtime as well. Fortunately, Viacom-CBS has leaked quite a bit of details to the press over the years, and their financial report provides specific numbers for total streaming subscribers. (For this project, I searched for every number I could find.) For example, in September, sources told Joe Flint of the Wall Street Journal that Showtime had 27 million total subscribers, including 7 million OTT. (That’s a very useful leak, if accurate.)

Meanwhile, in their latest earnings, Viacom CBS told us that between CBS All-Access and Showtime they have 17.9 million OTT subscribers. Assuming that ratio has held constant since the summer, then CBS All-Access has about 11 million subscribers. We can confidently estimate that. If you want an error range, since Viacom has said that subscribers are about evenly split between CBS All-Access and Showtime, the low would be 50% of the about 18 million subscribers and the high is the opposite end of that, or about 12.5 million subscribers.

However, unlike Disney, I didn’t try to disentangle ViacomCBS bundled customers at the company level. While Disney’s growth could easily be attributed to their bundle, it’s much less clear how many dual CBS All-Access and Showtime subscribers are out there.

Netflix Has as Many Subscribers as Disney+ and Prime Video Put Together In the United States – Visual of the Week

Let me tell you a pet peeve of mine. It’s folks citing how many Amazon Prime Video subscribers Amazon has. 

Because they don’t know.

What you know, or have been told once, is how many Amazon Prime subscribers there are. With Prime comes access to Prime Video. We don’t know how many members actually use that service or, more importantly, know how many value the service enough to pay for it on a recurring basis. (What a subscription is, by definition.)

But here’s what’s crazier: we don’t even know how many Amazon Prime subscribers there are by country. They could have 50 million US Prime members…or 125 million. Literally no one knows. (In fact, we haven’t gotten an update on Prime membership since January.)

This is indicative of a larger phenomenon of the “streaming wars”. The streamers have barely told us how well they are doing. By my estimates, only 4 of the 12 biggest streamers have shared actual US subscriber numbers! (Hulu, ESPN+, HBO Max and Starz)

That’s right, due to non-disclosure, global-only numbers, or definitional craziness, we really can’t compare the streamers to each other in the United States.

Well no more!

I’ve decided to fix this glaring mistake. What I’m going to do is provide the EntStrategyGuy Definitive Estimate for all the major streamers US subscriber base. Today, I’ll provide my table, chart and some notes, then tomorrow I’ll provide the longer, gory details. First, here’s the chart:

Chart - US Paid Streaming SubscribersAnd the table, which I’ll explain tomorrow:

Screen Shot 2020-11-18 at 9.03.01 AM

About That Headline

If the internet weren’t a cesspool of clickbait, I could have just explained what this article is, “My estimate of US subscribers for the streamers.” But that doesn’t get the clicks. A flashy headline on Netflix? That does.

Tomorrow, like I will say multiple times, is where I’ll really provide insights into this process and data. For now, though, if you have one takeaway, it should be that the streaming wars are messy. They are filled with nuance. The more that someone online pushes a simplistic narrative (Netflix has already won; Disney+ will kill Netflix; TV is dead) the less you should listen. There are no simple narratives.

So my headline is 100% true, and building this chart makes that clear. When it comes to one single streamer in the United States, Netflix is about twice as far ahead as its nearest competitors. Really, they are in the first tier by themselves. Then there is a second tier of services with about 35 million subscribers (Disney+, Hulu, HBO Max and Prime Video). Then a third tier of folks trying to break into that second tier (Apple, Peacock, Starz, CBS, Showtime, maybe AMC+). 

Yet, this look is in many ways a backwards looking view. The three oldest services happen to be the three biggest. The difficulty is forecasting what comes next. If we’re looking at growth, Netflix at the top was flat last quarter and down earlier in the year. And likely would have stayed that way all year in America except for Covid. Meanwhile, can the new streamers add subscribers? I think they can.

At least now, we/I have a common fact set to evaluate the United States performance of the streamers.

Quick FAQs

– What about global? I’m just focusing on the United States since many of these streamers are US-only. And we have the best data for this country. As the streaming wars continue, though, I’ll do a similar look for worldwide. (Though comparing global numbers to US only numbers is not a good method to do that.)

