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Analyzing Content Chaos

Content Insider #796 – All In

By Andy Marken – andy@markencom.com

“You just have to fight for yourself; no one’s going to save you. That’s just life.” Mitsuko, “Battle Royale,” Toho Company, 2000 

“No one” is going to the cinema.

“Everyone” is cutting the cord.

Streaming video is a goldmine.  

No … it’s just a **** tough business.

Crowded – You can hardly turn around without bumping into a new streaming service or new approach to streaming.  Hint: not all will survive.  

People are crawling all over each other, shuffling the deck chairs to be major player or part of a major player in the M&E business.

The traditional movie industry isn’t dead, it’s just changing.  

Last year was good for theater owners racked up an estimated $29B, thanks to a string of doorbusters including Top Gun: Maverick, Avatar: The Way of Water, Jurassic World Dominion, Black Panther Wakanda Forever, No Time to Die, The Woman King, Anything Anywhere All at Once and others.

In between, it was underwhelming, and attendance will continue to decline as it has since 2010 because it is at the whim of studios and their other outlet needs/opportunities.

Globally, people still have their cable connections:

  •  1775 TV stations, 5200 cable systems run by 660 operators reaching 90 percent of global population
  • 65 percent of Americans are still paying for cable TV
  • Global cable TV market is just under 50 percent.
  • 28 percent of viewing time is on traditional TV

It’s true, consumers are watching more streaming content and the market is projected to reach $170B this year.  

Room for Growth – The fact that there are 8B people on the planet and perhaps half of them prospective streaming content customers means there’s plenty of room for growth if only services can discover the winning formula.  

In a few years, it’s projected that the five major US-platforms will have 456M subscribers and those in the Middle Kingdom 374M..  

The global SVOD base will reach 1.75B by 2027 with China and the US accounting for 48 percent of the total.  

China is unlikely to loosen its grip on what citizens see on the giant, big or handheld screen so that leaves the Americas and ROW for the major content creators/distributors to win over.

Source – giphy

Great Race – Watching studios and streamers compete to get across the finish line first is fun as long as you’re standing on the sidelines cheering.  If you’re in the, race it’s a tough row.  

The industry continues to spend billions to create new, different content focusing on international expansion and subscriber value for bottomline profits.  

To achieve their global potential, nearly every country around the globe has directed that streamers must have a strong percentage – 20-30 percent – of their content catalogue produced locally, investing 4 – 20 percent of their country revenues on local content production.  

Open Slate – Streaming makes an almost unlimited selection of content of every genre available to your screen.  

That means more international films/shows will be funded by streamers to produce greater global exposure to their work.

At the same time, studios and content distributors are weighing which project genres will deliver the best return on investment.

Genre Trends – Every genre of films/shows has its day in the spotlight and is then replaced by the “new hot subject.”  The key is choosing the one that’s the next big winner and . .. deliver.  

Every project – action, horror, doc, family-friendly, rom-com – requires different production budgets, marketing plans, etc., with different potential audience breadth and monetization potential.

All of this is interesting and necessary but today, it’s what is going on and will go on behind the scenes that will set the stage for the industry tomorrow.

Upheaval is everywhere.

Bob Iger’s return to lead the Mouse House has produced a ripple effect that everyone is discussing, analyzing and second guessing.

Welcomed Return – Bob Iger had a brief retirement before he returned to Disney to replace his chosen replacement (only in Hollywood) with the order to get the entertainment giant back upright and start producing growth.  

Even with a term limit of two years, the company’s stock value jumped $12B, shares rose 10 percent and cast members (employees) said “Daddy’s Home!”

Emphasizing that the old Hollywood can’t be cast aside until the new one starts making real money, Iger announced in early February that 7,000 employees would be cut as part of a larger plan to reduce $5.5B in costs. 

CFO Christine McCarthy added that content spend would remain in the low $30B range and the company will return to licensing content to other services.

Citing increased self-awareness, Iger rolled back a number of changes Bob Chapek (his previously designated replacement) had made including giving creatives a greater voice in decision-making.

Sports (ESPN) has been spun off as a separate unit, which may indicate that when the time is right, it may be sold or become a stand-alone company.

The firm’s traditional TV operation – ABC and 15 cable channels – will continue to be a part of the mix for the time being even though ad revenues are temporarily down across the industry.

Investing in new/different shows won’t increase pay TV subscriber interest but it might draw more ad dollars back to the services.

