Over the past week, a wide variety of interviews with executives in the streaming business have emerged, in part because of the ongoing Morgan Stanley Technology, Media & Telecom Conference. Comcast CEO Brian Roberts, Disney CFO Christine McCarthy, Netflix CFO Spencer Neumann and Paramount Global CEO Bob Bakish all spoke at the conference.
There was also this must-read interview from Vulture's Joe Adalian with new Peacock and Hulu President Kelly Campbell. And, Starz CEO Jeffrey Hirsch gave an interview to McKinsey about "The future of streaming and diverse content".
All five interviews brought to mind PARQOR's Fiduciary vs. Visionary Framework.
I would describe Roberts, Bakish, McCarthy and Campbell as Fiduciary executives in streaming. They are valued for their track records in managing legacy media and entertainment conglomerates. Campbell seems to be valued more by Comcast for her past track record at Hulu in successfully managing a Direct-to-Consumer streaming service at scale. She is a proven fiduciary for Peacock.
Neumann is interesting because he is a C-Suite executive in a C-Suite filled with Visionaries. But, he has only been with the company since 2019, suggesting he is more valuable to the company as a Fiduciary than as a Visionary.
[NOTE: I dove deeper into the interview with Neumann, and how it echoes some things WarnerMedia CEO Jason Kilar has shared in Wednesday's mailing, WarnerMedia & Netflix's Narrow but Fascinating Challenges in AVOD & Gaming].
Why Does This Distinction Matter This Week?
There are two reasons why the Fiduciary vs. Visionary Framework came to mind this week. First, Bakish, Roberts and McCarthy all laid out updated business strategies that seemed more cynical about the future of the direct-to-consumer streaming business at the Conference.
Roberts and Bakish both laid out definitions of reach for their respective and joint streaming services (SkyShowtime) that include MVPD-like "hard bundles". In other words, constrained by the realities of the streaming marketplace in achieving their promised levels of scales to investors, they are accomplishing that objective by redefining "scale" for their respective and joint streaming services.
Bakish also walked back the “movie a week on Paramount+” he’d promised in 2021 to:
“...a movie every other week. We think that’s a better investment strategy.”
Peacock's Kelly Campbell suggested Comcast's redefinition of scale is its long-term strategy to become a sustainable business:
I think when Peacock entered the market, there was a realization that it wasn’t just about disruption or being the first to market or being the first to scale. It’s really about having the right content and building a quality relationship with consumers. You’re not going to hear us talking about these big numbers and providing no clarity on what’s within them. We’re really focused on building a long-term, sustainable business. We’re in the long game. It’s not just about scale. It’s about scaling while building a quality relationship with consumers. I think that’s a different lens than perhaps other streamers, especially at other points in time, may have looked at the market through. I think Peacock is really going to be focused on that idea of creating value, building a sustainable business. We’re focused on the long game.
Notably, this echoes much of what Bakish had to say and what Paramount executives shared with investors on its investor day.
Second, McCarthy was interesting because she added some color to the rationale behind the ad-supported model:
...we had some preconceived notions of what we thought consumers wanted. And we've done a lot of research and have found that a lot of consumers, they do not mind and some are actually more favorably disposed to services with ads than without ads.
So, we have also had an incredible amount of advertiser demand ever since the launch of Disney+ and as you can see from our results in addressable advertising out of our Hulu business, we have more demand than supply. So, looking at this business and realizing that it's not only -- it's about choice and control for the consumer, and Bob Chapek, has been really consistent in talking about -- let the consumer decide how they want to consume content, how they want to experience things. And this goes right down the alley of having an ad-supported tier. Yes, it will be the lowest cost tier.
She described the ad-supported tier as ultimately "a win-win for the consumers who want it, the consumers who couldn't afford it, otherwise." McCarthy is confirming the obvious here - Disney seems less certain to reach its promised objective of 260MM Disney+ streaming subscribers by 2024, and an ad-supported tier may pull in enough customers to mitigate that risk.
Notably, unlike Comcast and Paramount (moreso Paramount than Comcast), Disney management is not moving away from a DTC business model to satisfy investors. But, as fiduciaries they have evolved the original Disney+ business plan and target customer definition in order to deliver on a promised objective.
As for Netflix's Neumann, he defended Netflix's business model while downplaying a short-term focus on its ambitions in gaming, and refusing to rule out AVOD. But he did little to lay out Netflix's vision of the streaming marketplace and its bets on gaming, both of which are owned by Co-CEO Reed Hastings (an archetypal Visionary), Co-CEO Ted Sarandos (also Visionary), and COO and Chief Product Officer Greg Peters.
How Do We Evaluate a Fiduciary Executive?
If there is one shared, common constraint for all of these executives - excluding Spencer Neumann - it is that their respective promises of scale by 2024 seem less feasible now. Consequently, they are artfully redefining the means by which they will achieve that scale.
In doing so they are hitting on a key tension of the framework: do we judge a Fiduciary executive more based on the objective constraints they face? Or more by how well they deliver against their stated business objectives within those constraints based on operational, financial or even strategic metrics?
Or is it something else?
Moreover, what advantages does a Visionary executive have over a Fiduciary executive in these instances, if any? Because Netflix's Visionary leadership has seen their stock punished (📉-42% YTD) after a Q1 earnings miss.
Comcast, Disney and Paramount have each and all moved the goalposts for their original streaming objectives quite a bit. We are no longer talking about a scalable SVOD competitor to Netflix (Disney), or legacy media companies successfully transitioning from a Wholesale to a Retail model (Comcast, Paramount). Rather, the language has shifted from selling investors on a Netflix competitor to selling a "sustainable business".
The hard question in this moment is whether Comcast, Disney and Paramount executives are managing their businesses in a way that is benefitting shareholders. A bear market is giving us mixed answers to that question because prices are being driven by a wide variety of financial and geopolitical events.
And The Visionaries?
Only one executive reflected seemed unphased by the market reaction and confident in his company's future roadmap, and that was Netflix CFO Spencer Neumann. [NOTE: I would also describe Fox's Lachlan Murdoch as largely unphased in his interview at the Morgan Stanley Conference].
This implied how Netflix's success may be attributed to a streaming business run by Visionary executives with fewer constraints. Unlike Comcast, Disney or Paramount, Netflix is not burdened by legacy media business segments. The only risk of cannibalization it navigates is its DVD business, which generated $200MM in 2021, 0.67% of its annual revenues.
So, there is one key contrast to highlight between Fiduciary and Visionary executives at this moment in time in the streaming marketplace: the constraint of the burden of the legacy media, Wholesale linear model for Comcast, Disney and Paramount, and the lack thereof for Netflix.
Because, when faced with increased risk in the marketplace, Comcast, Disney and Paramount management have all pivoted their businesses towards the strengths of their linear business models: ad-supported streaming, MVPD-type bundling models - while Netflix continues to iterate and evolve its existing business model away from the Wholesale model.
I can't say which approach is "better" for investors. But, all of these approaches reflect the relative constraints on management to achieve their promised operational, financial and strategic objectives to investors.
I cannot recommend strongly enough the McKinsey interview with Starz CEO Jeffrey Hirsch, who is both a Visionary and a Fiduciary,
Hirsch is interesting because Starz's success with a demographics-targeted approach (women and black audiences) is Visionary. Also, in the McKinsey interview he lays out his vision of the streaming experience for the consumer in 2030. But he is also a Fiduciary for Starz's linear businesses, and he has been managing the decline of the domestic linear business.