– How did you get that Amazon number? It’s an estimate of an estimate of an estimate, which makes it a guess. I’ll explain tomorrow.

– Why didn’t “smaller streamer TBD” make the list? I set the cut off at roughly 2 million subscribers. Anything smaller would have made the chart difficult to read. Again, I’ll explain my rules tomorrow.

– What if you disagree? Well, tomorrow I’ll explain how I calculated each one, so if you want to adjust the estimates you can. That will allow you to disagree, but within the right zone of possible answers.

– [From Corporate PR] You got our numbers all wrong! One, if you don’t put them out, then no I didn’t. If any company wants to correct my math, send me three years of financial data and I’ll happily provide an exclusive update.

(This is the first article in a three part series estimating how many US paid streaming subscribers there are in the US. Read about how I calculated the numbers here or here.)

How Google’s Antitrust Case Explain Quibi’s Demise – Most Important Story of the Week – 23 Oct 20

Honestly, it’s either feast or famine with news in entertainment. Some weeks, I look at all the stories and can’t figure out what is the most important. Then other weeks, I have a plethora to choose from. This week fell on the “plethora” end of the spectrum.

Two stories led the pack. Quibi raised and lost $2 billion dollars. So that’s a big story. Yet, splitting up Google could have tens of billions of market moving ramifications. How do I pick when Quibi is so juicy, but Google is so important? Why, by combining the two! 

(As always, sign up for my newsletter to get all my writings and my favorite entertainment business picks from the last 2 weeks or so.)

Most Important Story of the Week  – Google’s Antitrust Lawsuit and Quibi’s Demise

The background, in case you didn’t hear: 

– The Department of Justice under Bill Barr filed a lawsuit with 12 state attorney’s general arguing that Google is an uncompetitive monopoly in search. This lawsuit makes lots of similar arguments to the Microsoft case of the 1990s about using their power to exclude competitors. 

– Quibi is exploring options to shut down, as reported in the Wall Street Journal.

So how does the former relate to the latter?

To explain that, consider a thought experiment. Imagine that along the way, Jeffrey Katzenberg pitched Susan Wojcicki (the head of Youtube) the plan for Quibi. And she loved it. (Hypothetically.) She replies, “Jeff, don’t launch Quibi as a standalone service, we’ll buy it! And you run it as a standalone venture.” Then assume they keep everything else the same. The same budgets. The same product. The same everything.

Would Quibi still be around? 

Yes!!!

And the explanation is fairly simple: Google can afford $2 billion in losses over three years. In fact, Google can afford to lose $2 billion dollars every year on one business. And maybe more. 

My favorite example to show this is the money pit that is Youtube TV. When it launched, Youtube TV cost $35 per month. After adding some more channels, it bumped up its price to nearly $60. And that’s every month. For nearly 2 million subscribers. The thing is Youtube was likely losing money every month on Youtube TV, and potentially still is losing money every month on that service.If Google is losing $20 per subscriber per month, then they could easily be losing half a billion dollars per year. If not more. 

In other words, Google will easily lose billions on a speculative streaming venture.

This gets to the realization I’ve had debating the streaming wars over the last year or so. And it started with Apple TV+. Essentially, I’d find myself talking past folks when we discussed our opinions on Apple TV+. I’d say that I thought the lack of a library, lack of ownership in original content and unclear pricing were strategically bad decisions. Then folks would counter that it didn’t matter because Apple could afford the losses. The same arguments are made for Amazon and Google in a number of businesses as well.

But these are two different arguments. One is about the quality of the strategy. One is about the access to resources. These two questions help frame the streaming wars. And they are two questions we should ask about every major player (from both entertainment and technology) in the streaming wars:

  1. Does a streamer have a good business strategy?
  2. Does the parent company have immense resources to allow deficit financing?

For example, I’d say that Apple TV+ has a bad strategy overall, but they have a parent company that can shield those losses. And while Prime Video has eventually clawed its way into second or third place in the US streaming rankings, it likely has lost lots of money in the process. But who cares because Jeff Bezos is the world’s richest man.