Iger sees strong growth potential for animation (Pixar) and Lucasfilms (Star Wars) content in theaters and the firm’s VOD (subscription/ad-supported) services noting that the films and shows  will be instrumental in making the streaming services profitable by 2024.

Despite a loss of 2.4M subscribers during the latest reporting period, Disney + has about 164.2M subscribers in 160+ countries, has rolled out a two-tier program (subscription/ad-supported) and is well on track to become the streaming leader over the next two years.

The new focus for Iger/Disney+ is leveraged (read profitable) growth.

Guardians – Superheroes from the MCU have begun Phase 5 of their planned path to consumers and folks are ready for them to hit their favorite viewing screen.  

Marvel Studios, headed by Kevin Feige, has shown a 16X increase in demand for MCU (Marvel Cinematic Universe) superheroes.

The most successful film franchises in history have developed a strong overarching set of storylines and globally recognized character names which can draw seats into theater seats as well as streaming subscribers.

In the midst of Marvel’s Phase 4, the company is on its way to introduce new and more exciting/diverse heroes and villains for the company’s global market.

The big question for Disney (Iger) is what about Hulu?

Murderers in the Building  – Hulu has had a good run since its beginning with a lot of great content and an enviable selection of statues but things can change quickly as murderers set their sights on their subscription base.  

Hulu/Hulu + was one of the industry’s earliest subscription services. It was launched in 2007 (the same year Netflix rolled out) by Disney (2/3 owner) and Comcast (1/3 owner).  

Next January, each organization can buy the other out.  The service is currently valued at $27B plus. Iger’s predecessor had said he was very interested in having all of the service and its 46M plus subscribers in the Mouse House while Comcast’s boss, Brian Roberts, had indicated at the time he would like it in his company’s portfolio.

The new Disney is quickly emerging as Iger questions the undifferentiated general entertainment fare as the pay TV/streaming giant cleans house and builds its global entertainment presence.  

While Comcast has been characteristically quiet about the potential outcome, Roberts did call Hulu, “a wonderful business with wonderful content, and said if it was put up for sale, Comcast would be interested — and so would a lot of other tech and media companies.” 

The world’s leading broadband/cable provider, Comcast already owns NBCUniversal and  its pay TV/content creation operations as well as Europe’s Sky Group and the fledgling Peacock + streaming service has 20M paid subscribers and 30M monthly users.

The service has scheduled a strong lineup of new content this year including John Wick, The Continental and Poker Face as well as shows with a solid following of projects, including In the Know, Beavis and Butthead and Silicon Valley. 

While Hulu represents an opportunity to offer Disney’s streaming roster as well as a strong boost for Peacock + with more adult fare and a strong subscriber base of 48M, but both could choose not to step forward in January.

The next few months at the poker table will tell which has the winning hand or if another deep pocketed tech entertainment organization enters the game.

Take No Prisoners – With his unscripted content background with Discovery, David Zaslav has made changes throughout the organization as he rebuilt his new Warner Bros Discovery empire which was saddled with nearly $50B in debt.  We’ll see what remains when the dust settles.  

Following months of slashing and burning to save billions (staff layoffs, shelving projects and gutting Warner Bros, HBO and CNN teams), CEO David Zaslav is far from completing his reshaping Warner Bros Discovery (WBD).

While he has said he is bullish on theatrical, his top priority has been to generate cash, eliminate content that wouldn’t help the firm grow and develop a management team that’s focused on quality and accountability.

The initial plan was to combine the content services HBO, HBO Max and Discovery + into a single service with a combined total of 94.9M global subscribers.  

In a slight course change, he later decided to keep Max (rumors indicate the new name) and keep his favorite Discovery + separate while other major changes are yet to come.  

Real Reality – WBD’s Zaslav built the Discovery content empire with such shows/networks as Chip/Joanne Gaines’ Magnolia Network.  The organization’s reality channels have had modest subscription growth.  

While lagging in global subscriptions (20M), Discovery has a large number of unscripted/profitable shows and networks including HGTV as well as Food, Magnolia, Travel, Cooking, OWN, others; a very loyal viewing base and  …  i.e., firm cashflow.

Zaslav is trying to figure out what to charge for both subscription and ad-supported services and will introduce a FAST channel later this year.

The fate of WarnerMedia, TNT and their sprawling/rich content libraries remain in doubt.

To make things more interesting, Zaslav brought on James Gunn (WCU fame) and Peter Safran as co-CEOs of the chaos-ridden DC Universe.

Gunn scorched the earth by saying the folks before him were not as good as he is. 