We could go on, or I could make a quad chart to give you my take on this equation:

Screen Shot 2020-10-23 at 9.00.56 AM

For Quibi, a questionable strategy meant they ran out of business. For Apple TV+, who has arguably the same bad strategy (if not even more cash burn), it doesn’t matter because they can burn cash unlimitedly. Disney likely can’t afford perpetual losses. Netflix is the only firm in the middle because it’s strategy clearly worked, but it also lost tons of money. It also needs to make some money, because it doesn’t have a wealthy parent, yet some would argue the equity markets do that for them.

The lesson here is really for practitioners. The business leaders out there. Draw lessons from those with good strategy, not those who have cash resources you may or may not have the ability to match. Good strategy is still good strategy. (What is good strategy? Books are written on it, but for me it’s a product that matches the needs of a targeted customer segment that creates value over the long term, by leveraging a competitive advantage.)

Society could also take some lessons from this. The market should pick winners or losers because they have good strategies. Because that means companies are creating value. When external factors support money losing enterprises, it’s usually because they are trying to acquire monopoly power, which is bad for innovation and customers.

These are trends that Quibi tried to fight against, but ultimately failed. Too many folks are spending too much in ways that don’t require earning money for it to have a fighting chance. Whether or not Jeffrey Katzenberg and Meg Whitman should have seen that coming is an open question. And likely their business model was flawed, as I’ve written about before. But the reason they went bankrupt, ultimately, is because they didn’t have a parent company support massive losses. 

This is the power of Big Tech and while the current antitrust lawsuit isn’t about this price gouging specifically, it’s still about the power of Big Tech. 

Additional Google Antitrust Thoughts

– Does this impact M&A by Big Tech? Especially when it comes to big tech snatching up smaller entertainment companies? I constantly read that Amazon should buy Viacom-CBS. Heck, just last week I wondered why Netflix doesn’t buy Sony, since they license all their shows. A source said he’s heard a lot of rumors that Netflix wants to buy Viacom-CBS. All of a sudden, mergers for vertical integration purposes look a lot dicier.

– What about entertainment mergers? That’s a good question. The ire of antitrust litigators will likely stay focused on Big Tech for the foreseeable future. If the DoJ casts their eye of Sauron around, though, Comcast and AT&T are the next in the crosshairs, given their mutual penchant for mergers, the local and national monopolies and vertical consolidation.

– Is this bad for Youtube? Potentially. One of the easy remedies for the government to insist on is that Google divest Youtube to diversify the advertising market. Given that Youtube makes almost as much money as Netflix each year in revenues, this is a reasonable request. However, the current case makes no mention of breaking up big tech, and neither did the Cicilline report. 

– What about price gouging/predatory pricing in entertainment? This is much more of a stretch, but a potential spinoff branch of antitrust. In other words, under scrutiny, the DoJ could say, “Hey, if you run a video service as part of a vertically integrated firm, you can’t lose money simply to gain market share.” This is the least likely outcome of these questions, but if it were enacted it would have the largest ramifications on streaming video of any other decision.

(I had more thoughts on Quibi too that will be up at a different outlet later.)

Data of the Week – What Happened to HBO’s 88 million International Subscribers?

When I spent weeks trying to figure out how much money Game of Thrones made for HBO, it required understanding HBO’s subscriber totals. Unfortunately, Warner Bros (now Warner Media) never made it easy. Before 2011 they didn’t report anything, so I had to rely on news sources. When AT&T acquired Warner Media, it stopped reporting HBO subscribers at all. Meanwhile, they combined Cinemax and HBO subscribers in the same total, even though most Cinemax subscribers were subscribed to both. To top it off, Warner never actually broke out subscribers in a table, you had to search the narrative to find the totals.

Last earnings report, AT&T decided to bring back HBO subscriber totals. So I updated my long term tracker. But AT&T decided to only report domestic/United States subscribers. Huh. Then in the latest earnings report, they added international subscribers, but claimed it was only 21 million. Double huh. So here’s my updated chart for HBO subscribers:

Screen Shot 2020-10-22 at 9.11.17 PM

What happened to the 94 million at peak and 88 million as of 2017? And how high did it get in 2019 as Game of Thrones debuted?

I’ve reached out to HBO for comment, and will let you know if they reply.

Other Contenders for Most Important Story

Netflix’s Earnings Report

If you want my initial thoughts, here’s the Twitter thread:

Reflecting on it, I’m surprisingly sanguine about Netflix’s earnings. I thought the content was more of a drag than it ended up being. For example, the films did pretty well with three besting the 70 million households watched by 2 minutes viewed total (55 million at 70% completion by my translation). Here’s a chart:

IMAGE 3 NFLX Viewership

Caveats abound, as I like to say. First, the challenge is that the shift from 2019’s 70% completion to 2020’s 2 minutes viewed just crushes the narrative. As Netflix has said, this conversion usually means a show gains about 35% more viewers. That’s a lot. And if you took all the Netflix shows down to the 70% threshold, the numbers look less impressive.

Second, the weakness may have been in television more than anything else. Really, Netflix’s top three series are Stranger Things, The Witcher and Money Heist (La Casa de Papel), in that order. And the last of those does very poorly in the United States. Given that binge-worthy TV series drive time on Netflix, not having one of those really does hurt Netflix, and that’s why they likely missed subscriber targets in Q3. 

The End of the Fast and the Furious

All things must come to an end, but even Universal’s biggest money maker of the last decade? As others said, we’ll see if Universal can hold to this promise.

A New Contender for “Next Game of Thrones”

The big question for 2022? Which series will be the “next Game of Thrones”, as I wrote about here. More than anything, every streamer is trying to mimic the success of HBO, even though it’s not clear to me audiences are clamoring for more fantasy series. (Contrary point? The Witcher did great numbers for Netflix.)

The news is that Disney+ is adapting 1988’s Willow into a TV series. This series immediately has more importance than many Netflix’ series. Mainly because Disney+ needs quarterly hits to drive subscribers and this is in “white space” that isn’t Marvel or Star Wars. (Netflix has tons of TV shows to bank on.) Plus, it could appeal to adults. Also, full disclosure: I loved Willow as a kid but haven’t rewatched on Disney+, so guess I’m doing that this weekend.

Charlie Brown Heads to Apple TV+

Well, how about that for a licensed content acquisition? All my hatred on not having a library, and then Apple grabs the Charlie Brown holiday specials, which are a tradition in many homes, exclusively for their service. 

I love this move for Apple. (Caveat: price is everything, and I don’t know the terms.) For a service that needs growth, this is a great move. Honestly, I think it will drive more subscriber acquisition than Borat or Coming to America 2 for Amazon Prime Video.

HBO U.S. Subscribers Over Time – Visual of the Week

Inspired by AT&T’s release of HBO Max “activations” and total HBO subscribers, here’s a timeline of HBO subscribers and HBO+Cinemax subscribers over time:

IMAGE 1 Chart

If you’d like to see that in table form, along with some financial numbers, here you go:

Screen Shot 2020-08-03 at 11.13.55 AM

What about total subscribers? Again, we only have data from 2011-2017, but here you go:

Screen Shot 2020-08-04 at 9.35.20 AM.pngSome quick points and explanations:

– This data was cobbled together from random leaks, Time-Warner’s annual reports and AT&T’s earnings reports. (Links here, here, or here for leaks and here for Statista.) If you know of any I missed, send them my way.

– There is a chance that the reason AT&T didn’t release 2018 numbers for HBO, in addition to the merger being ongoing is because their numbers during Game of Thrones season 8 last spring were higher than they are right now. We don’t know because of gaps in the data, but looking at 31.4 million HBO subs alone in 2015, then considering they had 5 million digital only subscribers in 2017, that could easily have been higher than the current 36 million.

– With only 3 million subscribers having “activated” HBO Max, that service has a lot of room to grow. I’d compare that to the early days of Amazon Prime Video; it too had a lot of time to convince people to try it out, but also the free cash flow to wait. Math and explanation of activations over at Variety.

– If you want more on the financials of HBO, and discussion of their subscriber counts over time, read my article at Decider and the Director’s Commentary.

– Comparing multiple subscriber counts with different definitions reminded me of this table I built for Netflix last fall. I’ll update it this fall with yet ANOTHER definition for Netflix.