The two had developed a magnificent 10-year plan for DCEU and related properties but none of the new/great content will appear until 2025 and oh yeah…DC properties are a stand-alone organization from the rest of WB.

Shazam! – Previously creative stars at Marvel, James Gunn and Peter Safran have minimized the work that has gone before them and have developed a 10-year plan for DCEU and its siblings. The new superheroes are ready to show off their superpowers.  

Zaslav sat by watching the excitement/intrigue while Shazam, Flash, Joker, Batman, Aquaman and the rest of the crew stood by waiting for someone to holler “action”.

Marking a new era in superheroes, the duo has subtly indicated that the new insanely great universe or maybe Warner Bros. might be considered for sale to someone with money to spend like Amazon, Apple or even Universal as part of the bigger plan.  

With everything in play, you gotta love this industry!

The other two major studio/streamer players –Paramount Global/CBS and Comcast’s NBCUniversal– aren’t going to disappear from the M&E landscape.

Growth is Paramount – CBS changed its name to Paramount Global with content being delivered to both pay TV and streaming customers. The organization is online to increase its subscription base in the Americas and internationally.  

In addition to its strong roster of pay TV properties (Showtime, MTV, Comedy Central, etc.; Paramount is intent on making Paramount + a strong – and profitable – global streaming service.

Paramount ended last year with 46M global subscribers and is intent on having more than 100M subs next year who will be attracted to its growing roster of content and project investment of $6B this year.

They’ll be adding a roster of new series, more than 150 international original titles over the next couple of years.

Of course, you can’t overlook the company’s valuable IP like Top Gun, Mission: Impossible, Titanic, Sonic the Hedgehog and stuff that’s still in production and in the vault.

Cocky – Comcast/NBC Universal is delivering both SVOD and AVOD streaming options through Paramount+ with a strong roster of films/shows.  

Peacock, the come-from-behind kid, has more than 18M subscribers and is staying close to home for the time being in the Americas with plans (hopes) to convert Comcast Xfinity’s 30M free viewers to paid viewers.

That feels like a tough sell on top of a cable bill of $100 +/- but then properties like John Wick, the Continental, M3GAN, Super Mario Bros., Fast and more may do the trick.

Of course, that doesn’t mean the tech-based streamers are going to take this lying down.

No Rest – The technically-based streamers (Netflix, Amazon Prime and Apple TV +) know that now is not the time to rest and the three are busy continuing to add great content – movies/shows – to their rosters.  

Amazon is leaning in with sports – Thursday Night (15.3M plus viewers) and Black Friday Football, etc., its 100M viewer hit Lord of the Rings, and 12-15 films destined to theaters and their streaming service.  In addition, they have a string of original series in the pipeline including Blade Runner, Warhammer and new animated DC series.

While Reed Hastings stepped back (slightly) from Netflix, co-CEO Ted Sarandos and his new partner, Greg Peters, still ended the year with 223M plus global subscribers.  They’ve clamped down on password sharing (everyone else is following suit) and added AVOD to their service offerings.

Focusing on a profitable subscriber base, Netflix is focusing on its new online gaming offerings, and continuing its multi-billion dollar international content development, especially in Asian originals and localized projects.

With more than a billion loyal device users worldwide, Apple TV+ may consider an outside acquisition but will probably focus on meeting the needs of its estimated 50M subscribers with things like its addition of major league baseball and steady stream of quality movies and series.

Still, there are people wanting to jump into the fray…

It’s Easy – It’s hard to believe but there are folks out there who think all it takes to build a profitable streaming service is to build out a site and BAM!  It ain’t that easy folks, or we would have done it … not.  

In addition to the major studio and tech streamers, there are about 300 VOD and OTT platforms across 200 countries struggling to profitably reach customers; and by 2025, folks estimate the number will increase to 600, all intent on getting their share of the 2B potential viewing subscribers.

Being an eternal optimist that appears to say there are still a lot of opportunities for indie producers even as they wade their way through the challenges of rising costs, the local and national regulation maze and slim/stretched budgets.

The indies can be flexible enough to shift with streamer/viewer demands some studios and streaming services may find themselves repeating Yukie Utsumi’s observation in Battle Royale, “What idiots. We might have all survived. We’re all so stupid. *Stupid!*”

Andy Markenandy@markencom.com – is an author of more than 700 articles on management, marketing, communications, industry trends in media & entertainment, consumer electronics, software and applications. An internationally recognized marketing/communications consultant with a broad range of technical and industry expertise especially in storage, storage management and film/video production fields; he has an extended range of relationships with business, industry trade press, online media and industry analysts/consultants.

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