Most Important Story of the Week – 24 July 20: The Incredible Shrinking Libraries of Peacock and HBO Max

The initial draft of this weekly column went very long in the “data of the week” section. So long it’s going to be its own article next week. (It isn’t that time sensitive.)

Meanwhile, the biggest story is one of omission…

Most Important Story of the Week – The Incredible Shrinking Libraries of Peacock and HBO Max

While the entertainment press often stares at shiny objects–Tenet’s delayed again is the example this week–I still can’t quite believe my eyes on this one:

The Harry Potter films are leaving HBO Max in August!

I’ve been telling everyone that the streaming wars aren’t a sprint, they’re a marathon. Heck, they’re an ultramarathon. Just like (most) real wars. World War II wasn’t won on December 7th. (Fine, 26th of May 1940 for my UK readers.) It slogged on for half a decade more. The Vietnam War or Iraq War were twice as long at least. Historically, wars have gone even longer. (Like 30 or 100 year time spans!) Even the Galactic Civil War in Star Wars lasted ten years. 

Yet the newly launched streamers tried to win it on day 1. In addition to the departure of Harry Potter, we have…

– The Jurassic Park films are leaving Peacock this month for Netflix.
– The Hobbit films quietly left HBO Max sometime in July.
– The Matrix films are leaving Peacock along with some Fast and Furious films.
And more

As far as content planning goes, this is bad strategy. The thinking for the traditional streamers must have been that buzz would never be higher than launch, so the goal was to present the impression that there are tons of blockbuster movies. (Just like Disney+.)

Of course, when folks see tons of movies, they expect them to stay there. If they leave without similar high-powered replacements coming in, the result is disappointment. Traditional HBO knows this, which is why every Saturday they usually have a big new movie, but it leaves after a few months. (And why no defining films have left Disney+.)

Why haven’t they paid more to keep these buzzy films around? Traditional companies like making money. And Wall Street still expects them too. It’s cheaper to pay for a limited, non-exclusive streaming window measured in months (or even days) than to permanently end some of these lucrative exclusive linear deals in the United States. (TNT/TBS, USA Network/Syfy, and FX/FXX still pay handsomely for blockbuster films. So do Netflix, Hulu and Prime Video.)

Disney paid dearly to get nearly all their rights back and keep them. As a result, Disney streaming has lost lots of money so far. (It did have some films leave the service, such as Home Alone.) Meanwhile, it stays focused on the numbers that drive Netflix’s stock price: subscriber counts.

In defense of HBO Max and Peacock, I’m not sure losing any of these titles besides Harry Potter and Jurassic Park will really hurt the brand. If I were offering them advice, though, it would be to end these old habits of shifting films around constantly. Some library rotation will make sense; windows under a year do not. The key to the traditional streamers competing with Netflix is to offer consistent libraries of classic films. Their value proposition is that their films are better on average than Netflix. Rotating films in and out won’t provide that. 

This does mean, frighteningly, to ignore the money guys. At least for now. Since the economics are all in flux anyways, the cash now doesn’t actually exceed the potential cash later, but that’s a tough case to make.

M&A Update

IMG and Learfield’s merger was cleared last week, consolidating another industry, this time sports viewing rights, mainly college. This will likely be anti-competitive and Sports Business Daily has the details. (Hat tip to Matt Stoller for pointing me to it.)

Meanwhile, the tech giants can’t seem to help themselves. First the Wall Street Journal reports that Google specifically preferences Youtube for video searches. Second, the Wall Street Journal reports that Amazon explores buying start ups, then copies their business models. 

Other Contenders for Most Important Story

Let’s do quick hits on other stories that piqued my interest.

UTA Signs the WGA Code of Conduct

Whoa! Why did I spend so much time on Netflix last week when this story is a way bigger deal?

It doesn’t end everything with the writer’s-firing-their-agents-strike, but this is the first major agency to break ranks. Though the deal definitely will have compromises on the writer’s side. I have to imagine that we’ll see WME and CAA strike deals soon, but I could be wrong.

Amazon’s New Video Game is a Dud

Amazon released a big new “shooter” video game out of private beta testing into public beta testing, then put it back into private. In other words, Amazon’s quest to be the “everything store” isn’t going about as well as their quest to make movies/TV shows: it may take a decade to make a profit, if they ever do. 

AMC Wins Latest Profit Sharing Deal

It looks like the talent for The Walking Dead will lose their suit against AMC Networks over profit sharing. Of course, with these legal opinions you never know how it will actually end or if it ever will.

Entertainment Strategy Guy Updates – The Films Moving Backwards

My take on Disney moving the dates for some of its films for next year–and following Tenet by delaying Mulan–is that the production pause is finally starting to impact the 2021 calendar. Every month that you can’t be shooting is another delay to already tight production/effects calendars.

Really, this issue has been covered widely, but with theaters closed in California, Texas and Florida, it doesn’t make sense to release blockbusters in America. And throws off the entire calculus. 

The solution to break the logjam is for someone to just reopen with the library titles doing well in drive-thrus. Obviously this would have to be done safely, using the best procedures to keep everyone as safe as possible. And not in locations with spiking cases. And this seems to be what AMC is planning to do. Which could finally break the impasse.

Most Important Story of the Week – 29 May 20: All the Complications of the AT&T and Amazon Show Down

Since May kicked off, I’ve been back to writing two articles per week and have had my highest traffic month since launch. So thank you to all the readers and supporters. If you want to stay on top of all my writings, the best method is to either subscribe to my newsletter (at Substack) or through the WordPress application.

Meanwhile, onto one of the more fascinating stories of the year…

Most Important Story of the Week – HBO Max and Amazon Stare Down

Well, HBO Max launched.

If you’re comparing hype, it feels way less substantial than Disney+. Or even Apple TV+. But that’s to be expected. Disney+ was a brand new thing by one of the most powerful brands in America; HBO Max is a retread of a brand most people already know. Meanwhile, while Warner Bros has always had big films and series, but they aren’t associated with their parent company.

Since the HBO Max that launched this week is mostly the service promised last fall, I’m going to focus on the issue we’re all obsessed with: 

HBO Max didn’t launch on Amazon’s devices.

Technically, Roku devices too. But Amazon is the fascinating topic to me, since their negotiating position isn’t just about devices, it’s also about operating systems, content rights, and profit sharing. Let’s try to explain why this negotiating is too contentious, and so critical for AT&T to get right.

The Issue: Operating System vs Device

The core issue of the streaming wars is who gets to aggregate content and who gets to bundle that aggregated content. The aggregators are the streamers, in this case. Think Disney+. HBO Max. Netflix. Prime Video. Previously, they were the linear channels. And formerly ESPN, Disney Channel and HBO.

Bundlers figure out a way to offer access to streamers. In some cases, this is via device. Fire TV. Roku. Apple TV. Sometimes this is via an operating system. Like Apple Channels and Prime Video Channels. Maybe Hulu and Youtube in the future. Formerly, this was the MVPDs like Comcast, DirecTV and Spectrum.

Notice that Amazon has both a device and an operating system.

The trouble is their operating system is a lot like their streaming service. Specifically, if you subscribe to HBO through Prime Video channels, you can access your content via the Prime Video application. This way a customer using Amazon Channels can seamlessly go from Prime Video shows like The Marvelous Mrs. Maisel to Game of Thrones and The Sopranos. Honestly, you couldn’t tell the difference between where the content comes from.

From Amazon’s perspective, if HBO is already included in channels, then so should HBO Max. They signed a deal several years back to make this happen, so why not continue since every other HBO customer (mostly) gets HBO Max with HBO?

Because AT&T learned enough over the last few years to know what matters when launching a streamer. When HBO was mostly a cash play, Amazon was found money. Since HBO was also a key piece to Amazon Channels–clearly their biggest seller– Warner Bro negotiated fairly beneficial deal terms. The partnership worked, as Amazon felt free to leak that 5 million folks subscribe to HBO through their Channels program.

The difference between distributing on Fire TV devices and within Amazon Channels–and the fact that Amazon bundled those discussions together–basically shows how much AT&T stands to lose.

The Key Negotiating Deal Points

  1. User Experience – This issue more than any is what AT&T wants to control. Prime Video has been around for years, and it still gets the most “blah” reviews as a streaming platform. When AT&T sends its content to Prime Video–as it has to for the Channels program–it essentially gives up control for how it will be branded and leveraged. Try as you might to negotiate this, it’s really hard to manage as a third party. Especially a deal point like, “Make your service more user friendly.”

I would add, the other piece is building value in the eyes of customers. If a customer has to go to HBO Max’s application every day, they learn to value the content on that experience. In someone else’s streaming service that just doesn’t happen. It devalues the HBO brand overall. 

  1. Pricing – I haven’t negotiated these type of deals in a few years, but if terms are roughly similar to then, which I believe they are, there is a big monetary difference between a channels revenue split–which is a monthly recurring payment–and a device “bounty” where the device owner gets a one-time payment for signing up new customers. The latter is an enticement to have the device owner market your platform; the former is a deal tax primarily. But they work out to dramatically different financial outcomes for a streamer. A 30% fee in perpetuity can be awfully expensive.

But that’s not all the revenue Amazon wants…

  1. Advertising – This issue came up with Disney+’s negotiations as Amazon wants a cut of advertising revenue from the apps on its platform. On the one hand, this is bonkers as Amazon will have very little to do with creating value from those ads. On the other hand, in the old MVPD world, cable channels shared advertising time with MVPD operators. (That’s how local ads made it on old school cable networks.) Given that AT&T has dreams to launch an ad-supported version of HBO Max, this is likely a huge sticking point.
  2. Content – Andrew Rosen thinks a big hold up is that Amazon wants Warner Media content for IMDb TV’s FAST service. I’m not sure AT&T would ever consent to this, but not long after Disney+’s deal was closed the same group licensed Disney-owned shows to IMDb TV. Consider the market power that when AT&T is trying to negotiate for a device deal for its streamer, Amazon is essentially demanding that some of the content for that service wind up on a competing streamer. Such is Amazon’s market power, that a deal term could be forcing a studio to sell it content. (As I wrote on Twitter, the echoes to Standard Oil are remarkable.)

 

  1. Data – AT&T also wants the customer data. If you don’t control the user experience, you don’t control the data either. They basically go hand in hand. For as much as I love data–look, it was the first theme of this website–I do think “data” has been a bit overhyped in the business sphere. Data is an asset, but it isn’t actually cash. It is something that can generate more cash, but only if you use it properly. Still since it goes hand-in-hand with user experience, they’re tied together.

The Major Streamers Don’t Allow Bundling

That’s really the issue for AT&T. Netflix, Hulu/Disney+ and now HBO Max see themselves as bigger than just content in someone else’s streaming application. Heck, even Prime Video content isn’t available in Apple Channels!

And when you think about it, the ask by Amazon is kind of crazy. It’s not just asking to sell rights to HBO’s content, it’s asking for that content to essentially be bundled with the rest of its content. Which seems a lot more like a retransmission issue than simply allowing an application on your operating system. The best tweet which summarized this for me came from The Verge’s Julia Alexander:

Screen Shot 2020-05-29 at 12.18.15 PM

Exactly. Thus, the whole debate is fairly simple: AT&T considers itself a major player. And won’t allow itself to be bundled. 

Who is right?

First off, no one is right or wrong. The worst thing in the world is to pretend like negotiations between two businesses are about fairness or justice. Or that the needs/wants of customers matter. (If you want the needs of customers taken into account, government regulation is your only hope. And entertainment should be heavily regulated!)

Still, who is more right in holding to their position in this negotiation? AT&T.

When in doubt, ask who is creating value. AT&T has decades of valuable content, is spending billions making more and will have to spend hundreds of millions more to market that content. In other words, they’re doing all the work to launch a streamer. Amazon is a gatekeeper asking for a fee/toll/rent to allow it’s application on its platform. 

Not to mention AT&T bears most of the risk, unlike Amazon. To maximize that investment, they need to distribute and own that customer relationship. So they’re right to hold, and it will be fascinating to see who blinks first. 

Other Contenders for Most Important Story

A few other stories filtered in over the last week that competed for the top spot. A few were generally interesting, but just couldn’t compete with the HBO Max drama.

DAZN Shops Itself

A report from the Financial Times says that sports streamer DAZN is looking to raise money, which could mean anything from selling itself to finding a strategic partner to simply selling equity. Of all the newly launched streamers, DAZN has the toughest road to travel. Sports rights are extremely expensive, meaning they cost almost as much as the value they bring in. As much as I’d like an “indie” sports streamer to survive, DAZN needs cash to compete with the tech giants of the world.

Quibi Programming Strategy Reset

Less than two months in and Quibi is already revamping its programming line up. The plan is to focus more on what is working, which is apparently content that appeals to older, female viewers

Is this too aggressive of a pivot? Maybe. This is the perennial problem with data driving content decisions. Quibi is looking at what is working on their platform, and using that to make future content decisions.

But does that make sense? If your two best shows happened to appeal to that demographic, then it will make it look like that’s your best customer demographic. If you use that data to make more decisions, then you’ll no doubt appeal more and more to older, female viewers.

Do you see how this is a self-reinforcing algorithm? And how that can limit your potential audience.

Want to see how this applies to Netflix? Well, they too made originals, but they also put originals on the top of their home screen. This drove usage, because anything on the top screen gets clicks. But then Netflix made more originals using that data, in a self-reinforcing loop. Hence, why some of Netflix’s content feels so similar or appealing to the same demographics.

Disney World and Universal Studios Plan Summer Openings

July 15th is the planned date for Disney World to reopen at half capacity with tons of restrictions. Universal presented plans as well. This is both expected and seemingly on track for the next stage. My tentative prediction is that as thinks open up, folks will return to old habits and behaviors quicker than currently anticipated. If testing continues to ramp up, we could find this surprisingly normal looking.

Peacock Originals Slate on July 15th

When NBC released their plans for Peacock, my initial reaction was Peacock wants to be the most broadcast network of the streamers. This review of Peacock on Bloomberg essentially describes that as the mission statement. And this made me happy because, in full disclosure, I think broadly popular content has mostly been missing from the streaming wold.

As Peacock prepares its first set of originals for July 15th launch, are we getting a broadly appealing set of shows, or are we getting another rebound of peak-TV/prestige content? Looking at the list of shows–a Brave New World remake, a David Schwimmer comedy and an international thriller–I’m worried it’s more of the latter. However, they do have Psych 2 special. So we’ll see.

Data of the Week – Nielsen Top 100 Broadcast TV Shows

Twice a year, Michael Schneider uses Nielsen data to look at the top shows and then networks for the previous TV season or year. Here’s the 2019 season edition, which feels so bizarre in today’s coronavirus times. I’m mainly looking at it for the next set of shows to come to streaming channels. Look for 9-1-1 to one day get a pay day on streaming.

Entertainment Strategy Guy Update – Apple Content Moves

Apple Snags the New Scorsese Film from Paramount…

This could have been my story of the week, but for HBO Max launching. Dollar wise, it’s relatively small. Just $200 million or so among friends. 

But not with Netflix? What went wrong!!!

Likely the price tag and performance of The Irishman scared off Netflix. As I wrote in multiple outlets last December, Netflix doesn’t have the monetization methods to get a return on $300 million budget films. (That’s what I expect Netflix ended up paying for The Irishman.) Toss in all the controversy about theaters, maybe some DiCaprio nervousness about back end, and I think Apple TV+ with Paramount theatrical was the logical choice.

Is this good for Apple TV+? Sure. It will get a ton of new subscribers to check them out. Without a library, though, how long will they stay? Speaking of…

…and Fraggle Rock from Henson Company

Bloomberg reported last week that Apple was looking at licensing library content. Well, their first “big” purchase is Fraggle Rock’s library to complement an upcoming reboot. Then there was controversy in the entertainment journalism press about whether Apple had changed strategies or not. (Which would directly contradict my column from last week.) Apple PR went to multiple outlets to leak that “No, no, nothing has changed.”

My guess is both scenarios are true. If Apple can’t find a library to buy, they’ll say their strategy hasn’t changed. If they do? Then they’ll happily announce it.

Meanwhile, is Fraggle Rock a game changer? I doubt it. Kids need lots of content to go through. Almost more so than adults. Frankly, Apple TV+ doesn’t have it.